By: Herman Cain
July 10, 2011
Paying taxes is a fact of life, because there are certain things that our federal government must provide as enumerated in the Constitution. But paying taxes does not have to be unfair, burdensome and costly. Our current system of taxation is all three, and it got that way little by little over time since 1913.
The Fair Tax (H.R. 25) is a fairer tax because it is just the opposite. It is fair because the consumer determines their taxes based on their purchase behavior instead of being determined by the government based on one’s capacity to produce. Our production is measured in terms of personal income and business profits.
The Fair Tax is a one-time one-point national sales tax on new goods and services. It is not collected on wholesale purchases, but rather, it is collected on retail purchases when the consumer consumes, and not when the consumer or business produces. This is totally consistent with Economic Guiding Principle #1 as described in Cain’s Economic Vision Part 1.
The Fair Tax is also fair because everybody pays the same consumption rate of 23 percent. Liberals hate that concept because it does not give them a tool to redistribute the income of others as with the current tax code. The rate is revenue-neutral and replaces all federal income and payroll taxes.
That’s right! There will be no more income tax fillings and no more Internal Revenue Service! That would be another day of independence worth celebrating.
As the big government liberals start screaming about how the Fair Tax is unfair to the poor, it actually empowers those with modest incomes through a sales tax pre-bate for basic necessities when coupled with a zero tax on used goods and services. My dad would have achieved his American dreams a lot sooner if we had had the Fair Tax in his lifetime.
It is a burden on every worker and business to have to keep track of nearly every financial transaction made during the year in order to try and comply with the ridiculous tax regulations. Even worse, it costs us collectively about $430 billion dollars a year. That’s insane!
In contrast, each state would collect the federal retail sales tax, as about 45 of them do today for their state sales tax, by adding one additional line to the sales receipt and sending those proceeds to the newly created Sales Tax Administration (STA). The STA would be for administrative purposes only, with no authority or mechanism to harass the taxpayers. The states would enforce the collection of sales taxes from retailers as they are already doing.
It’s called not reinventing the wheel.
The opponents of replacing the tax code with the Fair Tax will launch their usual distortions and lies against the Fair Tax. The most common ones include that it’s on top of the federal taxes we already pay. That’s a lie. Or, that the rate is really 30 percent, which is another lie.
Proposed legislation clearly states that the rate is 23 cents on a dollar of goods purchased. Over time, the taxes embedded in that dollar will go away due to price competition, such that the item costing one dollar will now cost 77 cents. The consumer still pays only 23 cents, which would make the 23 percent tax look like a 30 percent tax, if you divide 77 cents by 23 cents. The liberals call it inclusive versus exclusive rate to confuse people, but they don’t bother to tell you it’s the same 23 cents.
Replacing the current tax code with the Fair Tax is Phase Two of my Economic Vision for America, discussed in Parts 1 and 2 in the two previous commentaries. We must take some time to introduce and explain the concept of shifting taxation from income to consumption, and how it is fairer, flatter, simpler and less burdensome and costly than what we are doing today.
As president, I will end the insanity of the current tax code.
It’s common sense.