The Elly Report: National Issues

Fair Tax: An Idea Whose Time Has Come

by Jerry Horton

April brings longer days, melting snow, and daffodils. For millions of Americans it also brings a frenetic paper chase for W2s, receipts, bank statements, and a host of other records. Why? Because federal tax returns are due by April 15th.

Tax accountants are wracking up millions of hours as harried individuals try to understand, then comply with, the federal tax code...54,000 pages with more than 2.8 million words. This annual ritual is an odious example of government gone crazy.

No one really understands our tax code. It is widely regarded as unfair, complex, wasteful, confusing, and costly. Businesses and nonprofit organizations spend more than six billion hours each year complying with the federal tax code. The cost of this compliance – record keeping, accounting, filing forms, and so on – is estimated at more than $200 billion each year…that’s in addition to the paying the taxes themselves! These heavy compliance costs must be passed on to customers through higher prices, putting American businesses at a disadvantage when competing with overseas companies.

Individuals, too, suffer at the hands of an impenetrable tax code. We all must become part-time accountants or pay someone else to file our returns. We all must assemble and maintain detailed records for years. And we all must spend billions of hours on an ocean of paperwork. One reform plan before Congress, H.R. 25 and S. 25, also known as the "Fair Tax Act of 2005," calls for replacing the current federal income tax with a national retail sales tax. The main points are:

Eliminate all individual and corporate federal income taxes;
Eliminate all federal payroll taxes, including Social Security taxes, Medicare taxes, and self-employment taxes;
Abolish inheritance and capital gains taxes;
Collect same federal tax revenue through a national retail sales tax levied on newly produced, final goods and services; and
Repeal the 16th Amendment so an income tax can’t be reinstated.

The Fair Tax Plan is revenue neutral. As David Kendall, Professor of Economics at the University of Virginia, points out, if passed and signed into law it would:

Give workers and retirees 100% of their pension benefits;
Replace all federal income and payroll taxes with one simple, visible federal retail sales tax;
Rebate to each household on a monthly basis the federal sales tax paid on basic necessities, thus removing the burden of federal taxes on the poor;
Collect the national sales tax at the cash register, as 45 states do;
Eliminate all filing of individual federal tax returns;
Abolish the IRS and all audits of individual taxpayers; and
Not tax spending on education, thus making it half as expensive for American families as it is now.

Learn more about the Fair Tax Plan at www.fairtax.org. Then call your reps and senators and tell them to support H.R. 25 and S. 1493. Tell them you are tired of the headaches and intrusiveness of federal income taxes. Tell them you want our nation to be competitive again. And tell them you want time to enjoy the daffodils. ER