Although the Flat Tax and the FAIRtax share some important similarities they also have many important differences. They are both flat rate taxes that are neutral with respect to savings and investments. However, the flat tax retains the invasive income tax administration apparatus (known as the IRS ) and can easily revert to a graduated, convoluted mess as it has many times in the past. Few people truly understand the flat tax. It’s authors will tell you it is a consumption tax that uses the income tax system for implementation.
Any politician that claims the flat tax will eliminate the IRS is not telling the truth. Only a government bureaucrat could come up with the idea of a consumption tax being regulated by the IRS when you can simply have a retail sales tax (the FAIRtax) that reduces the bureaucracy by 90% or more. In addition, a large part of the tax burden of the flat tax (the business tax) remains hidden in the price of goods and services. The FAIRtax eliminates that hidden cost. Individuals would still need to file income tax returns under the flat tax and, while the form may be simplified, it still requires burdensome record keeping. Under the FAIRtax, individuals never file a tax return. When you pay at the cash register, your tax obligation is over. Under the flat tax, the payroll taxes, which are the most regressive of taxes on the working family, would be retained.
Under the FAIRtax, the payroll taxes are repealed and you bring home a paycheck with no federal withholding. Congress has tried many times over the years to reform the income tax with the results being a tax code that is so complex, so convoluted and so large that no one is able to understand it completely allowing for greater evasion, fraud and abuse. The problem is the income tax itself and we need to stop tinkering with it and eliminate it completely. Contrast this with the FAIRtax which is simple, easy to understand and visible. It cannot be converted to an income tax. It’s time to do away with the income tax and start over with a tax system more appropriate to a free society. It’s time for the FAIRtax. For more information go to FAIRtax.org.
