Subject: FairTax HR 25 Comment: An income tax system has proven to be one of the worst ways to collect revenues. For compliance, every working individual must track all sources of income and expenses. Then figure out their withholding using a cryptic form that effectively hides the real tax rates etc. from view. Then tax time every year to process all that information, compile it all and either pay someone or figure out their tax bill, file taxes, and pray they did it right. Businesses must collect withholding and report that to the employees and government, every business has to track its inventory, its capital expenses, reimbursed expenses, payroll taxes, benefits, whats used for personal versus business use, etc. etc. Every decision is made with consideration of tax implications. The problem with an income based tax, is it requires significant tracking, rules and regulations, to make it 'fair', and by definition is susceptible to being complicated/gamed by everyone's special case or need. The result is, a system that starts with a number (income) and has to be adjusted, deducted, exempted, and then credited to even figure out what the tax bill is, and then supply all the evidence for that. A consumption based tax, already implemented by many countries, and most states, greatly reduces the number of collection points for tax, while at the same time increasing the number of participants in the tax, AND at the SAME TIME reduces the reporting requirements. Instead of figuring how much an item needs to be taxed, and having to figure out every person's special needs, it is oriented by how much is consumed. Gasoline is taxed by the federal government, many states add other taxes to tobacco/alcohol, so although this system should NEVER include in itself those special taxes, it would be easy to apply special excise taxes OUTSIDE of this system as is already done. Thus the code is kept SIMPLE. By taxing retail only, you do not involve individuals in the tracking of used goods or gifts, although they will be able to see how much tax was charged. If you buy a gift, it is already taxed, if you sell a used product, it was already taxed when bought new. Businesses will benefit by only having to track ONE THING, what goods/services were sold (which you bet they already track), and then they multiply ONE number to calculate their tax burden. They do not have to worry about applying losses/gains, capital expenses, what is personal/what is business, just how much was charged for the service, or how much was charged for the goods. How simple is that? In a global market, it will have a very positive effect, since we are a global leader, on bringing global businesses back home. The income tax system never considered the implications to world trade in a much different trade environment. These days, it makes sense to say, if you want to sell goods in America, you will be taxed right along side with American products. |