Introduction
My topic is the Fair Tax. In simple terms Fair Tax refers to a tax reform suggestion for the United States federal government that would actually replace all the payroll taxes including Medicare and Social Security taxes, federal income taxes including corporate income taxes, alternative minimum tax, and capital gains tax, estate taxes, and gift taxes. The fair tax would decrease taxation amongst all people and reduce complexity of the current tax system. It would allow each person to keep his or her entire paycheck. It would eliminate federal income and payroll taxes.
I am in favor of this tax system. I pay more money in taxes than I should. I am taxed at a higher rate because of commission. When I receive a commission check I pay almost my entire hourly amount in taxes. It’s a shame the tax burden is so high that I literally get sick when I look at my pay stub. They raised the taxes this year, which cost me even more money. I am now looking at ways to reduce my spending to make up for the additional money that I am not making. The government fails to take into account the flaw of overlooking secondary consequences. When they increase taxes all they see is more revenue for government and what it’s going to cost the taxpayer. They fail to realize that each dollar taken away has exponential effects on the economy. For every dollar you take away from the public you take a dollar away that would have been spent on stimulating the economy.
HR25 includes a prebate which is a tax incentive on necessities. This amount is Only American citizens would be eligible for this. For example a family of 5 with an annual consumption allowance of 23,550 would receive a prebate of 5,417. This would help with the poverty levels.
I would use the scientific method to prove the effectiveness of the tax system. My experiment would consist of a small lab controlled economy. I would have theoretical families earning different incomes participate in a fake economy. There would be 2 different economies. My control group would be an economy with our current tax system. I would test the effectiveness of the fair tax. In the fair tax economy each family would keep every penny they earned. They would only pay taxes on what they consumed. The money from taxation would be used to fund the economy and pay for governmental expenses. I would conduct this experiment for one month. At the end of the month I would look at each economy as a whole. One month would not be long enough to gauge this properly but it would aim in proving 1 thing. The fair tax stimulates the economy much more effectively.
My attended audience would be people of all social statuses. Under our current tax system, the federal government depending on an average worker’s exemptions and salary takes about 7.65% for Social Security and Medicare. Then this government takes another 10% to 25% for withholding taxes. This shows that even before the worker has an opportunity to see his or her paycheck, he or she will have lost about 17% to 32% of what he or she has earned. The Fair Tax system would benefit the poor and reduce dependencies on the government. The prebate would eliminate the need for food stamps and other social assistance in some cases. Everyone would benefit because they would pay much less in taxes out of their paycheck and their consumption would stimulate the economy. For instance, for a family of 4 members, under Fair Tax, if they buy a good with a pre-tax value of 80 dollars, their real out of pocket tax is roughly 15 dollars. On the other hand, under the present income tax system, buying the same product will result in paying 45 dollars in taxes or more.
The difference between this system and our current system is that taxed income never does anything for the economy. The fair tax would stimulate the economy by allowing every form of taxation to stimulate the free market simultaneously. Each member of my audience would need to know how the tax system would affect them. I would show them the tax bracket, which would show them how much less in taxes they would actually be paying. As discussed above, it is unquestionable that unlike our present tax system, the Fair Tax in real sense does not depend upon hiding taxes. This means that those who earn more than the average end up paying more taxes and those who earn less end up paying less taxes under the Fair Tax. This is fundamental as it helps in reducing the gap between the rich and the poor.
There is a positioned on a flat tax that is gaining momentum, which puts every person on the same tax rate. In my opinion, the fair tax is the only solution that would eliminate the payroll tax and the IRS. The fair tax in actual sense would establish a national sales tax, which would essentially pull in enough to cater for all the government programs. The most interesting thing about this is that fair tax will take revenue from what have been spent instead of what is earned. For that reason, with fair tax the government will have to send a prebate to the families, which would cover taxes on the necessary expenses.
As stated in the first paragraph, the fair tax would reduce the complexity of our current tax system. The existing tax system is actually broken. It is horribly inefficient, old, unfair, subject to manipulation, and corrupt. All these make it become complex. In contrast, the Fair Tax is fair, simple, and efficient. The Fair Tax stimulates the economy, helps the poor, promotes the American entrepreneurs and businesses, and supports new employment creation which is not the case with our existing tax system.
Because the fair tax abolishes the current tax system, the loopholes that are frequently exploited by only the wealthy will essentially be closed. The fair tax will make it possible for their expensively paid lifestyles to be taxed. This also applies to middle class society members. Every one of us is fighting to become wealthy, that we normally get ahead and take on huge debt. With the fair tax, we will be encouraged to both save and invest our cash instead of using it to buy useless crap. This will help to boost the economy hence raise the living standards of the poor.
In a nutshell, the Fair Tax is a fair, transparent, and simple solution to replace the current tax system. The above discussion proves that the fair tax does not discriminate anybody since it treats all the citizens equally. In addition, it allows all the American businesses to prosper while generating same tax revenue for government.
References
Boortz, N., & Linder, J. (2005). The FairTax book: Saying goodbye to the income tax and the IRS. New York: Regan Books.
McCaffery, E. J. (2002). Fair not flat: How to make the tax system better and simpler. Chicago: University of Chicago Press.
Ontario. (2001). Fair taxation in a changing world: Report of the Ontario Fair Tax Commission: highlights. Toronto: Published by University of Toronto Press in cooperation with the Ontario Fair Tax Commission.
Zodrow, George R.; Mieszkowski, Peter (2002). United States Tax Reform in the 21st Century (Hardcover Ed.). Cambridge University Press.
