Saturday, December 12, 2009
By: Ken Hoagland
As published in The Houston Chronicle
More than 200 years ago a new idea about the rights of individuals and
the rights of government began as a tax protest in Boston Harbor.
"No taxation without representation" was the rallying cry that led to
the new concept that all government power and authority should derive
from the consent of those governed. Is a second American tax revolt now
needed to restore that noble but increasingly tattered idea?
Somehow, these many years later a new American aristocracy made up of
both parties is taxing generations of future citizens, not even yet
born, in order to secure mind-numbing levels of national debt today.
With government debt now totaling more than $500,000 per household, the
voice and best interests of the average American seem lost. We have
taken a destructive national path of spending beyond our means that
retards job creation, shreds responsible fiscal policy and undermines
the pursuit of happiness itself.
The second American tax revolt might very well be found in HR25, the
long pending FairTax legislation that most in Washington love to hate.
The FairTax replaces all federal taxes on income with a simple and
transparent tax on personal retail consumption. The FairTax raises the
same revenues now raised but in a way that helps the economy rather than
hurting it and, most importantly, in a manner that restores the role of
the American citizen.
Today our federal taxes are hidden from plain view through withheld
payroll taxes and by embedding tax costs in the price of American goods
and services. The relationship between personal wealth and the cost of
government has been effectively hidden, making almost impossible any
real check and balance on government spending and self-defeating debt.
For candidates from both parties, the promise of new spending buys
elections and to many citizens it is "free money" that is being thrown
at real problems and needs.
The FairTax ends embedded tax costs, puts the cost of the federal
government on every receipt and shifts national taxation away from what
goes into the economy--work, savings and investment--to what comes out
of the economy--consumption. The FairTax expands the tax base so that
nearly every American sees a tax reduction. The average tax bill (adding
together Social Security/Medicare and income taxes) now amounts to more
than 30 percent of what is earned. The FairTax caps taxation at no more
than 23 percent of what is spent. In essence, those who spend more pay
higher taxes without exceptions granted by Congress to the favored few
with tax lobbyists.
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The FairTax protects the poor and middle class in several ways. First, a
monthly "prebate" paid to every family reimburses the FairTax paid on
retail spending up to the poverty level, wiping out federal taxes on
those at or below the poverty line while also eliminating the highly
regressive FICA payroll tax. For a middle class family of four, the
prebate allows more than $28,000 of federal tax free spending a year on
top of an overall tax reduction. Advanced economic modeling shows that
the poor and middle class are the biggest beneficiaries of the FairTax
in terms of tax reduction.
By eliminating all federal withholding and payroll taxes, the FairTax
brings taxation into the open so that average Americans can fairly
debate the cost/benefit of devoting personal wealth to so much
government spending. It is a desperately needed awareness if we are to
control our government. At the same time, shifting away from taxing
labor, manufacturing, investment and upward mobility itself will make
the United States the most favorable tax environment in the world. This
will bring trillions of dollars of private investment, now offshore,
into our economy. Without borrowing against the future earnings of our
offspring, this private investment creates jobs, better benefits and a
new era of economic growth where productive American workers are again
in high demand.
The FairTax doesn't pit the poor against the rich or Wall Street against
Main Street. While every economic level benefits under the FairTax, the
poor and middle class see the greatest immediate tax benefits. If there
are losers they are congressional committees who can no longer sell
pieces of the tax code, illegal immigrants and those in the $1.5
trillion a year underground economy who become taxpayers as consumers
and foreign producers who now enjoy a tax advantage over American
But because the FairTax ends the $1.5 billion a year tax lobby business
along with congressional power over the tax code, it will take another
tax revolt to trump the narrow self-interests of Washington insiders.
The good and bad news is that a relative few, but politically powerful
and influential, Americans profit richly from the corrupted tax system.
With all their profits and power, can they be bested by hometown
Americans across the political spectrum? Only if we remember that the
first American tax revolt gave us that right.
Hoagland is chairman of the FairTax national campaign and a long-time
Houston resident. His book, The FairTax Solution, goes on sale in March