I hate taking issue with my fellow conservatives. With so much damage being caused by our liberal counterparts, it is dumb to spend time bickering amongst ourselves about details. However, it is important we put up a united front when it comes to solving our nation's problems.
The Fair Tax is a popular conservative proposal to solve our unfair and broken tax code. There are many ways to cheat the current system, if you can find the loopholes in the code.
The Fair Tax involves the elimination of federal income taxes in favor of a high national sales tax. The idea is to more equally distribute the tax burden among all Americans because all of us have to consume goods and services, regardless of our financial status. The theory is sound, however, I think it really overlooks major realities on the ground that not only would create the same problems we are having now, but could even be worse.
Basic reform of our current system is not enough to truly equate the tax burden faced by all citizens of all financial classes. The current progressive system makes only the top half of all Americans essentially pay all of the taxes. That would mean that I pay for myself and some random person I don't even know.
But it gets worse. Most of the tax burden (over four-fifths) is paid by the very wealthy. Now that doesn't seem too bad if you are not personally wealthy. The common saying is "they can afford to pay more."
The problem is the "super-rich" people are usually in charge of large and small businesses that create jobs for everyone else. If we don't reward and incentivize people to invest, then jobs don't get created and we lose our edge to others overseas who will step up.
People also predicate that taxes are the only way we can achieve some type of social welfare in our self-centered and greed-filled capitalist society. This is fundamentally untrue because the wealthy are also patrons of many social causes that improve the lives of the downtrodden. It is one thing to be able to volunteer to build a house for Habitat for Humanity. It is a whole other thing to buy the materials to build the house.
The wealthy also donate to religious organizations that seek to fulfill social welfare services in the community. These organizations operate at much higher efficiencies than the government could ever hope to achieve. We need a fairer tax system so the rich can afford to be more generous through non-governmental means. This doesn't just mean donating to good causes, but investing in new companies and creating new jobs and opportunities in for-profit ventures.
A Fair Tax rightfully assumes that current tax code heavily burdens those in the top half and especially the top 1 percent of Americans. Imagine either how much more the government could provide if we had every person pay (socialist approach) or how much less everybody would have to pay if everyone contributed (conservative approach). Either way it is better than what we have and certainly more fair.
Taxing consumption ensures that everyone pays in a "fair" share of the national tax revenue based on how much they can afford to consume. The super wealthy will still buy their expensive cars, planes and boats and as a result will have to pay more in taxes for those items. The poor who only have to pay for food, medical care and housing will pay in much less.
While in theory it seems like a fair system, I have my doubts that it would be the same story in practice. This is quite a radical reform that must first be asked several questions.
The first is how would we implement a national sales tax and eliminate the income tax? In Europe, countries already have national sales taxes (VAT or Value Added Tax) on top of the taxes they already have. How would we ensure greedy politicians would not just impose the national sales tax and leave it at that?
Another question is how they will address the significant artificial price inflation on all goods that will result? In my experience, any government meddling in the market usually carries negative consequences or inefficiencies.
Finally there are no guarantees that the tax code will not be manipulated to lessen the tax burden on poorer Americans. We would trade one corrupted tax code for another with all types of loop holes and breaks for special interests.
I believe the Flat Tax is the only practical solution to honest and productive tax reform and easiest to convince the American people that it's a simple and good idea. The Flat Tax is as basic as it gets. As a taxpayer, I calculate how much income I made over a period (12 months, six months, three months) and I take a set percentage of that and send it into the Internal Revenue Service. No cheating, no breaks, no complicated paperwork.
The system is also highly adjustable. It can incorporate a progressive scale such as the bottom rate pays 15 percent and the top rate pays 20 percent. The IRS can also collect on a schedule that is efficient, instead of once per year.
Estimates show that even at lower rates for everyone, a Flat Tax would bring in significantly more money to the U.S. Treasury because more people are paying in and the tax burden is being shared among all citizens.
It is also objectively fair. Someone that is unemployed will pay in their 15 percent just like everyone else but since they made no money over the period, they pay no taxes. A person working as a day clerk at a gas station with a modest salary will only pay a modest amount in taxes. For a billionaire who made significant income over the period, their percentage of taxes owed is going to be a very large sum of money.
Whoever makes more pays in more, and who ever doesn't make as much, doesn't pay in as much. That is the definition of fair, but in this case, everyone pays into the system and has equal access to public services as opposed to just some paying into the system, but everyone having equal access to services. With everyone having a little "skin in the game," Flat Tax proponents claim people will take their role in our country's politics more seriously, which probably is a good thing.
Mark Easley is a senior computer science major. He can be contacted at measley@nd.edu
The views expressed in this column are those of the author and not necessarily those of The Observer.
