Posted by
AuVox on Tuesday, November 25, 2008 12:58:04 PM
I'm a big Hugh Hewitt fan. It was he who got me interested in politics. But we disagree on something very important: The FairTax.
I'll give a brief explanation before addressing Hugh's objections:
For those of you who aren't aware, the FairTax was designed to replace the income tax as a way for the government to collect money. It's “revenue neutral”--that is, it brings in the same amount the current system is designed to do. (I say “designed to do” because vast sums of money that should be collected now, isn't)
The FairTax eliminates all federal taxes, and replaces them with a simple sales tax on all goods and services.
Instead of taxing you on what you make, you're taxed on what you spend. That means you largely control how much in taxes you pay. If you can afford it and want to buy a Ferrari you pay more tax than someone who buys a Geo Metro. Our tax system will no longer punish the successful; it will reward the responsible.
The FairTax rate is 23%, paid once, at the final retail consumer level. It's only paid on new items (once an item is used it can be sold tax-free).
If you're balking at paying an additional 23% on everything that you buy, don't. You won't. The important thing to remember is this: everything you buy already has 20-25% in federal taxes embedded in the price you pay. If all those taxes go away, the actual cost of every item immediately drops by 20-25%. Which means when the FairTax is added, your final cost at the register will be about the same.
The biggest difference to consumers, however, will be in their own paychecks. Under the FairTax, you take home what you make. No withholding. No FICA, no SSA. Which means that your actual purchasing power instantly climbs 25-50%.
There are many, many benefits, it would be great for America and I urge you to read The FairTax Book by Neal Bortz (short, entertaining, and easy to understand) or visit FairTax.org for more information.
From Hugh's interview with Mike Huckabee yesterday, the specific issues raised were about the elimination of the 1) charitable deduction, and the 2) home mortgage deduction.
The short answer is that under the FairTax there is no withholding. There is no income tax. So there is nothing to deduct from.
People who give to charity don't do it for the tax deduction. They do it out of generosity. Who is going to give $100.00 to charity to save 25.00? If people have between 30% and 50% more cash, do you think those who are so inclined will give more or less? When President Ronald Reagan dropped tax rates so people had more take-home pay, charitible giving rose 25%--twice the rate of the previous decade..
The home mortgage deduction is a lovely perk right now to home owners with large mortgages. The interest paid on the mortgage is currently tax deductible. It saves many homeowners a few thousand dollars a year in taxes—that's terrific.
But again, under the FairTax there is nothing to deduct it from, and you get to keep your entire paycheck. Only you can answer the question, “Would you rather save $2500.00 on your income tax, or nearly double your take-home pay?”
I had a lovely home in California, with a $3000.00 a month mortgage (which means my mortgage interest tax deduction was probably larger than yours). For me, it meant I paid roughly $8700.00 less on my taxes those years. But under the FairTax, I would have had roughly $55,000.00 additional to spend, save, or invest. Go ahead, plug in your own numbers.
Which would you prefer?