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Americans should consider new approach to taxes

Posted: October 5, 2012 - 4:47pm  |  Updated: October 8, 2012 - 10:28am

In this year’s election cycle, perhaps now more than ever, Americans are being asked to choose between two paths — one leading decidedly left, the other bearing to the right. Partisan issues abound with debates over the size and role of the Federal government in the lives of Americans — whether we should expand entitlements and subsidies or grow business to restart our economy. One thing that isn’t under debate is the lack of available jobs in this country.

With U.S. unemployment holding persistently at 8-plus percent for over 43 months, and an August Bureau of Labor Statistics report that showed a disappointing 96,000 new jobs created last month with four job seekers dropping out of the market for every one who found a job, it is clear that America’s economy needs a boost. With November drawing closer, the national debate continues over how to stimulate economic growth — whether to spend or save our way out of debt. However, many are failing to address a major root cause of the problem — the 73,608-page Federal Income Tax Code, full of loopholes, contradictions and inequities that stymie business growth and polarize Americans into haves and have-nots.

For a growing number of Americans, it is becoming clear that the only solution is replacement of the current Federal Income Tax system with the FairTax, a federal consumption-based tax on what individuals spend, not what they earn. The FairTax is a new, simple, transparent and totally equitable system of taxation that levels the economic playing field, and does away with the $13 billion-plus-a-year IRS bureaucracy.

The FairTax (HR25/S13) is a comprehensive plan to replace federal income and payroll taxes, including personal, gift, estate, capital gains, alternative minimum, Social Security/Medicare, self-employment and corporate taxes with a 23 percent consumption tax on new goods and services — no exceptions, exclusions or exemptions. Even so, the FairTax allows all Americans to consume what they see as the basic necessities of life free of tax.

It does this by providing a monthly tax rebate to all households to ensure that each family unit can consume tax free up to the poverty level, with the overall effect of making the FairTax progressive in application. For a family of four this tax rebate equals $6,960 per year. Included in the Plan is a constitutional amendment (HJR 16) that repeals the 16th Amendment and makes a federal income tax unconstitutional.

Last November, Americans for Fair Taxation ( released estimated incremental revenue projections had the FairTax been in effect in 2009 and 2010. According to estimates developed by Dr. David Tuerck, Chairman of the Economics Department and Executive Director of the Beacon Hill Institute at Suffolk University in Boston, the FairTax would have generated $171 billion more revenues in 2009 and $267 billion more in 2010 than the current federal income tax system demonstrating that the FairTax system would be a more stable and reliable revenue source than the income tax.

It is also important to note that the FairTax ends the triple taxation of Social Security and Medicare funds as they are under the income tax when payroll taxes are initially withheld; the withheld payroll taxes are counted as part of gross income for income tax purposes; and finally, when the promised benefits are finally received. With the FairTax, Social Security operates exactly as it does today, except it is funded from a broad-based, progressive national consumption tax versus a narrow, regressive payroll tax.

With the FairTax, consumers will pay the actual price of a product or service with no hidden taxes, and workers will keep 100 percent of the wages they earn. Additionally, the FairTax will eliminate the 15-25 percent cost disadvantage that manufacturers of American goods face when competing in international trade.

The FairTax slashes business compliance costs and eradicates the tax wedge that drives up the costs of U.S. goods both at home and overseas. Under the FairTax, imported and domestically produced goods incur the same U.S. tax. The FairTax removes all taxes on exports, restoring the international competitiveness of American manufacturers in the global marketplace, thereby further stimulating trade.

What all this means to America is a substantial increase in the growth of the U.S. economy, creating desperately needed jobs. Consider, for example, the plight of young Americans ages 18-29, 1.7 million of which have been jobless for the past year, the highest unemployment rate for that age group since World War II. This is a generation in danger of becoming a “lost generation,” jobless and without meaningful prospects to become productive, contributing members of our society and future leaders of American commerce. The FairTax provides hope for bringing hundreds of thousands of lost jobs back to all Americans, young and old.

Make no mistake — this is not a Democrat or a Republican issue — it is an American issue. And regardless of who sits in the Oval Office, the President and Congress owe it to America to support a culture of dedicated, hardworking people in this country with an expectation of making a fair wage for the work they do. Adopting the FairTax will go a long way towards ensuring the future competitiveness of our nation, our businesses and the people who call the United States of America their home.


Leo Linbeck Jr. is a co-founder of Americans for Fair Taxation.

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radiokenai 10/09/12 - 02:00 pm
Simple fix....

Send that Bafoon we have in office back to Kenya with his cabinet in tow! Then repeal the crap he shoved on the American people!

gfds98765 10/09/12 - 04:33 pm
Forward (raspberry) lets go BACK TO 1861

Forward (raspberry) lets go BACK TO 1861

1861, the government approved the first income tax, at a flat 3 percent rate for any income over $800 per year.

In 1913, the16th Amendment to the U.S. Constitution re-introduced the federal income tax for people who made more than $500,000 per year.

In1916, the law was amended in such a way that made anyone who earned income subject to paying income taxes.

Sam Von Pufendorf
Sam Von Pufendorf 10/11/12 - 09:54 am
A small correction to taxes gfds98765

In 1861 $800 would be about $20,000 when adjusted for inflation.
The tax rate in 1913 applied in seven separate tax brackets (figures adjusted for inflation to 2012 $)

Rate Earnings
1% $0 - $20,000
2% $20,001 - $50,000
3% $50,001 - $75,000
4% $75,001 - $100,000
5% $100,001 - $250,000
6% $250,001 - $500,000
7% $500,001 - above.

The change that occurred in 1916 is more brackets were added to cover more incomes.(Again adjusted for inflation)

2% $0 - $411,706 and adding 1% for each of the other tax brackets with the top bracket of 15% for those making $41,170,000 and above.

The following year (1917), the top bracket income was lowered to about $35 million (again, adjusted to 2012 $) but the rate was slightly increased ... to 67%. The bottom bracket was still 2% (on 0 - $35,000) and had twenty higher brackets topping at the $35 million @67%.

Since the ratification Article 16 (16th amendment) it has been a progressive tax.

If your reference to the 1861 tax on incomes greater than $800 of 3%, I can only assume that you would be in favor of a flat tax. Can you please explain to me how you believe that to be a fair and equitable form of taxation?

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