Letter to the House Ways and Means Committee

To the Committee on Ways and Means,

 

I am a strong supporter of the FairTax (H.R. 25) for a number of reasons.  Lowering my tax bill is not one of them.  In fact, my tax burden would definitely increase under the FairTax plan, based on my 2006 return.  But as the title suggests, I believe this would be more fair, and I believe that a move away from an unfair Income Tax would make the entire U.S. economy stronger, thereby making my tax burden less, well burdensome. 

The FairTax isn’t the perfect solution and isn’t without its own flaws and weaknesses.   But an Income Tax can never be perfect or fair.  In the United States, the Income Tax was unconstitutional and should have stayed that way.  I firmly believe if the citizens had a window into the future to see what the tax structure is like now, they would have never ratified the 16^th amendment. 

Please do not dismiss the idea of a consumption tax based on the false idea that it is regressive, compared to the “progressive” nature of the income tax.  An income tax, especially against corporations and businesses, affects every U.S. citizen, not just those directly taxed. 

Businesses do not pay taxes, their customers and employees do.

A business owner who sets up a store in a low income part of a city to provide food and groceries may make a modest living from the business.  And the families there benefit because the business owner offers the lowest prices around.  But what happens when the business is taxed because of its success?  The owner may opt to take a pay cut out of his profits, but more likely, it will be the employees that will not get a raise, and the prices paid by the low income families will go up.  The new tax will not be paid by the owner, but everyone benefiting from this low cost food and the jobs available at such a market will end up paying for this new tax increase. 

So it is with all income taxes.  I paid almost no federal tax in 2006, but I know that every part of the money I spent on groceries, medical bills, and everything else I purchased cost more because the businesses, employees, and owners were taxed on their income. 

The current tax system has made the average citizen ignorant of how much they pay in taxes.  Most see the deductions from their paychecks but don’t recognize that their “refund” was nothing more than an interest free loan to the government.  The average citizen also doesn’t recognize how much of their pay is lost because of the current tax system.  They see the value of their take home pay, and that 6.5% was taxed for Social Security.  But they are blind to the fact that they are paying 13% to Social Security.  They think their “employer” is paying the other 6.5%, but BUSINESSES DON’T PAY TAXES.  That 6.5% could have gone into their paycheck or it could have gone into lower prices.  It isn’t magically paid by the business without any repercussions to the employees or customers. 

 

I am in favor of the FairTax (or any other consumption based tax) because:

• ·         It shows every U.S. citizen (and non-citizens purchasing in the U.S.) exactly how much government costs.  This gives Congress a level of accountability they are currently shielded from. 
• ·         Those who spend more pay more.  This is in stark contrast from the current system where business owners and the wealthy can protect their money from taxes. 
• ·         Those who do not file taxes, or are intentionally fraudulent will still pay their part in federal taxes regardless.  There may be abuse in the FairTax system, but at one point or another, everyone will make purchases from legitimate businesses and pay their share of the taxes. 
• ·         If I sold a product for $100, I know that I will owe $23 in federal taxes.  If I earn $100 profit, I may make an educated guess on how much of that I owe to the IRS, but with tens of thousands of pages in the current tax code, who can be certain?  There’s s till a chance that the IRS will audit (thereby disrupting the life of a perfectly innocent citizen), and a penalty issued because of an oversight or legitimate ignorance of a certain part of the tax code. 
• ·         It restores integrity to our justice system.  Our “Innocent until Proven Guilty” system was designed to prevent the innocent from being wrongly convicted (under the premise that it’s better to let a guilty person go than to convict the innocent).  The Internal Revenue Service does not work under this principal.  Citizens have endured liens and wage garnishments which have later been appealed (or worse, never appealed).  And there are many cases where the justice system could not convict a person on their actual crime, and the tax code was used instead as a means to incarcerate.  While I’m glad murderers such as Al Capone did end up incarcerated, I fear for my liberties because the IRS can incarcerate when the justice department cannot.
• ·         There is no way to remove Income Taxes from exports.  If an individual exports commodities, he or she still pays taxes and must increase the price of the commodity accordingly.  This means that other countries can export the same product for a significantly lower price.  This makes it illegal or impossible for the U.S. to compete against those other countries.  If you want to see less “Made in China” and more “Proudly Made in the USA”, the income and corporate taxes must be repealed. 
• ·         An accountant should not be needed when making the decision to save for retirement.  A person thinking about saving money should be able to do so without having to figure out which option has the least amount of tax “penalty”.  If a person has $100 dollars, he or she should weigh the option to spend it (with a $23 tax), or save it with no tax.  Under the current system, a person can have $100 (already taxed when earned), and spend it with no tax penalty, or save it and be taxed on the interest earned.  Is it a wonder why the percentage of citizens saving money is so small under the current system?

The United States of America has been a prosperous nation with a great economy DESPITE the Income Taxes, not because of it.  Why hold ourselves back from an even greater and more prosperous nation? 

Thank you for your time,

 

Daniel Koster

~ by Daniel Koster on December 23, 2007.