Dennis Hastert raised eyebrows on Capitol Hill last week when he announced his belief that the Internal Revenue Service and personal income tax should be abolished.
Republican Speaker of the House Dennis Hastert (R-IL) raised eyebrows on Capitol Hill last week when he announced his belief that the Internal Revenue Service and personal income tax should be abolished.
In his upcoming book, Speaker: Forty Years in Coaching and Politics, Hastert reveals his belief that America would be better off under a tax system based on expenditure — such as a national sales tax on goods and services. Supporters of this plan, known as the Fair Tax System, rallied behind Hastert’s comments, acknowledging this is one issue Republicans can successfully seize upon in the November election.
Taken in combination with greatly needed spending cuts, a national sales tax system would lead America into a period of economic prosperity, possibly greater than any before.
In researching the Fair Tax System, I have come to the conclusion that it is a reasonable solution to our current income driven program. Several factors play into this.
First and foremost, under the Fair Tax System, Americans would keep 100% of their earnings. There will be no federal deductions via payroll taxes. All federal revenue will be raised through a national sales tax on goods and services. States will still be able to derive revenue from payroll taxes, but the federal government’s hands will be completely off your income.
Taxes on business would be revoked. This alone will substantially increase capital investment towards expansion. Private sector expansion equals more jobs for the American people and higher wages to boot.
With no corporate taxes, businesses will be able to greatly reduce, and in many cases eliminate imbedded costs on goods to raise profits. This will drop prices on many items and save even more money for consumers. The national sales tax will not rebound prices beyond their original point.
The Fair Tax proposal would simplify the complication of our current tax code — completely eliminating tax returns and deadlines. Federal revenue would fully fund government, including current payouts due in Social Security, Medicare, etc.
Many critics agree that the system seems sound, but worry about its impact on the poor. This has also been addressed.
The federal government, considering cost of living adjustments, would send monthly rebates to families spending less than one would at the poverty level to cover the cost of life necessities and ensure that they do not pay an unjust tax rate.
The final reason this plan makes sense is simply America is a nation of consumers. Rather than punishing the wealthy for being successful (as our current “progressive” tax system does), it will tax based on lifestyle. This makes the entire system “fair” — as liberals so often demand of our tax rates.
If one leads a more extravagant lifestyle, he or she will pay more in taxes. If one chooses to purchase luxury items, such as private jets and million dollar mansions, they will pay their due taxes for that choice. Those who choose to buy a used car and home will pay no taxes, since, under this system, used goods are tax exempt. This creates a truly fair and progressive system based on one’s lifestyle and spending choices.
Despite the “makes sense” essence of the Fair Tax System, the Bush Administration has rejected the proposal as a campaign issue. It seems the president has failed to realize that economic issues will play a major role in the upcoming election — not at the level of national security and terrorism, but an important one nonetheless.
The Bush tax cuts have stimulated the economy and our current period of growth is impressive and solidly on track, but this new, innovative initiative could push us leaps and bounds beyond what we are now experiencing.
There is always the possibility that the Fair Tax System could become a cornerstone of a second Bush term, but an endorsement from the president now could stimulate the support needed to put this issue before Congress in its next session, thus beginning the steps necessary for implementation.
Change is always hard to accept, but considering the current state of American tax laws, it is a necessity.
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