01 December 2006

Death and Taxes

Coming up on this Christmas season, I am reminded of an incident that took place about a year ago. The company I work for was offered a $750 bonus to each worker that worked on Thanksgiving day by one of our major customers. They had a product line that they wanted to deliver for Christmas, and they needed the components to assemble the products. As you might imagine, there were no shortages of volunteers to work that Thanksgiving day!

When the checks appeared, however, the amounts ranged from $400 to $500. The rest of the money had been eaten up in taxes. There was much wailing and gnashing of teeth, but Uncle Sam and Governor Mike had to get their shares.

Let me stop here for a moment and tell you what this discussion is not about. It is not a complaint about government, governments are necessary and proper to maintain order in the lives of men, and taxes are collected to support them. No anarchist am I, history does not support the notion that left to themselves men will conduct themselves honorably towards each other. Quite the opposite, in fact.

One needs look only as far back as Afghanistan, post Soviet occupation. Once the Soviets were gone, we left, too. The fates of the Afghanis were best left to Afghanis, we reasoned. But politics, as nature, abhors a vacuum. The result was the rise of the Taliban, and utopia certainly did not follow. Financed and supported by the Taliban, poppies (used in opium production) and terrorism soon became the chief exports of Afghanistan. We learned the error of that way on September 11, 2001.

But as I said, we are not discussing governments here, we are discussing taxes. More specifically, the means of tax collection. We currently have what is called a progressive tax, meaning the more you make the higher percentage you pay. At the present time, more than half of all tax revenues are collected by the top 5 percent of income earners. The bottom half of income earners pay little to no tax whatsoever. Given this, it's easy to see that the only thing progressive about the present system is how it gets worse. Under the present system it is quite possible to get a raise and see the real amount of your paycheck decrease due to taxes. It happened to me once while I was in the Navy, the raise we got put me in the next higher tax bracket.

HR25 and S25 are the House and Senate bills to introduce a completely new system of taxation. Unlike the current system that taxes income, the Fair Tax is collected at the point of sale of new products and services. A sales tax, in other words. All other forms of taxation, including payroll (Social Security and Medicare/Medicaid) taxes are abolished. The tax rate, set at 23 percent, is calculated to be revenue neutral, meaning the government's tax receipts will remain the same under the Fair Tax as they are under the current system.

The prices of goods and services will remain about the same since there will be no corporate income taxes. For those who are not aware, the concept of corporate income taxes are a farce. Taxes levied on corporations are carried as business expenses, and prices of the end products reflect that. Since there will be no corporate income taxes levied under the Fair Tax the prices of goods and services will decrease by the amount of corporate income taxes. The results are cheaper products at the point of sale; with the addition of the Fair Tax collected at the point of sale the total cost will remain about the same.

You will see all of your paycheck in your pocket, the only deductions will be corporate health care and retirement plans and state taxes (for the states that have income taxes). Additionally, all income earners will receive a "prebate" calculated on the current poverty rate; any taxes paid for goods and services up to that amount will be refunded to the taxpayers.

You will see, on your receipts, what the cost of government is to you. You will be able to control how much tax you pay based on your consumption habits. There will be no loopholes, no special interests, and best of all, no IRS. April 15 becomes just another beautiful Spring day.

Taxes remain commensurate to wealth, a rich man will go buy an expensive new automobile and pay the tax on it while a poor man will go buy an inexpensive used one and pay absolutely no tax on it. Taxes will only be collected for brand-new goods and services, used goods are completely exempt.

There will be some drawbacks for certain; I'm not claiming the Fair Tax is perfect, only better. One of the drawbacks will be all the tax attorneys and lobbyists that are thrown out of work. There are some valid concerns of course, but all in all I believe the Fair Tax would be a much better method of financing our government's operations than the current tax plan. But don't take my word for it, take a look at the Fair Tax website and see what you think.

Nothing can be done about death, of course, but we can make taxes a little less painful.

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