With Special Guest Star....Christian Hine

Posted by Jason Easley on 04.18.2007

This week’s special guest, Christian Hine tells us why he thinks the Fair Tax is a proposal that deserves your support.

Last week's column featured Brian McLain's argument that the Fair Tax is a flawed idea. This week's special guest, Christian Hine tells us why he thinks the Fair Tax is a proposal that deserves your support.

In the good old days of grade school, math was simply math. You learned how to add and subtract, multiply and divide, pretty simple really. As you grew up and progressed through the grade levels and into college, math took on different forms and some interesting names like algebra and calculus. All of these had their unchanging basic rules and principles that made learning and applying them relatively easy…or at least consistent.

On the opposite end of the spectrum, and only loosely connected to any of the math's learned in school, is IRS math. The 60,000 pages of rules known collectively as the Internal Revenue Code of 1986 change annually, often without any actual connection to common sense or simplicity. The tax code is truly irrational, and Tax Day has become an embarrassing national symbol of waste and abuse. Thankfully, people are finally taking notice. A political mentor of mine once told me that a national policy debate is ultimately won by successfully changing the terms of the debate to suit your position's strengths. This has been accomplished regarding tax policy because the debate is no longer over whether or not our tax code needs to be fixed, but rather how exactly to accomplish this.

I for one am a staunch supporter of the Fairtax, by far the tax replacement alternative with the most research behind it, the fastest momentum in terms of support nationwide, and most importantly, the largest number of Congressional co-sponsors. It is something real, not simply wishful thinking by a handful of dreamers. The Fairtax proposal is to eliminate the personal income tax, payroll tax, self-employment tax, corporate tax, capital gains tax, gift tax, alternative minimum tax, and estate tax while replacing them all with a simple, visible, federal retail sales tax on the purchase of all new goods and services. Existing state sales tax authorities would collect it.

Imagine it. After the Fairtax becomes law, you will receive your whole paycheck without any Federal withholding. All the money you wish to invest will remain tax free without the need to funnel through an alphabet soup of different IRA, college savings, and medical care accounts. Your entire home mortgage will be paid with pre-tax dollars, not just interest payments. No more paperwork, no more record keeping, no more tax loopholes that benefit everyone but you. April 15 will be just another day.You won't pay any Federal tax until you choose to purchase a new good or service, and even then, spending up to the poverty level will remain tax free by way of a "prebate" check you will receive every month to compensate you for the taxes you will pay on necessities. This standard amount is adjusted according to the size of your household.

So, what is the rate? The government would receive 23% of every dollar spent on a new good or service. Don't be fooled if you think this is impossibly high. Remember, your payroll tax is already 7.65% and if you find yourself in the 15% tax bracket as most Americans do, you have already reached 22.65%. But it gets better. It is estimated that nearly 22% of the price of every good or service you purchase is composed of the embedded costs of the current income tax code. Once the Fairtax eliminates these embedded costs, prices will drop over time by that 22% so even after you pay the Fairtax, the final price is roughly what it is now…except you have your whole paycheck to pay it with!

Other benefits of the Fairtax include: Making American made goods more appealing to foreign purchasers by stripping out the embedded taxes, encouraging companies and investors to bring their capital back to the United States, collecting taxes from visitors to this country…both legal and illegal, eliminating lobbyists' power over the tax code, and shoring up social security by expanding the tax base. Of course, every proposal has its detractors. Change can be frightening, especially when it sounds too good to be true.

Some argue that a fatal flaw of the Fairtax is that it does not eliminate the 16th amendment to the Constitution, which allows the income tax to exist. They fear the potential of having both an income and a sales tax. I think that opinion is valid, but I honestly don't believe that until faced with the possible reality of having both systems would enough support be gathered to eliminate it. Remember, the Fairtax can be made law by a simple majority, and it includes the elimination of the current income tax code. We'd be safe for a time. The repeal process would take a 2/3 majority followed by ratification by ¾ of the states. I personally am not willing to wait an additional decade or two for the repeal to do what's necessary to fix our antiquated national joke of a tax policy.

I have heard suggestions that a "sunset clause" be placed in the Fairtax that says that if the 16th isn't repealed within X number of years from passage, that we will simply revert back to the old system. I don't know if I support that fully, but talk about a swift kick in the butt to get the activists involved in making sure the repeal happens! The "prebate" system has also been criticized as unnecessarily complicating an otherwise good proposal. The counter suggestion is to simply not tax food, clothing, and shelter. On its face, this sounds like a plausible argument, however, the prebate is in fact the most equitable and efficient way to go. Allowing exemptions would open up the flood gates once again to lobbyists and code manipulators who all see their product or service as deserving of such special treatment as tax exemption. We don't want to go there again.

The biggest reason though is an economic one. If "necessities" weren't taxed, the Fairtax rate on everything else would be unworkably high. Those opposed to the Fairtax often cite their research that shows tax rates of up to 60% would be necessary for revenue neutrality. What they don't tell you is that their proposals often allow for exemptions of necessities! The decision of what is a necessity is purely a subjective argument. There is no right answer. Deciding what to exempt and what not to is frankly an impossible task, and as I mentioned, only opens the flood gates of everybody wanting an exemption.

The Fairtax treats everything the same, period. You are given the allowance, and you, not the government, decide what a necessity is. There is no perfect tax system. Our current code certainly isn't, and ultimately it is difficult to get behind and cheer for the best way for the government to confiscate our money! Allowing for that, we are in desperate need for a system that collects taxes in the least burdensome, easiest to understand, fairest way possible. The Fairtax accomplishes those goals with room to spare.

Please visit fairtax.org for additional information and more in depth research.

You can email Christian at [e-mail] He would love to hear from you.

Christian Hine is a former political consultant enjoying a sanity break from the mad world of campaigning in the suburbs of Charlotte, NC.


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