Fair Tax?
I’ve been hearing about Fair tax lately and about how it is a better solution to our economy than the current income tax. This has got me thinking about the dynamics of such a system. I am not an economist or anything, but I try to be analytical about anything that deals with money when it comes to laws and such.
Here is what i have heard about Fair Tax, 1) it replaces the income tax and payroll tax system, 2) it would allow workers to keep all their payroll money, and 3) it would allow the government to get more money because taxes would come from the expenses of citizens and non-citizens alike.
While all this sounds pretty good and fair, I must be honest and admit that I am still not convinced. My girlfriend did a speech in class about this subject, and even hearing about her research, I still feel that the fair tax system is overly simplistic. I don’t mean that a tax system need to be complex, especially not as our current system, but i am not persuaded by what i read about it. Frankly, the details are lacking. I do, however, agree that some reform is needed. I hate sounding like the conservatives who fought against the health care reform bill, but in this case i have to, i don’t have a well thought out alternative, yet i cannot back the current representation of Fair Tax, it just isn’t complete.
Here is where i have issue with what Fair Tax is suppose to do:
I can see how replacing income tax with a Fair Tax system could be beneficial in at least making things simpler, but for it to replace social security, Medicare, and etc. just doesn’t seem feasible. I would really like to see their numbers on how they believe that everything would be covered with just sales tax. I know that it is based on the fact that people will continue to spend at the current rate or even higher, but i find that to be an “if” i’d rather not rely on. I also don’t believe this system would pull us out of the recession, and that is something that needs to be addressed before any system that depends on the market is put into place.
One point that is stressed over and over in all campaigns for Fair Tax is that workers would be able to keep all of their paychecks. i find holes in this statement based on the fact that i don’t believe a reasonable sales tax would cover what the social security, medicare, and other payroll taxes cover. But the other issue is that no one really keeps all their paycheck unless they do not get health insurance or any benefits from the company they work for, and if they don’t then they probably have to pay for those things from a third party, though with an increased sales tax, those benefits have just become more expensive. Sure, it sounds great to say that you can keep all your money, but that is misleading, because your need to spend has not been affected, but the price of those expenses has been. Individuals with low incomes are included in the Fair Tax system through a government deduction on expenses, but i don’t really see how this would be any different than an income tax return, other than the fact that you would now have to present your monthly expenses to the government, which would only lead to more government intrusion. So while overall the Fair Tax system WOULD be simpler than the current Income Tax, i believe it has the potential to be just as complex when it comes to being fair to those who have low incomes and necessary monthly expenses.
On the third point my issue deals with the IDEA of Fair tax. When it really comes to the root of issue, Fair Tax is about taxing EVERYONE. My issue with this is not so much about ignoring holes in the current system, but really about the extent to which they are played out by proponents of Fair Tax. Currently, payroll taxes only affect those who are legally allowed to work in this country. This is presented as being a problem because immigrants and tourists allegedly get our benefits but do not contribute to the cost of providing them. While this may be true to some degree, i don’t entirely buy it, after all, regardless of your citizenship status, to work in this country you HAVE to have a social security number, among other things, AND legally allowed to work, so anyone who has those things already contributes to payroll taxes, so it is covered. You can’t get medicare and social security if you are not legal, and if you are legal, then what difference does it make? So what it really boils down to is creating a system that taxes immigrants (who are not legally ALLOWED to work, this does not mean they are illegal immigrants, however) and tourists. And this is something i do not agree with. If you are an immigrant in this country with a student visa, you cannot be legally employed, and if you are a tourist you do not stay long enough to work, so why should you be taxed for benefits that CITIZENS and documented workers get? i do not believe it is fair to tax other people for our benefits. If someone is a tourist that means they already pay taxes in their country, so why should they come to the United States and be taxed again? If someone is working illegally, then their income comes from the money that a company or individual has already paid income taxes for, and illegal immigrants do not come with social security cards nor any rights to benefits such as social security and medicare, so why should we tax them for only taking advantage of illegal jobs provided by crooked citizens?
In the end, i feel that there are many questions and details that are just not addressed by the proponents of Fair Tax, because their focus is on propaganda and campaigning for a cause, not writing the legislation that would have to be passed. (this was the same issue with the health care bill, a lot of talk was about politics, not about the facts) I will admit that I may be missing a few things about this subject, i am not an expert, but i still do not feel my questions have been answered by the research i have done, so if you are a supporter of Fair Tax and can provide answers or explanations to my points, then i welcome your aid. But until then, i am just one more skeptic caught in the middle of partisan warfare.
