Ethics is the branch of philosophy that deals with the questions of right and wrong conduct, moral duty, justice, fairness and the principles that should guide human behavior. Ethics asks: What should we do and why is it the right thing to do? It focuses on moral standards, not on government rules. It is the study and application of moral principles that determine what is right, fair, just, honest and responsible in human conduct. So what would an “ethical” tax system look like? It would be a tax system that is more consistent with principles such as fairness, honesty, transparency, equal treatment, respect for privacy, limited coercion and protection of human dignity.
Our current income/payroll tax system requires every American to report details of his or her earnings, deductions, investments, business expenses, family status and financial life to the federal government every year. This is some of the most sensitive and private data we have. Under an ethical tax system, that would be none of the government’s business.
Enforcement requires government inspection, forced disclosure and the assumption that citizens must prove they have paid enough in taxes. A tax system that requires constant surveillance of private income is inherently disrespectful of personal liberty. That’s not ethical.
The FAIRtax takes a different approach. It taxes consumption, not productivity. Under the FAIRtax, Americans would no longer be punished for working, saving, investing, building a business, earning overtime or improving their financial position. People would only be taxed when they choose to purchase new goods and retail services for final consumption.
The FAIRtax doesn’t penalize the creation of wealth. Almost everyone agrees that work and savings are socially beneficial activities; taxing them discourages the very conduct that strengthens families and the economy. The FAIRtax is also more transparent. Under the income/payroll tax, much of the tax burden is hidden inside payroll withholding, corporate taxes, compliance costs and embedded taxes in prices. Many Americans never see the full cost of the federal tax system. The FAIRtax would make the tax visible at the cash register. Voters would know exactly what the federal government costs them. Transparency is an ethical virtue because democratic consent is meaningful only when citizens can see the burden being imposed.
The present income tax also gives Washington enormous power to reward favored groups and punish disfavored ones through deductions, credits, exemptions, phaseouts, audits and special rules. Our present system guarantees lobbying, manipulation and political favoritism.
The FAIRtax would greatly reduce that power by applying one broad national retail sales tax with universal prebate to protect basic consumption.
The FAIRtax would be a simpler, broader tax system that would be less vulnerable to corruption and special interest engineering. The FAIRtax is more ethical than the present federal income tax system because it treats citizens as free individuals rather than as financial subjects of the government.
For more information, please go to FAIRtax.org
