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FLAT TAX? FAIR TAX? Something’s Gotta Change

One of many things I like about conservatives is we fight well with each other. Unfortunately, at times we fight more with our side than against anyone else. Spirited debates are part of our game, however.

So as we embark on yet another holiday season with retail businesses hoping their Christmas sales will keep them in the black — this is how Black Friday was named — all this consumption got me thinking about our tax code and the wish list of things we could put into legislation if we had enough Republicans with the spine to do anything.

Stop laughing. It’s the Christmas season, a time for hope.

Our tax code is 73,954 pages and growing. The same dollar can be taxed four separate times with the Capitol Gains Tax, the Corporate Income Tax, the Personal Income Tax, and the Death Tax. Why? We have brigades of lobbyists in Washington, D.C. who make money adding layers upon layers of rules and regulations for their clients so companies like GE, who filed a 57,000 page tax return, ended up paying nothing in corporate income tax.

If we scoff at anyone reading a 2,000 page healthcare bill, why would anyone not barf up a lung at the prospect of combing through a tax tome almost 30 times that size? And what of the cost to file, record, and pay all those taxes? Economist Art Laffer says we basically spend about one third of our economy just on the filing. Oh, but what good we could do with that money.

Of the many ways to simplify our tax code, two reign supreme among conservatives and libertarians: The Flat Tax and the Fair Tax.

The Flat Tax is just that. Whatever money you make in whatever capacity (employed, self-employed, business, etc.) a percentage of that is taken out in taxes. That’s it. The actual percentage varies among many sources but I’ve seen it range from nine to 15 percent.

The variations and heated debates come most often when discussing mortgage interest and charitable deductions. Deductions seem to be Flat Tax opponents’ biggest problem, saying the American taxpayer wouldn’t support it because too many would lose money (i.e. pay more in taxes) without these long-standing “gifts.” To me, this is a minor problem because if you only pay e.g. 10 percent against your income, most people will have a sizable net gain compared to our existing progressive tax system.

Regarding charitable deductions, while I understand the concerns of churches, charities, and places like Goodwill, I often wonder if we’re missing the point on charity if we’re only doing it for the tax write off. The other solution to this is make the percentage higher and still allow for the more popular deductions. Regardless, can you imagine the financial sonic boom that would shake planet Earth if the US went to the Flat Tax like 24 other countries?

The other tax is called the Fair Tax or National Sales Tax. This gets a bit more complicated. Instead of taxing you when you earn money, you are taxed when you spend it — on anything. Spend five minutes looking into the Fair Tax and you’ll see a heated battle as to whether the Fair Tax is 23 or 30 percent. So, if you make $60,000 a year you keep $60,000 a year. But when you buy a $20,000 car you’ll pay at least another $4,600 in taxes on top of that. Fair Tax supporters say, and to a degree I think they might be right, that there’s a still a net gain.

Here’s another problem, though: Via the 16th Amendment we already have an income tax so this would first have to be repealed. Knowing well the last time an Amendment or anything of import that was repealed or overturned, and you’ll understand the bleak odds of saying goodbye to the 16th Amendment.

So, the first problem is that if we all agreed to put the Fair Tax in place with a promise from Congress that they’ll do away with the income tax, would it be a stretch to think our elected and appointed representatives may treat that promise as they do, say, a wall on our southern border? Having both an income tax and a national sales tax makes us Europe. I don’t want to be Europe.

Another thing: Adding at least 23% to your daily expenses is a lot so Fair Tax supporters have come up with the idea of prebates. Families across America will receive a payment from the US government to get them above the poverty level so everyone pays the same percentage “at the cash register.” By the way, the good folks at Health and Human Services are the ones who determine who qualifies for this prebate, and how much you get. Yes, there’s nothing like opening up yet another avenue for corruption to go with your coffee in the morning.

As Dan Mitchell of the Cato Institute said, we might have a compromise in that we first implement a Flat Tax and once momentum has grown, we repeal the 16th Amendment. For me, that’s too much change and too much work for those we know in Washington who just love the way things are going.

As for me and my house, we will choose the Flat Tax.



Michael Cummings

Michael A. Cummings has a Bachelors in Business Management from St. John's University in Collegeville, MN, and a Masters in Rhetoric & Composition from Northern Arizona University. He has worked as a department store Loss Prevention Officer, bank auditor, textbook store manager, Chinese food delivery man, and technology salesman. Cummings wrote position pieces for the 2010 Trevor Drown for US Senate (AR) and 2012 Joe Coors for Congress (CO) campaigns.

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