After reading Paul Siegel’s post regarding a national sales tax from yesterday along with many of the responses that were either wrong or misinformed I decided to go ahead with this post that addresses HR 25, the implementation of the fair tax plan instead of addressing them in the comments of his post, which was directed more generally at sales taxes. First, let’s simply state what HR 25 is.

(PDF of HR 25)

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.

Now, what does this mean? We would eliminate the income taxes currently collected from private citizens and businesses as well. This will eliminate the ‘imbedded taxes’ that we all pay for all consumer goods. Imbedded Tax, what’s that? Let’s say we have a transmission that we are going to buy to replace one that has gone out in our car. The price we will pay to ‘company A’ will have imbedded taxes in them that will be passed on to you. The bearings that company A purchases from company B will include the offset of the taxes that they had to pay for their employees to design and make the bearings as well as the taxes that company C, who provided the steel and company D, who provided the machine parts, etc… By the time you see the final price of the transmission, all of those taxes are included into that price, YOU end up paying for the taxes.

Yikes! How much is that we end up paying? According to Dr. Dale Jorgenson of Harvard University, hidden income taxes are passed on to the consumer in the form of higher prices – from an average 22 percent on goods to an average 25 percent on services – for everything you buy. With the Fair Tax plan, the sham of corporate welfare ends. Over. No longer will we be able to give ‘incentives’ to corporations that are then passed on to the consumer, all taxes on you will be visible. And the good part is that after adding the sales tax onto the price and removing the imbedded taxes on goods and services and competition works it’s way through the system to lower costs, we will end up paying roughly the same for the goods we buy now. All while we are able to retain all of our paychecks.

But what about the poor? There are some who say that this ‘fair tax’ is repressive. Unfortunately, that viewpoint is based on many misunderstandings. HR 25 has been called the most progressive tax possible because the poor will no longer have to pay any taxes at all. Each month, a check for the amount of taxes that they would have paid for goods and services is electronically deposited in their bank account, offsetting the taxes that they pay during that month. The imbedded taxes will be gone, so instead of the current situation where the poor end up paying a huge tax bill that they never see, they will be paying no taxes at all. How much more progressive can you get than that?

And, with no more worry about paying corporate taxes, one of the main reasons that businesses take their business to other countries is now eliminated. We can keep more jobs at home and lose fewer jobs overseas, making our economy even stronger.

I know that there are many more questions by those of you that are curious but cautious about such a large overhaul to the system. You can find answers to your questions at the FAQ page of the Fairtax org page. And I know that there are those who will be opposed to the plan because of a variety of reasons. All I ask is that you look at those FAQs before posting your disapproval so that we can discuss things that haven’t already been discussed and countered well by others. I will do my best to address the issues presented as long as you are willing to view the plan with an open mind.

And those of us who have been touting the plan for the past few years, keep up the fight. Thanks to congressman Linder and Neil Boortz for their excellent book on the subject we are getting more and more discussion that I’ve ever seen before.