About three years ago I published Ten Reasons that you should like the Fair Tax. I gave ten great reasons that we should enact the Fair Tax – yesterday. Things like not needing to keep records in case the IRS calls and asks. Not needing to deal with the IRS at all. Not needing to spend any time filling out forms. Not needing to have special tax-sheltered accounts for anything.
How simple is this: You walk into a store, buy something, and pay your Fair Tax when you pay your bill. About 20% is added on to your purchase (assuming we stay with the same amount of government revenue). This is compared with having 15% of your full income taken before you get it, plus another 12.4% for Social Security and 6% or whatever it is for Medicare. If you spend all of your income, you pay 20% for the Fair Tax or about 30% with the income tax and payroll taxes. If you spend less than your income and actually save, you pay even less with the Fair Tax.
The income tax punishes earning money. The Fair Tax punishes spending money.
And it even gets better. Because the company you’re buying stuff from doesn’t need to do fancy maneuvers to avoid taxes, like have a corporate headquarters in Barbatos, the price you pay for the things you’re buying are 10% less. So you end up paying less than you pay now with the income tax.
So why don’t we have it yet? Do you like keeping receipts? Do you like funneling your child care money through a flexible spending account, and then risk losing it at the end of the year if you don’t spend it all? Perhaps you like a check that is 25-50% smaller than it would be with the Fair Tax.
Maybe you’re worried that it doesn’t zap the evil rich guy enough and punish him for employing all of those people and making all of those products you use every day. But then you forget about the prebate – money that comes to you to cover taxes up to a certain income level. If you’re making $30,000 per year, you would still not be paying any taxes. That evil high earning guy would be paying it all. Ha ha haaaa….
So come on, what gives? Why haven’t you called, emailed, and shown up on your Congressman’s door, demanding the Fair Tax?
Do you just like your accountant too much? Do you like buying TurboTax every year? ( Their ads talking about your taxes being the story of your life do make it sound kind of exciting to spend an afternoon with your W2 forms and receipts.)
Tell me, please. I’d like to know.
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Disclaimer: This blog is not meant to give financial planning or tax advice. It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.
