The Death of the Income Tax
May 19, 2009 by Charlie
Filed under About the FairTax
From www.NoSweatEconomics.com
By Tod Ginnis
Imagine April 15 was just another spring day. The only things on your mind are the warming weather and the fact that the Pittsburgh Pirates are still in the pennant race. Fantasy? Perhaps. But before the 1913 ratification of the 16th amendment, Congress’ ability to levy an income tax was limited. It sold the concept to the states and people by claiming only the wealthiest citizens would pay. That didn’t last long.The next important step in America’s income tax experiment came during WWII. To speed up tax receipts to finance the war effort, the government began requiring employers to withhold money for income tax from each paycheck. Without withholding it’s unlikely the current tax system could exist. Can you imagine middle class taxpayers cranking out checks for $5,000, $10,000, or $25,000 each April? There would be a revolt.
To illustrate how important withholding is, think about the conversations most people have around tax time. How much did you pay in taxes last year? Nothing-I got back $1200! This poor sap is ecstatic he gave the government an interest free loan for $1200. If banks could find enough customers like this maybe we could knock a few hundred billion off the bailout package.
According to the Tax Foundation, in 2005 U.S. individuals and businesses spent about $265 billion complying with the federal income tax. This equals 22% of the amount the IRS actually collected. And it’s pure waste…unless of course your name is H&R Block.
Let’s put aside the philosophical debates for now. We’ll accept that government is entitled to every dollar it gets (as much as it pains me). Isn’t there a more efficient way to collect this money?
Fortunately, a group of business leaders financed a study on precisely that question. Their conclusion led to the national phenomenon (including two best selling books) known as the FairTax.
The FairTax is based on consumption, not income. It’s like a sales tax. But unlike an ordinary sales tax, which is regressive (more painful for the poor), there is a “prebate” that completely removes poor people from the tax rolls. Since it doesn’t tax income, the FairTax would encourage businesses to make decisions for purely rational reasons, as they no longer would factor in tax liabilities.
There are no loopholes under the FairTax. It is revenue neutral, meaning it takes in as much money as the current system. And best of all, it gets rid of the IRS. There are many more benefits of switching to the FairTax. I encourage everyone to read about it on the FairTax.org web site.
Campaigning to end the income tax may seem like tilting at windmills. And maybe it is. But if incumbents start losing elections to FairTax supporters, the landscape would change in a hurry. After all, there’s nothing more important to politicians than keeping their own seats.
Hi there. I’m the author. I appreciate the link, but my web site address is missing an “s” at the end. It’s http://www.NoSweatEconomics.com. Fight the good fight!
This guy really gets it! And knows how to sell it too.