Fair Tax, Flat Tax and Progressive Tax:
Which Would You Choose?
Principles of Taxation
Fair Tax, Flat Tax, and Progressive Tax: Which Would You Choose?
As Tax Paying Americans, Tax Plans are a very important concept in our lives. Do you feel that there is a better option out there? In this paper we will discuss the differences between the Fair Tax Plan, Flat Tax Plan and the Progressive Tax Plans. We will discuss the Pros and Cons of each plan. What is the best option out there and is there any other version that could be more acceptable? There are many proposals that have been offered in recent years, it is important to do a thorough review of all plans in order to make an educated decision on which is the better option. According to Karen Walby, The federal income tax was established in 1913. It actually required an amendment to the United States Constitution to make it legal. Why? Our Founding Fathers believed that taxing individuals on their private income was economic folly. They were right. The absence of an income tax, a tax on productivity, allowed our economy to grow and individuals to prosper for 124 years. The original income tax legislation affected only individuals earning $4,000 or more per year, at a time when the overwhelming majority of Americans earned far less. The 16th Amendment was eventually ratified and added to the Constitution, and a national income tax was born. (Karen Walby, Ph.D., 2008) Since then, the federal income tax system has become so complex that it requires tens of millions of Americans to seek professional help to comply with it, not to mention the enormous, expensive federal bureaucracy required to enforce and administer the tax. The Internal Revenue Service employs more investigative agents than the FBI and the CIA combined, and with 144,000 employees, employs more people than all but the 36 largest corporations in the United States. (Karen Walby, Ph.D., 2008) Why is it that we would make the process so difficult that it requires so many employees to process? It should be simple. There is a clear understanding that an income tax is required for an economy to grow but there has to be a better solution.
The Fair Tax proposal is a comprehensive plan to replace federal income and payroll taxes, including personal, gift, estate, capital gains, alternative minimum, Social Security/Medicare, self-employment, and corporate taxes. The Fair Tax proposal integrates such features as a progressive national retail sales tax, dollar-for-dollar revenue replacement, and a rebate to ensure that no American pays such federal taxes up to the poverty level. The FairTax allows Americans to keep 100 percent of their paychecks (minus any state income taxes), ends corporate taxes and compliance costs hidden in the retail cost of goods and services, and fully funds the federal government while fulfilling the promise of Social Security and Medicare. (Karen Walby, Ph.D., 2008) How would you like to keep your whole paycheck? Based off of the previous statement, many would say that the Fair Tax Plan seems like a great option. Another Pro of this plan is that the sham of corporate taxation ends, competition drives prices down, more people in America have jobs, and retirement/pension funds see improved performance. A con of this plan is that many jobs in the IRS would be lost. There would still be jobs to work on taking in the money, but many less than what is needed currently. The large sales tax would discourage people from buying things. Our economy is very heavily dependent on consumers, and a large sales tax would probably make some people spend less on things, save more, and pay off debt. In turn, I would probable consider that more of a pro because people would begin to save again.
The flat tax system is an income tax system in which everyone pays the same tax rate regardless of their income....