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Making April 15th Just Another Day: The Fair Taxation Act

by rock oakeson

Imagine: "A bill to promote freedom, fairness, and economic opportunity by repealing the income tax and other taxes, abolishing the Internal Revenue Service, and enacting a national sales tax to be administered primarily by the States." Thus reads the Preamble to the Fair Tax Act of 1999.

Death and taxes might be things we can all count on, but the way we participate in either can be up to us. We have taken the IRS for granted, but they don't have to exist. There could be other, and perhaps more fair, ways to render unto Caesar his share. One possible way is the Fair Tax Act (H.R. 2525) introduced to Congress on July 14, 1999, by Representatives Collin Peterson (D.-Minnesota) and John Linder (R.-Georgia), with a hearing by the House Committee on Ways and Means on April 11, 2000.

But wait! Isn't the idea of getting rid of the Internal Revenue Service blasphemy?!?! The Americans for Fair Taxation doesn't think so. Their proposal is to replace the federal income tax with a retail sales tax in which the amount of federal tax you pay is based on whatever you choose to spend. In other words, this is a system where one would only be taxed on the final sale of goods and services used for personal consumption. This revenue-neutral taxation would pass legislation that repeals not only income tax, but payroll tax entirely, estate tax, gift tax, capital gains tax, self-employment tax and corporate tax.

Imagine! No April 15th worries! No tax preparers! It might seem impossible to most of us who have lived with the IRS all our lives. But think of it. Those who make purchases-of things like food, appliances, homes, boats, books, CDs, whatever-would pay a higher sales tax than we have now, and that would be that. This sales tax might go from Utah's current 6.7% up to 12%, but beyond that, there would be no other federal taxes to worry about.

According to the Fair Taxation Website (, "support is exploding, breaking records with thousands of new members!" It claims that more than 70% of Americans support this idea, with support on Capitol Hill growing and bipartisan legislation already having been introduced. "We live in a country that was founded on hard work and independence, yet we tax every dollar working people earn. That's not right." The Fair Tax Act would change that. Is this truly an idea whose time has come?

Gwendolyn Bronson, a Midvale-based bookkeeper, tax preparer/planner and registered representative with Walnut Street Securities Inc., has her reservations. "Fair Tax certainly makes tax evasion more difficult. Drug dealers, for example, who make great sums under the table and never report it, would be presented with a new game that they would have to play. Reporting income would no longer be the issue; whenever they bought their fancy homes, clothes and cars, they would be forced to pay their taxes. So that is a good thing. The part I worry about concerns the poor. They need to eat, and I do not think that the consumption tax should be added to food and edible groceries-which I am afraid would be taxed like anything else."

Bronson sees that, with such a taxation, the wealthy would end up paying more simply because they spend more. "If the sales tax was raised to 12%, for example, most of us would probably spend the same on tax as we do now. But the problem is, again, with the poor. Right now they don't have to pay tax on food when they buy it with food stamps. But with this new form of taxation, they might."

When asked what might happen if the Fair Tax system were adopted, only to fail later, Bronson replied, "It is hard to say. I can't imagine us going back to our current system, though. Instead, the government would do what it always does: revise the new system, rather than go back to an older one."

So, with such a radical new idea being considered in Congress, and with such support by taxpayers all over America, it will be interesting to observe what happens. In the meantime, each voter out there will have to think about what a Fair Tax Act would mean to you. Are you a big spender? If so, you might pay lots of federal tax under the new Act. Do you spend very little? If so, you might not be contributing much to the federal tax reserves. Perhaps such a new system might encourage all of us to watch our frivolous spending and become conservers. We might live lives of mindful, economic simplicity after all. And this is not a bad thing.

Let the big spenders foot the bill!