‘Fair tax’ vs. flat income-tax rate debated

‘Fair tax’ vs. flat income-tax rate debated.

Just a few quick notes

Dubay, a senior policy analyst on tax policy for the Heritage Foundation in Washington, spoke in favor of a flat income tax of about 25 percent.

  1. The flat tax that is in front of Congress (S173) now calls for a 17% tax on income, but does not include payroll (FICA) taxes. If you add FICA taxes to the flat tax, it would be 24.65%; but that doesn’t include the Self-Employed (SECA) tax. Add in SECA tax and the 17% is now up to 32.3%.
  2. The FairTax of 23% on ONLY NEW goods and services already includes both (FICA & SECA) payroll taxes.

Now, almost 50 percent of Americans don’t pay income tax, Dubay said. “They should pay at least something.”

What’s funny is the flat tax is still an income tax and will not change the fact that Illegal Immigrants, Drug Dealers, Prostitutes, Corrupt Politicians, and the Underground Economy don’t pay income taxes. The flat tax is still an “honor system” that requires you to tell the IRS (honestly they hope), how much you have earned in the past year.

The FairTax, OTOH, will ensure each of those previously mentioned groups will “pay at least something” whenever they make purchases such as food, clothing, or other necessities. What’s more, should they decide to spend their ill-earned money on new cars, new phones, iPads, PlayStations, or other expensive goods, they will have no choice but to pay the tax in order to receive the goods.

He also said the fair tax would be difficult to enforce and could lay the groundwork for Americans paying higher taxes.

“Difficult to enforce”? Really? Businesses will collect the FairTax at the register, as they do today with their State & Local Sales Taxes. Businesses remit those collected taxes to their respective State on a monthly basis and each State then remits those collected taxes to the Department of the Treasury. There’s certainly nothing that -sounds- difficult about that process. In addition, both businesses and States are reimbursed for the work they put into collecting and remitting the FairTax. Each will receive 0.25% of the taxes collected.

Now, if a tax that is “difficult to collect” would cause Americans to pay -higher- taxes, wouldn’t it make sense that having a tax that is “easy to collect” would cause Americans to pay -lower- taxes? FairTax is the simplest form of tax because YOU (as a citizen) don’t have to calculate or send any money to the IRS or Federal Gov’t.

No matter how I look at the flat tax, it never stands up next to the FairTax.

I'm the grandson of an Underwood and have been mapping my Underwood Family Tree for a couple years now.

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Posted in FairTax, flat tax, HR-25, S173
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