Fair Tax Keeps Money Working Productively
Tax day, April 15, has historically been a dreaded date for many, but even more so today, as Americans are facing some of the most trying economic times in years. We are reminded that most things in life are taxed, and this trend only seems to be increasing with the recent passage of the 2010 budget, as it could bring the largest tax increase in U.S. history.
Americans have become so accustomed to the ritual of paying income taxes that it is hard to believe that this process was started in the 20th century. In 1913, with the addition of the 16th Amendment, Congress was legally able to collect income taxes and since then, the tax code has become more convoluted every year. With each addition, we find it has become increasingly more difficult to excel economically. During times such as these, we need to be moving toward fiscal stability, not further away.
Our tax code is more than 60,000 pages and is so complicated at this point that most individuals could never file their own taxes, causing an entire set of new problems. The numerous filing mistakes made by President Obama's Cabinet appointees may serve as a perfect example of this. In addition, the code includes loopholes that can be exploited and must be constantly patched. Even after such actions, the burden still seems to fall upon the middle class and small business owners.
Our current economic crisis will not be solved through tax increases or massive government spending. Instead, we must reform the broken tax code by offering Americans progressive alternatives like the Fair Tax.
As the only member of the S.C. Delegation to support the Fair Tax Act, I continue to stand firmly behind this legislation as it would actually simplify our tax system by repealing the current income tax, abolishing the Internal Revenue Service and enacting a national sales tax.
The Fair Tax would replace all federal income and payroll based taxes, taxing us instead only on what we choose to spend rather than punishing those taxpayers who are successful. In turn all income groups will benefit as it will increase wages, disposable income, consumption and the overall Gross Domestic Product.
To put it in concrete terms, take Joe from Charleston who would make an extra $25 if he worked an hour of overtime. If his marginal income tax rate for that extra hour of work is 40 percent, he would only earn $15 and pay $10 in income taxes. If income taxes have been eliminated and the Fair Tax instated, Joe would get to keep the whole $25. So workers as a whole will end up earning more. If workers earn more, they'll spend more.
In addition to American workers and retirees keeping their entire paychecks and pensions, goods would only be taxed once, hidden taxes would be removed from retail items, and the unstable revenue system based on income would be replaced by a stable method based on consumption. Most important, the tax code would be streamlined and transparency and accountability would finally be present. The Fair Tax would usher in a new and much needed period of economic growth, job creation and confidence in the market. Business would boom without harsh taxation restrictions and more of Americans hard earned dollars would remain just that, their hard earned dollars, not the governments.
It is time to stop pointing the finger and begin focusing on fixing our nation's outdated tax system. Leaders in Washington must put politics aside and support common-sense tax solutions that lift the financial burden of overwhelmed families. The American people deserve it and the future of our nation depends on it.
Henry Brown, a Republican, represents South Carolina's 1st District in the U.S. House of Representatives.