The only people who seem to enjoy tax system as it is today are those charged with distributing the money, those receiving said money, and those not actually paying any aforementioned money.
Naturally a recipient of another’s largess would prefer to increase taxes. After all, he isn't paying and sacrificing things for his family for someone he doesn't know. Anyone with the authority to hand out money to adoring constituents would also like to see even more available.
Can we raise taxes more? As alluded to earlier, about half of us believe taxes are not high enough, so there must be room to raise them. At some point average taxpaying citizens will eventually just give up and decide to become state-dependent. Isn't that easier than to battle regulators day in and day out? Our fearless leaders don't want that, so let’s tend to focus on demonizing the rich and target them for increased taxes. When there isn't enough there, they have to redefine the rich to a lesser level. On and on it goes until there is no one left to tax.
If we tax the rich at a much higher rate and hope that they continue to earn a boatload of money and pay the increased tax, we could be disappointed in the results. Unfortunately (or fortunately depending on your point of view) many of those earning more have the ability to earn less if they choose, still live well and avoid the tax. As Maryland found out with their surtax on evil millionaires, people with means also have the ability to move, or limit income. The wealthy will just not accept it.
We all realize we need a government. We can debate about how much government is necessary, but we must fund some kind of government at some level, and it has to have revenue to operate. That means taxation of some kind is inevitable. What kind? Our current tax code has roughly 80,000 pages of rules, regulations, procedures and explanations. That’s about 79,700 more than most ordinary books.
What if there were a way to fund government without any income tax returns while not increasing our operating costs? Would you go for it? More importantly, would the congress enact it?
There is a way; it is very appropriately termed:
The Fair Tax
There is no question that no matter how much we detest taxation and government, there is a need for both to some extent. This alternative taxing structure as put forth by former Congressman John Linder and supported primarily by Neal Boortz, national talk show host as well as legions of enlightened followers. With the passage of the new tax law in late 2017, we don't expect much talk about the Fair Tax proposal, which has been kicking around Congress for over a decade. That's unfortunate, because although I like this new tax law far better than the last, the Fair Tax would be much superior in many ways.
Taxes are much too high, as evidenced by the disproportionately disturbing increase in the federal government's share of Gross Domestic Product as compared to the citizen's share. Government has too much money, therefore, taxes are too high. GDP is simply the money spent during the year. We are approaching 50% today. That means that only half of the economy is controlled by the citizens. In 1900, the government spent 7%, and we had the other 93%. No wonder we can't make ends meet anymore, we only have half our money.
Despite the harm the Federal Reserve has done, we do have to concede that at this point in history, there may be no way to return to a less-regulated competitive banking system as we had prior to 1913. If there is, I can't think of it. That said, if we can eradicate the other half, the income tax half of the Evil Twins, the Federal Reserve will have much less power alone. Like Bonny without Clyde, Butch Cassidy without the Sundance Kid, or Laurel without Hardy – the Federal Reserve just wouldn’t have the same impact without its evil companion.
This doesn't mean we lost the war on taxation too. We have a chance.
Significant tax reduction is the ultimate goal, but the Fair Tax does not reduce government spending, or overall taxation. The Fair Tax is a revenue neutral approach which projects to generate as much money as government is now absorbing out of the economy through the myriad of income and payroll taxes currently levied.
Embedded in everything we buy today is income and payroll tax. Like an ingrown toenail to a ballet dancer, the income tax is a constant irritation not only to the businessman, but also his employee. There are far better ways to fund a government. The following is an example of the cost to, and tax impact of an ordinary consumer item if the Fair Tax were implemented.
The Miracle Gizmo
A product comes to market, let's call it the Miracle Gizmo. It is an electronic device the size of a garage door remote opener. The Gizmo electronically locates all of those pesky things we constantly temporarily lose for hours or days at a time. It works either with different color lights, or an increasing sound of your choice. The closer you get to your lost item, the louder the sound, or the closer the color gets to red, you know you're getting warmer. Your keys, your glasses, TV remotes - whatever you program, pocketbook or wallet, your spouse - whatever you might lose, this handy dandy little hi tech doohickey will, after proper programming, locate your habitually lost items.
Like any manufacturer, the management and board of directors of the Miracle Gizmo' goal is to make a profit for its shareholders. (It doesn't matter what is manufactured, "Widget" is a little overused in these types of examples, so we made something up a little more interesting for you.)
In order to bring a Gizmo to market, costs must be calculated to arrive at a price they believe they can charge for it which will be profitable enough to make production worthwhile. It goes something like this - keep in mind this is a very simple example; there could be many more cost categories. This is not meant to be an advanced accounting course.
To estimate the cost of marketing the Miracle Gizmo, we have to consider taxation in several forms, some of which are already pre-considered by our suppliers in advance to arrive at the price they charge us for our materials.
Expense Fair Tax Current Tax
Plastic Molding $10 $10
Elec Components 15 15
Marketing 5 5
Payroll Wages 25 25
Embedded Taxes 0 23
Plant Expenses 10 10
Total Costs $65 $88
Profit Rqr'd/unit 12 12
Fair Tax 23 0
Cost to Consumer $100 $100
First, there is the payroll tax the employer must pay on behalf of the all employees. Employers pay over 7% in tax for every employee for Social Security and Medicare.
Next, there is corporate income tax, which can vary, but would be around 21% of profits.
Next are accounting and payroll expenses. In order to comply with the tax laws, these can be another 5% or sometimes more.
Don't forget the taxes along the way paid by the suppliers. The plastic manufacturer also pays payroll taxes, as do all of the other providers to get the Gizmo on the shelf. These come to about another 5% or so. They are already in our costs of purchasing materials from other companies, but are real costs none-the-less.
The total cost of taxes paid but unseen at the sales register in the production of the Miracle Gizmo is about 22 - 24% per unit. This does vary, but according to very expensive research done by top economists it is calculated to about 22- 23% of everything we buy. We use $23 in this example because that is about the average nationwide.
OK, you're wondering why if we have 5% here, 7% there another 5% here and 21% there, why isn't the embedded tax cost over 40% and not just 23%? Some of those costs are born by others, and passed on in the form of pricing. So a 10% cost to the manufacturer of the electronic components for example may only be an additional cost to Marvel of 3% or so in additional expense. These circular calculations are tough - even for Excel, so we rely on the Beacon Hill Institute at Suffolk University and Dr. Lawrence Kotlikoff, Professor of Economics there to provide the boring details. Suffice it to say, the number is about 23% for more details, see the report from Suffolk University. They've spent over $20 million dollars analyzing this. Since I personally came up with a similar tax cost of production and sale using my own crude analysis techniques, I am very comfortable with their number.
If the Miracle Gizmo costs consumers about the same - give or take a few pennies, then why bother?
The Miracle Gizmo you buy in Walmart will be the same price under the Fair Tax as it is under our current unintelligible complex system. Rather than offering the Gizmo for $75, they must price it at around $100. If they earn $12 on each one sold, they would have to pay tax of about three dollars, which is also embedded in the price of the unit - somewhere.
That settles it. The Gizmo will be priced at $100 per unit because embedded in the cost of production is about $23 in tax that must be paid. This is a real cost of production and must be included, otherwise, Miracle Gizmo will lose money on every sale, or the profit margin will not be acceptable enough to produce the gadget. They can't survive losing money on every sale, - after all, they are not General Motors. They must count all the beans.
Many of you have heard of the Fair Tax, for those who haven't the following is a brief description:
The "Fair Tax" is a national sales tax expected to be set at 23% to be collected by the seller on every new item or service purchased, no exceptions. It is to replace all of the income and payroll taxes currently on the books, it is not in addition to them. When implemented, all income taxes and payroll taxes will be repealed.
Because it is believed that no one should pay tax on the necessities of life, a "PREBATE" will be sent in cash to each citizen with a valid social security number every month. This amount will be calculated and be set at the amount determined to be the sales tax that likely would have been paid at the poverty level. Current estimates indicate that would amount to a check for about $160 or so per person per month. So a family of four would receive approximately $500 or so every month in addition to whatever they may have been able to earn.
NOTE: the prebate for a family of four would be closer to $500 than to $600 because the total amount per household declines a little as family size increases. A family of 10 would not receive 10 times the single amount because 10 people in the same house do not buy 10 times the daily living necessities of one.
Rather than force the expense of the filing of 175 million individual and business tax returns to raise money, why not instead embed that 23% at the point of original sale? Like the state sales taxes that are so prevalent, the money will be collected at the register of retail stores, or at the point of service when other goods and services are sold.
Now if you've followed the logic, you will realize that this is not an additional expense of 23% it is replacing the 23% previously embedded. So rather than offering the Gizmo at $100, Marvel Enterprises, parent company that manufactures the Miracle Gizmo can offer it at $77 or maybe $79 because the embedded tax of $23 or so is not part of their cost equation, and their profit is still $12 per unit sold.
You go into the store, and see the gizmo on the shelf. Its price tag reads $100. You wonder why because you thought it would be cheaper. Well, the Fair Tax has been added at the shelf, so you pay the $100, about the same as before. There is not an additional 23% more at the register. It is still $100. You will pay that plus whatever local sales tax is added at your store – just as before.
Take Home Pay
So what's in it for me you say? If I have to pay the same for the item, where is the consumer advantage? Simple. You're taxes were also a part of the embedded tax that has been eliminated in favor of the Fair Tax. This is a very complex circular calculation.
Maybe you work for a company that provides the electronic components Marvel bought to make the Gizmo. No tax has been withheld from your pay. Maybe you work for a company that delivers to Marvel. Since that company paid no embedded tax, Marvel paid less for the deliveries. It is made up at the point of sale.
The portion of our pay we have been accustomed to calling "take-home" pay will be an expression of the past. If your gross pay is $1,000 per week, that is what will be on your check. You will now deposit into your bank account the full $1,000 instead of the $725 or so that you were used to clearing. So the wages you are allowed to keep has risen to the level of your gross pay. You will have far more money to spend.
Are Fair Tax opponents purposely lying, or just stupid? We think lying.
Don't be fooled by opponents of the Fair Tax. They like to tell us that it is some kind of boondoggle for the wealthy, and another dagger in the hearts of the poor. Even Steve Forbes, who apparently has his own agenda, is spouting this nonsense and, rather than attacking his motivation, intelligence or honesty, let's just say we believe he knows better.
Every new item sold, from real estate to Miracle Gizmos will have this Fair Tax attached to it. It is a replacement of a previously embedded tax, not an additional tax. To the purchaser, it would result in nearly identical cost as before except for the fact that the purchaser would have a bigger personal paycheck every week to buy more stuff.
Arguments Against the Fair Tax
There are many arguments against the Fair Tax, most of which use the same tired old approach to appeal to the more stupid and dependent among us: It is only to benefit the rich; It exploits the poor; it will have to be a lot more than 23%; it will foster massive tax cheating. If you have any more questions about it after reading our FAQ's please buy one of the Fair Tax Books. Neal Boortz wrote a good one.
Objection: I won't receive any more in pay check because my employer will reduce my pay to take home levels since that is what I am used to receiving and he can get away with it. If that happens, I won't benefit me at all.
Answer: It is true to a certain extent that an owner may want to reduce employee pay because employees may be able to accept reduced wages. It would be very unlikely that any possible reduction would be worse than current take-home pay because of normal competition. Salary is a negotiated agreement. Most employers will likely leave wages where they are because their profit margins won't be negatively impacted. Perhaps they would reduce pay slightly - by the amount of the payroll tax they must pay in your behalf now (a little over 7%). They would have no legitimate reason for retaining income tax part of the withholding amounts you currently are losing every week.
The improving economy competition will bring more and better jobs at higher wages. If employers try to take advantage and reduce pay significantly, they will lose valuable employees to others. It is more likely that very soon wages will likely increase at greater rates, not decrease.
Don't forget the Prebate. When you add the Prebate to your wages, you will very likely have considerably more to spend each month.
Objection: There should be exceptions to sales taxes. All new items or services sold should not be taxed. If this includes medical care, food and clothing and all other necessities of life, the poor will suffer more. How callous is that? It just isn't fair.
Answer: Since the price of these necessities should not increase due to the substituted embedded tax, there would be no "additional cost" and so it would not be relevant. Second, the Prebate is designed to allow for United States citizens to receive a check every month for each person in the household equivalent to the amount of tax expected to be spent on the necessities of daily life.
The framers of the Fair Tax believe family comes first. No tax should be paid until household and family necessities have been fully satisfied. The Prebate handles this very practically by reimbursing an amount to each citizen expected to be paid for those taxes in advance and every month.
Objection: The wealthy won't pay their fair share. Interest and dividend income won't be taxed.
Answer: The wealthy are smart, they arrange their affairs to pay as little in tax as possible. Yes they pay a lot now, but often they legally manipulate their finances to pay as little as possible by investing in municipal bonds and tax deferred or other tax exempt income. I help them to do exactly that and am proud of it. Many very wealthy retired people pay very little in income tax. They consume a lot, and so it is very possible that their effective tax rate will actually be higher under the Fair Tax because they will be paying 23% on everything they purchase. Since they buy a lot more than the rest of us, it will likely result in more tax payments, not less. It is kind of a progressive tax because the more we spend, the more we pay, although the rate would be fixed.
Under the current system, the wealthy spend far more, and are not taxed at all on what they spend. The money used for spending is often received by them income tax free.
Some working wealthy will see their overall contributions cut because they could be taxed as high as 37% or so now.
If the goal is to punish all wealthy; then this isn't the tax for us. If the goal is to generate the same government revenues easier, more effectively and more fairly, then it is.
Objection: People will cheat. They will buy things and not pay the tax. Sellers will cheat, they will sell things without registering to pay.
Answer: People will always try to find creative ways to cheat, it is in our nature - but it will be more difficult under the Fair Tax than it is now. Currently around 175 million tax returns are filed by individuals and businesses. Many of them cheat now. Millions more currently work under the table and pay no tax at all. Your friendly neighborhood drug dealer or Mafia hit-man generally works "off of the books", and so they do not pay very much tax - but they do go to Walmart. When they do, they will pay taxes and fund our corrupt government just like the rest of us more honest folk have to do.
So, next time you see your local hit-man at the grocery store, (you'll recognize him, he is the one in the nice suit, with the flat nose, narrow eyes, misshapen ears, and the pistol bulge under his coat near his breast pocket) you can smile and say to yourself; "Finally he has to pay taxes too." Behind him in line may be your underground pharmaceutical merchant - (he is the one with the tattoos of dragons on his neck, and the white residue just beneath his nose-ring). You shake his hand and say "Thank you for shopping at Walmart and paying taxes just like me and for lowering my tax burden."
Objection: All kinds of jobs will be lost. Accountants, IRS agents, bookkeepers will become largely unnecessary and will have to go on unemployment or worse, welfare.
Answer: It is true. Though many businesses still will need to keep books and records - maintaining sales tax records won't be nearly as tedious or time consuming. Specific jobs will be lost in the shift, particularly in the tax preparation and related areas. Consider though that we are not talking about unskilled workers here. These are professional people who could do a many number of different things. The market will be so stimulated by the elimination of the income tax and the resurgence of the economy that most of these displaced workers will find it relatively easy to make a transition.
Objection: The wealthy will get the Prebate just the same as the poor. That isn't fair.
Answer: What is the definition of “fair”? The wealthy spend money on necessities too, they will receive the Prebate. First, if medical, food and clothing were exempted, they would garner an even greater benefit because they spend more in those areas simply because they can. Instead of Rahman Noodles, maybe they buy Filet Mignon. Instead of buying a $10 shirt at Target, maybe they buy one for $200 at Nieman Marcus. But their Prebate is not any more than the poorest of the poor even though they may spend and pay tax on "necessities" many times that of the value spent by the poor.
Another reason not to restrict prebates is that it would take another administrative department in government to oversee and determine who is rich and so ineligible, and who is poor and eligible. This would mean accounting expense for everyone, perhaps even requiring something similar to an income tax return; no one wants that. The poor would also have to bear this expense to justify and prove that they are in fact poor enough to receive the prebate.
Keep it simple. Every legal citizen with a valid social security number gets the prebate.
Objection: Real Estate - The deduction for real estate mortgage interest will be lost. People won't be able to afford their mortgage and will lose their homes.
Answer: Correct - there will be no mortgage interest to deduct from your taxable income - Turn your light on in Marblehead. There no longer will be taxable income, so of course there can be no deductions from a tax that no longer exists. Hello? Anyone home?
But this question is valid: Will it be better or worse to own and pay for a house?
Let’s assume you have $100,000 of taxable income today and pay $10,000 interest on your home mortgage, and all of it exceeded the standard deduction when adding all your deductions, generating maximum benefit from those interest payments. Under current law, your mortgage interest payments would save almost $2,000 in tax. If the Fair Tax were implemented, your savings would be almost $14,000, not just $2,000.
Don't believe it? See the table on next page:
Comparison of Real Estate Deductions and Fair Tax:
2018 2018 2018
No Mort Fair
Deducts Deduct Tax
Income $124K $124K $124K
Deducts 24,000 34,000 - 0 -
Taxble Inc 100,000 90,000 - 0 -
Income Tax Paid 13,879 11,965 - 0 -
Soc Sec Tax paid 7,688 7,688 - 0 -
Med Tax paid 1,798 1,798 - 0 -
Total Fed Tax $23,765 $21,451 - 0 -
Savings NONE $1,914 $23,765
The table depicts a married couple filing jointly. They pay mortgage interest of $10,000. It assumes that in addition to the $10,000 in mortgage interest, that their other itemized deductions are equal to the standard deduction, allowing for maximum benefit in a their 22% bracket, which is not always the case.
Here we add the mortgage interest to the $24,000 standard deduction and so they are allowed a total $34,000 in deductions. If they only have $15,000 in other deductions (like deductible taxes, contributions and medical expenses), there savings would be far less. We show maximum benefit here so we can compare to the Fair Tax and without hesitation conclude that there is no comparison.
Which would you prefer. A mortgage deduction and a savings of almost $2,000 or the Fair Tax and a savings of over $23,000? Is there really any question?
Objection: My state has an income tax as do most states. I will have to do just about as much accounting work as I ever did. It won't save me much in the way of time or tax preparation fees.
Answer: If the states don't change and implement something like the federal Fair Tax, they will very soon have a tax revolt and a non-compliance issue to deal with. They will find it has become much better government policy to do what the people want and employ a similar method. It is possible a state could do nothing. If they don’t alter their codes to match, plenty of other states will change and open their gates to refugees abandoning income tax sates. State income tax laws will evaporate very quickly.
Objection: Real Estate prices will go through the roof when adding 23%, combined with the non-deductibility of mortgage interest, this will lead to a meltdown in real estate prices.
Answer: Which is it? A meltdown or inflation through the roof? First we explained that the mortgage deduction will be irrelevant. When there is no income tax, there is no relevancy to any deductions.
The Fair Tax only taxes sales of new property. When you sell your house, the tax does not apply. (It is the same with cars and trucks. New cars and trucks would have the tax imposed, just as they had all of the embedded taxes along the way to manufacture them, so their prices should remain about the same). So when the developer builds a house and sells it to its initial owner, there will be that 23% tax. Like any widget or Miracle Gizmo, the embedded tax disappears and is replaced NOT ADDED TO the cost of manufacture - or in this case the building. So real estate prices should be about the same, just like everything else.
Objection: Capitalists will profiteer. Sure, you say the prices will drop and then adding back the fair tax will bring them to the same level as today. What about sellers and companies who want to profiteer from this. What is to stop sellers from just adding the fair tax and increase their profits at our expense?
Answer: Competition. Fair competition will stop them. First, a major retailer has already pledged to reduce all of its prices by 23% so that the sticker price you see on their shelves won't change. Since they are one of the biggest retailers in the world, there should be no worries from other retailers who must compete with them or suffer a rapid and painful death.
Could a company just try to profit unreasonably from this? Absolutely, but competition would drive their prices back down, or could force the more stubborn out of business.
There is a profit margin each company strives to earn. In some businesses it is more than others, but in general, if one company finds a way to reduce costs and maintain its acceptable profit margin, its competitors better do the same or they will lose sales and eventually go out of business.
You Liar! - Fair Tax is Really 30% or more!!
Objection: Fair Tax speakers lie. The Fair Tax is closer to 30% or more. If something costs 75 cents and is charged a dollar, that 25 cents represents 1/3 the cost, or 33%, not 23%.
Answer: True and not true. The reason we calculate it as we do is because the current tax included in everything we buy is an "embedded" tax cost. So although the Fair Tax is an add-on tax and is not embedded as is the payroll and income taxes to which it is compared, we have to mathematically equalize the equations for accurate comparisons. We examine the final price paid at the register of a store and "back out" both taxes for appropriate comparison.
If you prefer to claim that the Fair Tax costs 30% and not 23%, you will have to also agree that the payroll and income tax expenses are also about 30% as well. Suggesting that the Fair Tax is really 30% and the embedded income and payroll tax and related expenses are only 23% is completely inaccurate. The conclusion is that the Fair Tax and the embedded tax is the same, give or take a few pennies. The following table shows the tax calculated both ways:
Fair Tax Comparison:
Store Price $100 $100
Fair Tax (Included) $23 none
Embedded Tax None $23
Price Less Tax $77 $77
Tax as % of Price 23% 23%
Tax as % of Cost 30% 30%
If anyone claims that the Fair Tax Rate is not 23%, but in reality much higher they either don’t know about it, don’t care to know, - or are intentionally misrepresenting it to dishonestly enhance their own faulty argument.
Objection: If the government is funded by a sales tax, what happens if everyone decides to stop consuming, or if they save their money and buy less stuff? Wouldn't that be a big problem?
Answer: Consumption has proven to be a far more stable and reliable source for taxation than has income. A good example is after the attack on the World Trade Center buildings on September 11, 2001. Quite a few people lost their jobs, and the economy fell drastically. These job losses obviously resulted in reduced income tax revenues as all times of unemployment tend to do. Income tax revenues fell sharply for several quarters after that attack because fewer people were working at the level at which they were previously.
Consumption did not suffer as serious a decline. Think about it. Working or not, we still must consume. Sometimes we borrow to do it; usually we can buy what we want and need from earnings. In the absence of earnings, we still must consume. Consumption levels dipped slightly in the aftermath of the attacks, but not nearly as much as taxable income.
A consumption tax is a far more reliable source for government revenue than an income tax because it is much more consistent. The tax base is larger because it includes not only wage earning citizens, but also previously underground businesses, illegal ventures, state governments and foreign visitors too.
Wouldn't it be nice to see foreigners on our soil and know that they are contributing to our nation, welfare and tax system? When they run over us in line at Disney World, we can smile and say: “Thank you for paying for my Social Security.”
The only arguments opponents have to counter the logic of the Fair Tax are either disingenuous, self serving, ill informed, or emanate from the "hate the rich at any cost" crowd, willing to suffer themselves as long as the wealthy take one in the head.
What About my Earned Income Credit??
Objection: What about my tax refund. I don’t pay any income taxes and get about $4,000 every year as an earned income tax credit because I don't earn much money. I look forward to my refund every year. Why would I want to lose that?
Answer: First or all, you are not getting a refund. By definition, a "refund" is a "return of some or all of a previously made payment". Since you did not make a payment of tax, the refund sent from the government must be something else. Let’s call it what it is - government subsidy. Your government checks will more than likely increase. The prebate will replace it and will come every month instead of once a year. If for example, a family of four any age would receive about $500 per month. $500 X 12 = $6,000. You just wouldn't get it at the end of the year because you would file no taxes. Your personal inability to budget this prebate responsibly is not a rational variable in this argument.
It helps the rich too and they should pay more
If you are one of those people who are outraged that this helps not only the poor but the wealthy too, I have a response to that too. You are not anyone I care about. If you are not satisfied with having a better opportunity for yourself and more money in your pocket for your family unless the wealthier among us correspondingly suffer as a direct result of your good fortune, (If you wish for Boris' goat to die) well, I guess this wouldn't be for you - and please move somewhere else. We will take up a collection for airfare to any other country you like.
Both the poor and the wealthy will benefit from the Fair Tax. The poor benefit more relatively, but the wealthy benefit too. If you are willing to sacrifice yourself so that the wealthy continue to experience onerous taxation, maybe you should reevaluate your own priorities. To intentionally support a system that sacrifices yourself and your family just so that others will continue to suffer ever greater difficulty and wealth confiscation is a morally corrupt and ethically fraudulent position to maintain.
There are those who profit handsomely yet indirectly from the current system. I am one. I have been offering tax advice and preparing income tax returns for over 35 years. As an Enrolled Agent I know first hand how unreasonable, unintelligible and ludicrous our tax laws are - but I make money working with them. Should I argue that there would be more cheating under a sales tax replacement format? We can cheat now. Certainly I would lose a lot of income should the fair tax be enacted - does that make it right for me to suggest it wouldn't be better – when it is?
I work with taxes because I am good at it, not because I believe they are right. I actually enjoy it because I get to legally help people keep money away from the government. The IRS is oppressive, yet I am better off because of them. I help people avoid them, and they pay me to do that.
Unfortunately many professionals in the field, Enrolled Agents, CPA's Attorneys, and tax preparers who make money from the current insane system often argue that although it isn't perfect, our current tax code is better than any other system in the world. It isn't. So we look to glom onto one of the disingenuous arguments against the fair tax; it will take away the mortgage deduction or eliminate the credits such as the earned income credits, college tuition, energy saving, - which is much of what is wrong with the system in the first place. We know better - or at least the more educated and honest among us do.
Any professional tax person with any experience who opposes the fair tax does so for personal gain, or they are not very good and don't really understand what they do. This is not enlightened self-interest, it is just plain ill-advised selfishness.
Arguments extolling the benefits for the wealthy are enumerated by the opponents. They want to enrage the poor so they will not support this law. Yes, the wealthy will benefit - but the poor will benefit even more because many of them are looking for jobs. Employment opportunities will rise appreciably and benefit the poor far more than the wealthy – who already have good jobs, or don’t need them. They forget that part because it is not in their interest to remember it. Very few people ever got a job from a poor person.
As we mentioned, the low income citizens of this country who receive benefits would receive even greater benefits under the Fair Tax. They oppose it as a group because they are intentionally misinformed, and they don't bother to find out the truth.
Congressmen oppose it because it would usurp much of their power. Should a fair tax be implemented, there would be no deductions. There would be no income tax from which to deduct them. No lobbyist from Iowa would wine and dine a congressman in order to obtain farming credits for planting wheat instead of corn, or for planting nothing instead of wheat. There would be no line on the tax form to take a credit for making fuel derived from grain which no one wants to buy and damages engines. There would be no accelerated depreciation deductions for power equipment over a certain weight because a manufacturer of large equipment has a senator's ear. There would be no tax incentive for buying a crappy new car because General Motors is in trouble again. On and on it goes.
In order for us to have a tax code which makes sense and is a benefit rather than a drain on our economy in relation to other nations, we need congress on board. Citizens can't create tax law.
If the Fair Tax were implemented, maybe congressmen wouldn’t want to stay as long, and so would do more of the right things for us. Congress would not be as lucrative for them without the ability to game the tax code for their supporters. Precisely because of this, it is unlikely they will offer to pass the Fair Tax. A law that limits their own power and influence is not apt to get a lot of support in the hallowed halls of a corrupt congress.
On the other hand, if their terms were limited it would benefit the congressmen themselves and their own families to pass it so that when they must leave, they will be able to live under a more reasonable and understandable tax and economic system.