Tax Issues: Current Vs. Flat/Fair Tax

While we're on the subject, it would be good to explore an alternative tax system that has been floating around for a long time but hasn't gotten a whole lot of traction...until recently. But first, let's look at our current tax system:

Yeah, there's a reason you hate it.

From what I've read, there are two major alternatives being thrown around now, a flat tax and a fair tax. In a nutshell, the flat tax is a set tax rate on income for everyone. So, everyone pays 15% (or whatever the number might be) on their income, whether it's $25,000 or $2.5 million. The fair tax is basically a national sales tax - it's 23% on all goods and services sold.

What are the differences between the two?

For those who would rather read it, the main difference between these plans is where the tax is collected - at the time it is earned, or at the time it is spent. Both of these systems are far more fair than our current progressive system, where the higher income earners are taxed far more heavily than those who earn less. While that system may sound fair -- to those who make very little, that is -- it is inherently unfair, and any objective examination of the subject will support that.

The Heritage Foundation did a thorough examination of the flat tax in 2005 - if you're interested, they've got a load of information on how such a tax would affect families, businesses, individuals, and companies. The bottom line is that, compared to our current system, it is much more fair, pro-growth, and simple. Isn't that what we want?

Regarding the fair tax, here's a good explanation:

I'm not 100% certain, but if I had to choose one today, I'd go with the fair tax. It's simple and fair, and it doesn't penalize success. I really like how it would tax spending rather than income, too. If I make a bundle of money but save a lot of it, I don't think I should have to pay as much as someone who makes the same money and spends it all. That's penalizing my prudence, and I think that sucks. And, a tax on the spending would have the added benefit of catching a bunch of tax dodgers who don't currently pay income taxes (i.e. illegal immigrants, drug dealers, Obama Cabinet members) but who do buy goods and services. But, I'd take either one over our current system in a heartbeat.

An increasing number of nations around the world have adopted some kind of flat/fair tax, and they're doing really well with it. Go here to see more on that.

The key is to translate this momentum into action. Call your Senators and Representative and tell them your thoughts on our current tax system, as well as the flat/fair tax. Watch their votes, and reward the ones who stand up for fiscal responsibility. Vote the rest of them home.

It will not be easy to dig out such an entrenched system as the IRS and our tax system, but if the American people demand it, it is possible to make this change and unleash the American economy.

Wouldn't that be nice for a change?

There's my two cents.


Related reading:
http://www.townhall.com/columnists/NealBoortz/2007/11/27/the_fairtax_--_the_truth?page=full&comments=true