Subject: FairTax Comment: I support the FairTax because it would free a large number of low income people from paying taxes. While they may not be paying income taxes at the moment, they are certainly paying the 22% embedded taxes on everything they buy. They are also paying social security taxes and other payroll taxes which amount to approximately 8% of their salary. Assuming that they spend everything they earn (and as a low income household, we spend everything we earn), that amounts to approximately 30% in taxes overall. The FairTax would be a huge benefit to someone like me who is barely making ends meet and raising three children. One of the main things I like about the FairTax is that people pay the tax when they have money and don't pay the tax when they are low on money because when you have more money, you spend more and when you don't have money you don't spend it. Some have suggested that the FairTax would not be revenue neutral at 23% and that it would actually be closer to 30%. I think a large portion of this confusion is due to whether the percentage is calculated as tax-inclusive or tax-exclusive. If I earn 100% and my income tax is 23%, then the tax is $23. However, if I buy something that costs $77 and pay a 30% sales tax, the tax would be $23. The amount of money is the same at the end ($100). The 23% calculation is the tax-inclusive rate and is used to compare to the tax-inclusive income tax. Tens of millions of dollars have been spent at major universities, including the original study at Harvard that came up with the FairTax plan, to determine the revenue-neutral tax rate, and the economics experts have determined that it would be 23% tax-inclusive. By spreading the tax out over a larger base as well as allowing people to pay the tax when Another concern that has been raised is that the FairTax would be difficult to collect. First, it can't be any more difficult than the current system. Second, 45 states and parts of the rest already have a sales tax collection system. Piggy-backing the Fair-Tax on top of this would be much easier than the current system or even the Flat Tax which still requires a tax return or VAT which requires a large amount of bookkeeping (and which is a horrible idea). The final criticism is that the FairTax would create a black market with people crossing the Canadian and Mexican borders and bringing goods back across to sell tax-free. I agree that this could happen if we added the tax to the current prices. However, critics who use this argument forget that under the FairTax the price of goods would drop, on average, 22%. The price of goods in Canada and Mexico would remain the same (except for maybe US made goods since the price of our exports would drop making US companies MUCH, MUCH more competitive overseas). So, you get a negligible increase in the price of goods. It really doesn't seem likely that people will be going out of their way to engage in smuggling any more than they are now. As for the argument that the FairTax would be difficult to enforce, there may be a small element of truth to this. There will likely be cheating just as there is cheating in any tax system. However, the cheating should be minimal. Large retailers will not be able to cheat, and smaller retailers would be unlikely to cheat if they would lose their businesses and maybe their freedom for a while if they did so. There would certainly be much less cheating than the current tax system. Didn't the IRS say that there was over $500 BILLION in uncollected taxes this year alone and they they were unlikely to collect much of it? I heard of one taxi driver in Chicago a few years back who reported just enough income to earn the maximum refundable child tax credit, so not only did the government lose his taxes on the unreported income, they also paid him thousands in refunds more than he paid in. I seriously doubt that this is an isolated event. Just think of all the revenue pulled in on transactions at Wal-Mart alone. Or electronic retailers such as Amazon.com or eBay. Thank you for your time. Ray Woodward Lombard, Illinos |