My ears are buzzing with your silent questions. Charlie, what about the poor? And, and …the underground economy? Well, take heart, Binky; we have some answers for you. The Fair Tax as currently designed does have an allowance for those who have lower incomes. Generally, I would find such an offset to be discriminatory because it does seem to impose a “progressive” element to the levying of the tax. There is, however, a mitigating aspect that I find acceptable. When implemented, the Fair Tax would provide a “prebate” to EVERYONE that represents 23% of the federally-designated poverty line for each respective household or person. For example, a single person living alone would receive a monthly prebate via direct deposit of $207.58. This figure represents 23% of the 2010 poverty level income of $10,830.00 for one person. For a family of four the prebate amount would be $422.63 which is 23% of the 2010 poverty level income for four of $22,050.00. So, the poor, the rich and the in-between would ALL get a direct deposit at the beginning of every month which, to some degree, minimizes the effect of the tax on individual taxpayers.
Earlier we discussed the embedded tax on current products and services. I’m going to provide an example of how those hidden costs accumulate. This analysis will not be exhaustive, but I do hope that it will be illustrative. Let’s use bread for our example. It’s a commodity that is purchased by nearly every household in the nation. To arrive at a true number for embedded taxes on bread, one would have to pro-rate all the federal taxes paid by the farmer, the grain elevator or buyer, the miller who grinds the flour or cracks the grain, the baker, the supermarket and all the miscellaneous shippers, truckers and handlers who facilitate the movement of the grain. Also, included in the final tally would be the pro-rated federal taxes for the seed distributor, the fertilizer provider (if used) and whatever extraneous treatments are needed to preserve the crop. Who knew that a tiny little grain of wheat or oats or barley or rye would be such a prolific generator of tax dollars for Big Brother and lots of paperwork for the private sector? Now that “faith of a mustard seed” analogy makes more sense, doesn’t it? There’s lots of power in those little seeds or grains.
When considering the example cited above, please remember than your dedicated public servants in Washington have been considering a Value Added Tax for debt reduction (yeah, right). Every step in the process from seed to bread to seed that adds value to the tiny little botanical grain would add more tax. Sneaky S.O.B.’s want your money, but also want to hide its collection from you.
There is a huge benefit that results from the Fair Tax that is often overlooked or minimized. When taxes are paid on final consumption, then every drug dealer, hooker, criminal thug and international tourist will be paying “their fair share.” Also, every individual who has entered the United States illegally will contribute to the tax coffers when they purchase something. In other words, a broad range of the underground economy will be forced into the sunlight merely because of their needs for routine products and services. When that inbred Saudi Prince brings his extended family and retinue of servants to Cleveland while commandeering an entire wing of a world-class hospital, his lavish lifestyle will generate a large sum of Fair Tax receipts….and no prebate for Abdullah.
So, you may ask, when the Fair Tax merely offsets the embedded tax, how can that be revenue neutral? How can those limited sources of money…minus the prebates…actually equal all the dollars collected from the hundreds or thousands of taxes that are in the government’s quiver today? It’s simple, Boy Wonder. No exemptions. Let me repeat that. No exemptions. No special clauses in the code. No non-profit ruses. No artificially structured entities to game the tax code. We all ride on the same pond, but we can choose our own boat. New Lexus versus used Lexus. Bakery bread versus Bunny Bread versus day old bread. Sears or Jenn-Aire. Freedom…it’s a beautiful thing. Political freedom is vital for a nation to thrive economically, intellectually and politically. Perhaps, just perhaps when the semi-comatose sheeple of our nation savor the taste of economic freedom, they will understand how desirable liberty is. Maybe then, they’ll finish the job.
Tomorrow I’ll explore how I believe that the Fair Tax can be sold, promoted and implemented.
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