Via Terry Dillard, the info below is a kinda shirtsleeve comparison of the Fair Tax, the current Income Tax and the Flat Tax proposal. The same information can be seen in table format here (although the table format might best be viewed in screen resolutions of 1024X768 or above).
Do you want to know why I support the FairTax? Check the various issues below and see how the Income Tax, a Flat Tax, and the FairTax would affect each situation.
16th Amendment
FairTax – Proposes repeal.
Federal Income Tax – No change.
Flat Tax – No change.
Complexity
FairTax – Individuals do not file. Businesses need only to deal with sales tax returns.
Federal Income Tax – Very complex; 20,000 pages of regulations; I.R.S. incorrect over half of the time.
Flat Tax – Withholding continues. Individuals and businesses must still track income and file income tax forms.
Home Business
FairTax – Record all business expenses and is subject to IRS audit? No.
Federal Income Tax – Record all business expenses and is subject to IRS audit? Yes.
Flat Tax – Record all business expenses and is subject to IRS audit? Yes.
Congressional Action
FairTax – 23% Linder/Peterson FairTax Act of 2001 (H.R. 25). Employees receive 100% of pay. Social Security and Medicare funded from consumption tax revenue, not your paycheck. (H.J.Res45) – Will repeal the 16th Amendment.
Federal Income Tax – Used by lobbyists and the wealthy for tax-breaks and loopholes. Used by bureaucrats for social engineering.
Flat Tax – Rep. Armey’s H.R. 1040 has some problems, but is far superior to current law.
Cost of Filing
FairTax – No personal forms are filed. Significant cost savings.
Federal Income Tax – $225 billion in annual compliance costs.
Flat Tax – Significant simplification costs are somewhat reduced.
Economy
FairTax – Un-taxes wages, savings, and investment. Increases productivity. Produces significant economic growth.
Federal Income Tax – Taxes savings, labor, investment, and productivity multiple times.
Flat Tax – Imposes a tax burden some of which is still hidden in the price of goods and services.
Equality
FairTax – Taxpayers pay the same rate and control their liability. Tax paid depends on lifestyle. All taxes are rebated on spending up to the poverty level.
Federal Income Tax – The current tax code violates the principle of equality. Special rates for special circumstances violate the original Constitution and are unfair.
Flat Tax – The flat tax is an improvement over the current income tax, but it is still open to manipulation by special interests.
Foreign Companies
FairTax – Foreign companies are forced to compete on even terms with U.S. companies for the first time in over 80 years.
Federal Income Tax – Current tax code places unfair tax burden on U.S. exports and fails to neutralize tax advantages for imports.
Flat Tax – A flat tax taxes exported goods and does not tax foreign imports to the U.S., creating unfair competition for U.S. manufacturers and businesses.
Government Intrusion
FairTax – As the Founding Fathers intended, the FairTax does not directly tax individuals.
Federal Income Tax – Current tax code requires massive files, dossiers, audits, and collection activities.
Flat Tax – A flat tax still requires personal files, dossiers, audits, and collection activities.
History
FairTax – 45 states now use a retail sales tax.
Federal Income Tax – The 1913 income tax has evolved into an antiquated, unenforceable morass, with annual tax returns long enough to circle Earth 28 times.
Flat Tax – A flat tax just won’t stay flat. Starting out nearly flat in 1913, the income tax grew out of control with top rates over 90% until the Kennedy administration.
Interest Rates
FairTax – Reduces rates by an estimated 25-35 percent. Savings and investment increase.
Federal Income Tax – Pushes rates up. Biased against savings and investment.
Flat Tax – Reduces rates 25-35 percent. Neutral toward savings and investment.
Investment
FairTax – Increases investment by U.S. citizens, attracts foreign investment.
Federal Income Tax – Biased against savings and investment.
Flat Tax – Neutral toward savings and investment.
IRS
FairTax – Abolished.
Federal Income Tax – Retained.
Flat Tax – Retained with reduced role.
Jobs
FairTax – Makes U.S. manufacturers more competitive against overseas companies.Escalates creation of jobs by attracting foreign investment and reducing tax bias against savings and investment.
Federal Income Tax – Hurts U.S. companies and decreases available jobs. Payroll tax a direct tax on labor.
Flat Tax – Positive impact on jobs. Does not repeal payroll tax on jobs.
Man-hours required for compliance
FairTax – Zero hours for individuals. Greatly reduced hours for businesses.
Federal Income Tax – Over 5.4 billion hours per year.
Flat Tax – Reduced.
Non-filers
FairTax – Reduced tax rates and fewer filers will increase compliance.
Federal Income Tax – High tax rates, unfairness and high complexity harm compliance.
Flat Tax – Reduced tax rates and improved simplicity will improve compliance.
Personal and Corporate Income Taxes
FairTax – Both are abolished.
Federal Income Tax – Retained.
Flat Tax – Retained in a different form.
Productivity
FairTax – Increases.
Federal Income Tax – Inhibits productivity.
Flat Tax – Increases.
Savings
FairTax – Increases savings.
Federal Income Tax – Decreases savings.
Flat Tax – Increases savings.
Visibility
FairTax – The FairTax is highly visible and easy to understand. No tax is withheld from paychecks.
Federal Income Tax – The current tax code is hidden, embedded in prices, complex, and incomprehensible. Taxes are withheld from paychecks.
Flat Tax – The business component of the flat tax and payroll taxes are hidden and would be embedded in prices. Taxes are withheld from paychecks.
Any questions?
The FairTax Blogburst is jointly produced by Terry of The Right Track Blog and Jonathan of Publius Rendezvous. If you would like to host the weekly postings on your blog, please e-mail Terry. You will be added to our mailing list and blogroll.
Davido,
Me thinks you lived up to an old military aviation adage: You “screwed the pooch” today with the Dillard table comparing the various tax “suggestons.” The “flat tax” explanations there are TOTALLY bogus, relative to a “true” flat tax.
In previous off-line communications, I’ve agreed to support Fair Tax, **IF** it’s the change that’s getting traction AGAINST the current IRS system.
The flat tax portion of Dillard’s table can be taken apart “item by item” and shown as bogus, I just don’t have time to do it justice. (Similar to your not having time last week for blogging–you know a bit about my current situation.)
Bottom line: It’s an atrocious comparison!
Any REAL change will require a constitutional amendment, AND I’ve seen NO-THING yet about how to keep congresscritters from continuing to meddle.
If one wants to equate the Fair Tax to state sales taxes, tell me which states don’t continue to have legislatures meddling with state sales taxes–one way or another.
Here in SC we’ve just had a change to trade off some reduced property tax for an increased sales tax. Net result, local school boards and county councils are acting to increase property taxes through the back door, and we’ll still be paying a higher sales tax.
It never ends. Can’t see congress doing anything different.
Grrrr!
Well, that’s certainly an opinion, Hugh. However absent any substantive argument, I’ll stand by my tacit agreement with Terry’s post. In fact, I’ll make my agreement with his comparison (specifically the Flat tax comments) explicit. The only substantive disagreement I have with the comparison is that is does not make the distinctions between teh Fair Tax advantages and the Flat Tax disadvantages stark enough, IMO.
And of COURSE there is no guarantee that congresscritters won’t “tinker” with the Fair tax (OR your fav, the Flat Tax), absent any sudden maturity among the electorate. Congresscritters as a whole actually act responsibly, not abuse their power? The electorate actually REQUIRE honest, ethical, moral behavior and proper representation within Constitutional strictures? Gee, if you think there are ANY real constraints on feddle gummint abuse of power you must be smokin’ the funky herb, Hugh.
At least with the Flat Tax–which includes provisions for repeal of th3e 16th Amendment–there’d be a big fat cluebat hitting folks upside the head at the checkout stand.
Flat Tax? Hey, we had that when the Income Tax started, ya know. Look what that’s gotten us.