How can Congress replace the income tax?

How can Congress replace the income tax?

OCALA, Fla., February 11, 2014 — If one thing is always unpopular in American life, it is paying federal income taxes. A number of alternatives have been proposed as fairer, simpler, or more efficient ways to raise government revenue. One of them is called the “fair tax.”

The fair tax is a national sales tax proposal designed for simplicity and to treat all individuals equally. Whether they know much about it, the odds are that many have heard arguments against the fair tax. One of the most popular claims is that a national sales tax would be regressive, and therefore burdensome to the impoverished.

“The prebate, which grants taxpayers an up-front tax refund each month, addresses that concern directly,” says former New Mexico Governor Gary Johnson. “By refunding the tax, in advance, each month for purchases of necessities up to the poverty level, everyone is treated equally, regardless of income or assets.”

One of America’s strongest libertarian voices, Johnson stood as a candidate for the 2012 Republican presidential nomination. He ultimately left the GOP to run as the Libertarian Party’s standard-bearer. Today, Johnson continues his advocacy for libertarian public policy.

Johnson is far from alone in his support of the fair tax. Dan Mastromarco is an Annapolis-based attorney who has been leading the charge for years on fair tax-related matters. He tells CDN that “(a) fundamental premise of the FT is that we ought not to tax Americans before they have met their basic needs. The FT is the only plan that un-taxes the poor by not taxing spending up to the poverty level; hence no poor person is paying any tax and no household is paying tax on the necessities of life.

“This prebate makes the FT progressive because the effective rate climbs with expenditures. For example, a married couple with two children with taxable spending of $62,404 would pay 11½ percent.” 

How might the federal government go about replacing the income tax with a fair tax system?

“It is actually rather straightforward,” says Johnson. “All existing statutes requiring the collection of taxes based on income would be repealed, the IRS abolished, and Americans would no longer be required to file annual returns. The most popular Fair Tax proposal is very well-designed and, I believe, anticipates virtually all of the potential complications from what would clearly be a dramatic change in the way the government is funded and operates.”

Mastromarco claims that “(t)he Congress can enact HR 25/S122 (the FT) and the President can sign it into law. But replacing hidden taxes with more visible taxes is more easily said than done. We need to create the infrastructure for change to break Congress habit of appropriating through the tax code. The IRS should be required to disclose the entire costs of the tax system imposed on American taxpayers e.g. $430 billion in compliance costs, as truth in labeling on the return, not just their immediate budget but their mandates.

“The CBO or Treasury should be required to estimate the tremendous economic loss stemming from high marginal tax rates. We need to have Americans feel the pain of the current system before tax reform will be on their agenda. The greatest impediment is citizens who bury their heads in the sand unwilling or unable to see the taxes and costs of the current system.”

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