The Fair Tax Act of 2005, Part I
The bill begins by stating its purpose:
To promote freedom, fairness, and economic opportunity by repealing the income tax and other taxes, abolishing the Internal Revenue Service, and enacting a national sales tax to be administered primarily by the States.
This part is pretty self-explanatory.
Next follows a table of contents, which I won’t repeat here.
Following that is a series of findings, each of which are the stated impetus for the bill’s origin:
(a) Findings Relating to Federal Income Tax- Congress finds the Federal income tax–
(1) retards economic growth and has reduced the standard of living of the American public;
— No arguments here.
(2) impedes the international competitiveness of United States industry;
— Specifically by inflating the price of American labor and the cost of American goods.
(3) reduces savings and investment in the United States by taxing income multiple times;
— Pretty self-explanatory
(4) slows the capital formation necessary for real wages to steadily increase;
(5) lowers productivity;
— I agree with these statements. Especially about lowered productivity, since if you know your effort is worth 20-30% less than stated on paper, you have less motivation to excel.
(6) imposes unacceptable and unnecessary administrative and compliance costs on individual and business taxpayers;
(7) is unfair and inequitable;
— Not only is it unfair because of the methods of taxation (particularly the AMT) it is easy to use loopholes to ‘beat the code.’ The unjust man will be taxed less, so the saying goes.
(8) unnecessarily intrudes upon the privacy and civil rights of United States citizens;
— Goodness yes. And no income tax can be enforced without such intrusion. Hence this bill.
(9) hides the true cost of government by embedding taxes in the costs of everything Americans buy;
— Perhaps not by design, but definitely in practice.
(10) is not being complied with at satisfactory levels and therefore raises the tax burden on law abiding citizens; and
— Roughly 1 in 4 Americans evades taxation willingly. Is this a nonviolent revolt?
(11) impedes upward social mobility.
— In no small part because it discourages upward mobility and rewards indolent behavior.
(b) Findings Relating to Federal Payroll Taxes- Congress finds further that the Social Security and Medicare payroll taxes and self-employment taxes–
(1) raise the cost of employment;
(2) destroy jobs and cause unemployment; and
–Number 1 causes number 2.
(3) have a disproportionately adverse impact on lower income Americans.
— In general, the lower your income, the more disposable your job is.
(c) Findings Relating to Federal Estate and Gift Taxes- Congress finds further that the Federal estate and gift taxes–
(1) force family businesses and farms to be sold by the family to pay such taxes;
(2) discourage capital formation and entrepreneurship;
(3) foster the continued dominance of large enterprises over small family-owned companies and farms; and
(4) impose unacceptably high tax planning costs on small businesses and farms.
— Certainly this is true for many moderate-sized farms or businesses that have grown a bit. This type of tax used to be reserved for the truly affluent, but is beginning to impact people with large assets that create only moderate incomes (like the family farm example).
(d) Findings Relating to National Sales Tax- Congress finds further that a broad-based national sales tax on goods and services purchased for final consumption–
(1) is similar in many respects to the sales and use taxes in place in 45 of the 50 States;
— By design, in order to make implementation easy.
(2) will promote savings and investment;
— You can ‘pay yourself first’ rather than ‘pay the government first’
(3) will promote fairness;
— All Americans receive the same rate of taxation and the same exemption from taxation on a person-for-person basis.
(4) will promote economic growth;
(5) will raise the standard of living;
(6) will increase investment;
(7) will enhance productivity and international competitiveness;
(8) will reduce administrative burdens on the American taxpayer;
(9) will improve upward social mobility; and
(10) will respect the privacy interests and civil rights of taxpayers.
— All of which are possible simply by NOT using income taxes anymore.
(e) Findings Relating to Administration of National Sales Tax- Congress further finds that–
(1) most of the practical experience administering sales taxes is found at the State governmental level;
(2) it is desirable to harmonize Federal and State collection and enforcement efforts to the maximum extent possible;
(3) it is sound tax administration policy to foster administration and collection of the Federal sales tax at the State level in return for a reasonable administration fee to the States; and
(4) businesses that must collect and remit taxes should receive reasonable compensation for the cost of doing so.
— 1-4 basically state that the states and retailers are best equipped to handle administering the tax already, and should be justly compensated for doing so.
(f) Findings Relating to Repeal of Present Federal Tax System- Congress further finds that the 16th amendment to the United States Constitution should be repealed.
— This is important in order to secure the country from the ills of income taxation for as long as possible (hopefully no one will think it is a good idea in the future…)
And that does it for Section 1, Short Title and Table of Contents. Next will come Title I. Future segments of this series will likely be shorter and more focused on particulars.
