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Fearless Philosophy For Free Minds: Fearless Philosophy Flashback: We Can Make April 15th Just Another Day

Friday, April 14, 2006

Fearless Philosophy Flashback: We Can Make April 15th Just Another Day

(Original post published here on April 14, 2005)

It’s that time of year again – April 15th, the federal income tax deadline. Time to cross your fingers and hope you filed correctly lest you be visited by your friendly neighborhood IRS agent. Let’s be honest, the current federal income tax is too intrusive, too complex, too costly, and punishes both entrepreneurs and everyday wage-earners. There is a better way. The Fair Tax plan will allow workers and retirees to keep their entire paychecks (minus other non-federal withholdings), close all tax loopholes, eliminate the need for individuals to file tax returns, abolish the IRS with the effect of ending tax audits, eliminate hidden taxes on goods and services, increase government accountability, level the playing field for American-made products with foreign competitors, and allows families to buy basic necessities tax-free.

In 1998, the IRS budget for collecting income tax was $8 billion. In the same year, Americans spent $225 billion to comply with the tax code for that tax year. Businesses would have cut compliance costs by 95% had the Fair Tax been in place at the time and would have eliminate compliance costs completely for individuals. What kind of economic impact would that have had allowing Americans to keep that $225 billion? Would that money have created more jobs, encouraged more investment, or allowed more people to buy a home?

The economists measured the economic affects of adding the proposed 23% tax on goods and services (assuming that all federal income taxes are abolished) to determine whether or not the price of goods and services would actually increase. Some people would probably believe that businesses would selfishly keep the increased profit margin with the elimination of the corporate taxes (another false notion thanks to the media, the government, and public education). Companies would need to keep their prices low to compete in an increasingly competitive marketplace. In today’s market, most large corporations operate on less than a 1% profit margin (those greedy bastards). In the current system, all corporate taxes are reflected in higher prices. Likewise, if those costs disappear, any savings will be passed on to the customer.

According to Dr. Dale Jorgenson of Harvard University the average producer would reduce prices by 20% in the first year under the Fair Tax system and would ultimately keep prices on the end products at about the same rate as before. In the current system, the American citizen already pays these hidden taxes in addition to what is withheld from his or her paycheck.

If the Fair Tax passes, the daily lives of Americans of every walk of life will have the choice of how much taxes they pay based on the financial decisions they make. No longer will investors be penalized for saving or contributing to the market. The only taxes any individual would pay regardless of income status would be the amount of money he or she spends above the determined poverty level for the size his or her family. The tax code will be much easier for the average person to understand and would eliminate the anxiety of potentially being audited by the IRS.

This is only the tip of the iceberg; the Fair Tax has many other benefits. Don’t take my word for it, do your homework and find out for yourself if this bold step should be taken. Visit http://www.fairtax.org/ and do some other independent research as well.

We must be realistic; however. Passing this legislation will not be easy. The most important part of this legislation will require repealing the 16th Amendment, which would make federal income tax unconstitutional. Also, after viewing the Fair Tax congressional scorecard, most of our representatives in congress have not made a commitment one way or another. This means that most of them are unaware of this legislation, have an incomplete understanding of the bill, are waiting to hear from their special interest groups, or hopefully, waiting to hear from their constituents. Whether your representative is for, against, or undecided on The Fair Tax, we all need to let them know what we want.

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9 Comments:

Blogger Dus10 D said...

I used to be a big supporter of the Fair Tax. It is a good plan for improvement of our current tax code. However, I think there is a better plan... and I do not think it nor the Fair Tax will pass.

My plan would be a much larger overhaul of not only the Federal income tax, but of the Constitution, beyond the 16th Amendment (which would be required for the Fair Tax).

The plan I invision would get rid of Federal taxation completely. There would no way for the Federal government to receive money except from the states. So, this would require the reversal of the 16th Amendment, as would the Fair Tax. In addition, the 17th Amendment would need to be reversed. What was the 17th Amendment? It changed how Senators are elected.

Public education is a farse. What did you learn in your high school civics course? This is what I was told: the legislative branch was divided into two houses. One was for equal representation of each state. This became known as the Senate. Each state then was given two Senators. Then, the states that were more populus wanted more representation, so we have the House of Representatives.

That is a load of hogwash. It was explained that way, to me, on numerous occassions, and the people explaining it probably thought it was true, due to their improper education.

Here is the truth. The legislative branch was divided into to houses because we were mimicking the English parlimentary system. It has two houses. The House of the Lords, and the House of the Commons. You need some understanding of the old European feudal system. In that system, the monarchy delegated control of land to various Lords, kind of like mini-kings. When parliment was created, the Lords representation, so the House of Lords was created to give them representation. The people also wanted representation, so the House of Commons was created for the common folk to have representation. Guess what, the Senate was our House of Lords, and the House of Representatives was our House of Commons. Why was this vital? The state governments needed direct federal representation. There was no Federal tax system, so the states actually funded the Federal government, and they needed the Senators accountable to them for proper representation.

So, before the 17th Amendment, Senators were elected by the state legislative bodies. Afterwards, they were elected by the people of the states. In order to go back to no Federal taxation, the states need some direct representation that is accountable directly to them.

Doing this would require the states to let go of some money. Well, the states would fight to keep every last cent possible within the state. This would drop the Federal spending quickly. The only funds necessary would be for defense, the treasury, and the judiciary. The states would handle all of the fees for their legislative bodies, directly.

In 1929, all taxation (Federal, State, and Local - combined) was 10% of the GDP. In 2000, the State and Local was about 10% of the GDP, and the Federal was 20%. It has gone down a bit since then, but not much. Further, During the 1960's, the defense budget was 10% of our GDP. Today, it is under 4% of our GDP. So, of all the things our Federal government should be doing, only a small percentage of the Federal government is going toward those efforts. What does this mean? The Federal budget does not need replaced... it needs cut, and dramatically, at that.

7:40 AM  
Blogger Stephen Littau said...

Dus10 D:

Thanks for the civics lesson! I agree with you about the need to repeal the 16th and 17th amendments for many of the reasons you listed. The original purpose of the senate (prior to the 17th amendment) was so that each state would be represented while the House would represent the people. If we were to repeal the 17th amendment, voters would be required to pay more attention to local candidates running for the state house and the state senate because the state legislative bodies would select 1 of 2 senators at offsetting expiring terms.

When you said that your plan (has such a plan ever been proposed?) ‘would be a much larger overhaul,’ you weren’t kidding! That would be nearly impossible to repeal the 17th amendment because I think most people would see this as anit-democratic (which it is, which is why this would be a good thing) and would take more direct power from the people. Most people would probably prefer a more democratic system because, as you correctly noted, this farce we call public education incorrectly refers to our REPUBLIC as a democracy and most all of our elected officials repeat this lie for their own reasons.

Having said that, I am not convinced that having the states fund the federal government would necessarily reduce the size of government but I think your argument deserves some consideration. Maybe special interest groups would lose some of their influence in the Senate? The reason I have doubts is because as much as the states would like to keep as much money as they could, the states still would want to receive the redistributed funds collected by the federal government. Do you think for a moment that each state would want to be responsible for its own disaster relief when FEMA could provide the relief? This is but one example but my point is the poorer, less populated states (meaning a smaller tax base) would want to get their hands on the money of the wealthier states.

Another problem with this approach is that even if the 16th amendment was repealed, nothing would prevent the state governments from imposing income taxes (which most do). Just as the federal government does now, the state governments would punish success by levying taxes based on how much a person earns. This is immoral plain and simple. With the Fair Tax, at least the individual can decide how much taxes he or she wants to pay based on his or her spending habits. While the Fair Tax is not perfect, it is by far the fairest method of collecting taxes and has a much better chance of becoming a reality than a complete restructuring of our system of government.

12:50 PM  
Blogger lecentre said...

It's advocating tiny government, basically. Dunno how that'll maintain social programs, unless somehow the government will become massively more effective, which is unlikely given 8 billion in a trillion+ budget is a drop i n the bucket.

9:02 PM  
Blogger My Boaz's Ruth said...

I would maintain that social programs are not a constitutional function of our government.

12:20 PM  
Blogger Stephen Littau said...

I agree with you Ruth but for the purposes of this post I'm only dealing with the Fair Tax. If the average person could have the benefit of the transparency the Fair Tax offers, I think a lot more people would be paying more attention to how their tax dollar are spent. If you look through my archive you will see that I have spent quite a few posts on the issue of social programs and government waste.

12:33 PM  
Blogger Gun-Toting Liberal said...

Relax, y'all...

President Bush promised he would overhaul and simplify the tax codes and perhaps even abolish the IRS. I'm sure he's on it ;-)

NOT!

Blog ON...

10:14 PM  
Blogger Sylvenwolf said...

Hmm... How far should we go in abolishing social programs? What qualifies?

As an example, our school system is really a social program. It is provided "free of charge" (currently depending on your tax bracket and state laws) to any and all citizens. While it is expensive, badly run and badly tested (by that I mean that the tests currently used to rate its performance are outdated and absolutely have little bearing on real world results) it also provides the definite benefit of a more educated populace, without which the United States would never have advanced as far as it has. Granted, the average person rides on the proverbial coattails of the high acheivers, people who might have educated themselves without public intervention, but in today's world, everyone does need to have at least basic reading skills, to form a solid foundation on which a society can build. So, while you have societal drain, you also have a definite societal benefit. Should we ignore such practical benefits in favor of rigidity, when the constitution was meant to be a fluid document?

The other side of the coin is that people over-extend this practice to include programs that have guilt-easing value, perhaps, but have been proven to deplete a society's resources more than they help it. Some examples of this include social security and welfare - legislating to help the lowest common denominator while cutting at the support of everyone else.

Perhaps we should have some smarties come up with some formulas to evaluate actual societal benefit over a 5, 10, 50 and 100 year period for each program suggested.

What will keep us moving forward, will help push us forward, strong and bright (or at least adaptable)?

What will rely on "feelings" and morals of a subjective nature to show any long term societal benefit?

What will hurt us on a long term level while band-aiding people's woes on a short term?

Within these programs that realize long-term benefits outweighing their costs, how do we separate the subjective guidelines from the objective? Evaluate the practicality - Based on years of successful and failed social engineering experimentation within and without our republic, we can evaluate what works and what doesn't. Does the idea of having no social programs at all actually work? If so, what drove their creation to begin with?

10:40 AM  
Blogger johnwk said...

I wonder when Neal Boortz, who is promoting H.R. 25, the alleged fair tax, is going to address the fact that H.R. 25 would subjugate our Constitution’s fair share formula [see Article 1, Section 2, Clause 3] for a general tax imposed among the states to fill the national treasury.

That formula requires each state to contribute in a general tax among the states a share based upon its number of votes in Congress, an idea boiling down to representation with proportional obligation, an idea which socialists and the friends of big government fear with a passion.

To subjugate this rule with regard to taxing income without apportioning the tax among the states, socialists worked very hard during the early 1900’s to have the 16th Amendment adopted. Prior to adopting the 16th Amendment, the SCOTUS in POLLOCK v. FARMERS' LOAN & TRUST CO., 158 U.S. 601 (1895) struck down the socialists attempt to tax income without apportioning the tax.

Now, under H.R. 25, the friends of a big socialist government are back and want to also be able to tax property, real and personal, without apportioning the tax among the states as our Constitution commands!

H.R. 25 states the following:

SEC. 101. IMPOSITION OF SALES TAX.
`(a) IN GENERAL- There is hereby imposed a tax on the use or consumption in the United States of taxable property or services.
(b)
Rate-
`(1) FOR 2005- In the calendar year 2005, the rate of tax is 23 percent of the gross payments for the taxable property or service.

But such a tax, as the SCOTUS has repeatedly held, must abide by the rule of apportionment.

And what were some of the reasons our founding fathers adopted the rule of apportionment? Here are some highlights of the case and what it states:

QUOTE:

``The men who framed and adopted that instrument [our Constitution] had just emerged from the struggle for independence whose rallying cry had been that 'taxation and representation go together. ``

QUOTE:

``…and that when congress, and especially the house of representatives, where it was specifically provided that all revenue bills must originate, voted a tax upon property, it should be with the consciousness, and under the responsibility, that in so doing the tax so voted would proportionately fall upon the immediate constituents of those who imposed it.``

QUOTE:

``But the acceptance of the rule of apportionment was one of the compromises which made the adoption of the constitution possible, and secured the creation of that dual form of government, so elastic and so strong, which has thus far survived in unabated vigor. If, by calling a tax indirect when it is essentially direct, the rule of protection could be frittered away, one of the great landmarks defining the boundary between the nation and the states of which it is composed, would have disappeared, and with it one of the bulwarks of private rights and private property.

We are of opinion that the law in question, so far as it levies a tax on the rents or income of real estate, is in violation of the constitution, and is invalid. ``


And, in rehearing the Case, the Court stated:

QUOTE:

``The founders anticipated that the expenditures of the states, their counties, cities, and towns, would chiefly be met by direct taxation on accumulated property, while they expected that those of the federal government would be for the most part met by indirect taxes. And in order that the power of direct taxation by the general government should not be exercised except on necessity, and, when the necessity arose, should be so exercised as to leave the states at liberty to discharge their respective obligations, and should not be so exercised unfairly and discriminatingly, as to particular states or otherwise, by a mere majority vote, possibly of those whose constituents were intentionally not subjected to any part of the burden, the qualified grant was made. Those who made it knew that the power to tax involved the power to destroy, and that, in the language of Chief Justice Marshall, 'the only security against the abuse of this power is found in the structure of the government itself. In imposing a tax, the legislature acts upon its constituents. This is, in general, a sufficient security against erroneous and oppressive taxation.' 4 Wheat. 428. And they retained this security by providing that direct taxation and representation in [158 U.S. 601, 622] the lower house of congress should be adjusted on the same measure.

Moreover, whatever the reasons for the constitutional provisions, there they are, and they appear to us to speak in plain language.``


Neal Boortz, in his propaganda book has not addressed the question of H.R. 25 subjugating our Constitution’s fair share formula by which the various states have agreed to contribute in a general tax among the states. We do know the socialists in America attempted to override the rule of apportionment as applied to taxing income with the 16th Amendment. Now they also want to tax property, real and personal, without abiding by the fair share formula in our Constitution. Just goes to show you how socialists never sleep, always trying to steal the people’s wealth under the guise of taxation.


JWK ___ a proud supporter of our founding father’s original tax reform plan.


"To lay with one hand the power of the government on the property of the citizen and with the other to bestow upon favored individuals, to aid private enterprises and build up private fortunes is none the less a robbery because it is done under forms of law and called taxation." ___Savings and Loan Assc. v. Topeka,(1875).

9:59 PM  
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