Revenue base will be increased
By Special to the Florida Times-Union, Jacksonville
With all of the attention given to the Fair Tax initiative, I continue to be amazed at the incorrect interpretation by individuals who choose to see it as a negative alternative to our current taxing system.
The $22 million spent on research was dismissed as invalid. The truth is that the research was done by top-notch economists from Harvard, Boston College and other well-respected research institutions. The models used have been examined and re-examined and proved to be an honest evaluation of the future positive effects of a national consumption tax vs. continuing to tax income.
Those who oppose the Fair Tax plan routinely use the paper written by William Gale for the Institute on Taxation and Economic Policy.
This is the same study used by the President's Commission on Tax Reform. Here are the details on the study: The work did not model the Fair Tax plan as written. The ITEP keeps its sales tax rate a mystery. It will not share the details of its methodology. The work relies on static modeling and is not designed to model consumption taxes. This research was simply a jaded evaluation with the outcome predetermined.
The Fair Tax plan does not suggest that it will lower or raise individual taxes. It is revenue neutral. However, the revenue base will be greatly increased.
Using models available for all to see, the Fair Tax base for 2007 was $3,286 billion, $358 billion more than the tax revenues generated by the taxes it repeals.
This is the primary reason that the Fair Tax plan can raise the same amount of revenue, at 23 cents on the dollar, and fully fund all current government programs, including Social Security.
The prebate, administered by the Social Security Administration, completely untaxes the poor.
Potential loopholes have been addressed, e.g., Social Security numbers required, citizenship required, validation of the individuals within the household each year validated, etc.
As for the top end, products or services bought outside of the United States will have to pay the appropriate retail sales tax or tariff. Along these same lines, $11 trillion that is now not taxed in the United States will be brought back into the country, because there is no economic reason to shelter the asset.
As for compliance, the Internal Revenue Service now has to monitor 140 million individual tax returns and 20 million business returns. Does it not make common sense that the appropriate government entities will have an ability to more closely watch the potential cheaters with far less returns to examine?