FairTax Prebate: Fair or Foul

The prebate is an integral part of the FairTax, and essential to one of the fundamental principles upon which the FairTax is built, namely an individual’s right to the fruits of their labors comes before any claims the federal government might have upon that person.  In other words, under the FairTax, citizens are allowed, and expected, to take care of themselves and their families first, and then, after those expenses are addressed, provide a portion of their “extra” resources to fund the essential functions of our National government.

The prebate isn’t a handout, entitlement, or any redistribution of wealth.  It is simply a return, to each person, the taxes paid on purchases of “essentials”, as defined by the poverty level.  Each month, each individual, or household, would see a “return” of the taxes that will be collected as they make purchases of essential goods and services.  It is money that belongs to the individual, and money that, under a perfect system, would not have been collected by the federal government in the first place.

It is no more a handout, entitlement, or form of welfare than the present system of income tax refunds that the IRS utilizes every April 15th.

But many opponents of the FairTax are trying to misrepresent the prebate as a means of undermining the FairTax itself.  Some of the more common claims, such as those used by Senator Sherrod Brown of Ohio, is that “the prebate plan would cost the federal government between $600 and $700 billion annually, making the total costs of the prebate larger than any other category of federal spending.”  Mr. Brown apparently doesn’t realize that the return of monies to which you are not entitled isn’t a cost, it is fair, honorable, and just.

FairTax detractors also like to maintain that the prebate will be a source of large-scale fraud, and, to be truthful, the potential does exist.  After all, we have, under the present system, cats, dogs, frogs, unicorns, and all sorts of other

mythical creatures, registered as exemptions or dependents for Earned Income Tax credits.  Not to mention the legions of dead people, particularly inIllinois, who file returns every year.  Apparently with great success.  At least under the FairTax program, those wishing to defraud the system will have to file every year, provide valid social security numbers, and risk detection when records don’t match up.  Something that the current system, by its own admission, has been incapable of doing as evidenced by the cases of Secretary Geithner, Congressmen Rangell and Daschell, and others who “avoid” paying more than $350 billion due under the current income tax system (IRS)   Since the total “size” of the prebate is estimated to be around $600 billion, a fraud rate of more than 50% would have to exist in order for the FairTax to see the same levels of fraud and evasion tolerated, or condoned, under the current system.  Rather than being a haven for tax fraud, it seems likely fraud will be less, not more, under the FairTax.

Using a similar logic, other opponents of the FairTax claim that the estimated cost of the prebate would be approximately $600 billion, larger than the budgets of Agriculture, Commerce, Defense, Education, Energy, Homeland Security, Housing and Urban Development, and Interior combined.  And the size of the prebate alone is reason enough to dump the FairTax.  Leaving aside the fact that these monies are never “owned” by the government, what they fail to share with the audience is that the current income tax refunds, exemptions, and loopholes amounts to more than $945 billion, “costs” that would be eliminated under the FairTax.  Using our opponents logic, the Fairtax, by itself, could “save” more than $300 billion per year, which could be used to pay down the National Debt.

Opponents of the FairTax depend upon an uneducated, superficial, electorate to get away with their misrepresentations and distortions, and no where is that more true than when it comes to the prebate and its impacts.  Rather than letting them get away with such blatant disrespect, opponents of the FairTax, like Senator Sherrod Brown, need to be called out and chastised for their venal and malicious behavior, dishonesty, and disrespect.

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Posted in Fact, FairTax, FairTax Act of 2011, FairTaxFraud, Income Tax, Myth, Prebate, Uncategorized
7 comments on “FairTax Prebate: Fair or Foul
  1. Steve Ross says:

    Dear Kicker 51…

    Is the prebate the current whipping boy? Have there been other such issues – now settled? My point: call it for what it is. When Senator Brown’s comments are effectively challenged – he’ll just pounce upon another non-existent issue.

    BTW – I went to Johnny Appleseed Junior High School in Mansfield, OH with Sherrod Brown! Back then we were in agreement on all issues. Then he went onto Mansfield Senior – I went to Malabar. I’m convinced that’s where his change occured.

  2. Ed Pickard says:

    I totally agree with the logic presented in this posting. I fail to understand WHAT does Senator Brown and other disenters of our Fair Tax bill gain by not seeing the value in the “Fair Tax” bill. They should be asked… “What’s in it for you to remain with the same failed system?”

  3. Yes, the prebate has been a whipping post for the liberals for quite some time now. It seems they’ve always claimed sales taxes are regressive (which, I agree, they are), and they claim they want a progressive tax system (which the FairTax provides – with the prebate), but in the same breath they shoot the prebate down; and often because they consider it welfare or an entitlement. Yet, they often refuse to understand that the prebate is the most economical means of “untaxing” poor and middle-class families.

    Thanks for this awesome piece, Steve. I added the link to our Prebate Page

  4. John Pierce says:

    the prebate is already figured into the 23% rate. That alone puts it outside the realm of entitlement. It is simply designed to untax all US citizens up to the poverty level.

  5. Gretna says:

    Why not just forget about the prebate and all the gov’t machinery needed to make it work and police for fraud, and then reduce the FAIRTAX 23% by ‘X’ percent.

    • FairTaxer says:

      @Gretna, via Tom Stark:
      Because EVERYONE gets the Pre-bate regardless of income for one simple reason…the necessities of life for every human being should not be taxed. The only practical means to make sure NOBODY pays for the equivalent of those necessities, the pre-bate serves the purpose well. Compared with the current bureaucracy – IRS, etc. – the number of people to process the pre-bate is rather small. Once the index card is provided by each citizen with the number of people in the household, all the checks are set for the whole year. In fact, with electronic deposits, once the data is entered the system runs itself (almost).

    • FairTaxer says:

      Gretna, I have to ask: What about the “Gov’t Machinery” needed to police for fraud? Are you aware that the IRS is that “policing agency” right now and that they put an additional $1 Billion Dollar drag on our economy each year? Removing the prebate mechanism from the FairTax would lower the FairTax rate by about 3%, but then that would add back in the difficulty of choosing who gets tax breaks and who doesn’t. And, it would give back to Congress the power to pick winners and losers. Is that something we really need? I think I will stick with the prebate. Thank you!

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