Would the Fair Tax Lead to Double Taxation?

The Fair Tax is far more complex than the name implies. Everyone is for fair taxation and is sick and tired of the Progressive Income Tax. The Fair tax is not as simple and “fair” as one might think.

If the Fair Tax Bill were to pass, permanent elimination of income taxation would not be guaranteed because the Sixteenth Amendment would remain in place. Cases decided by the U.S. Supreme Court after the ratification of the Sixteenth Amendment have established that Congress has the power to enact an income tax even if the amendment did not exist. The elimination of the possibility that income taxation would return, through a separate Congressional bill, requires a repeal of the Sixteenth Amendment to the U.S. Constitution along with expressly prohibiting an income tax. This is referred to as an "aggressive repeal." The Constitution does not require an income tax, it only allows one. Separate income taxes enforced by individual states would be unaffected by the federal repeal.

The other problem is that passing a Fair Tax would only require a simple majority in each house of Congress and the signature of the president, whereas enactment of a constitutional amendment to repeal the Sixteenth Amendment must be approved by two thirds of each house of Congress and three quarters of the individual states. Therefore, it is quite possible that passage of the Fair Tax bill would simply add another system of taxation. There is nothing today preventing the addition of a national sales tax, or VAT tax, on top of today’s income tax system!

You may not have heard about some of the quirky aspects in the Fair Tax bill, such as the Pre-bates before the taxpayer purchases anything (another expensive entitlement program.)

As for eliminating the IRS if repeal of the sixteenth amendment should occur, another bureaucracy by a different name would be required to collect the sales taxes.

Regardless of a few attractive aspects of the Fair Tax, implementation and the risk of double taxation is cause to halt the headlong plunge into the Fair Tax system. Signing the TV petition calling for a Fair Tax would be a mistake.

A Flat Tax should be seriously considered if deductions allowed under the income tax are to be preserved.

The source for this information in much more detail can be found at
http://en.wikipedia.org/wiki/Predicted_effects_of_the_FairTax#Economic_effects
http://en.wikipedia.org/wiki/FairTax

Comments

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I am sitting here with a copy of HR.25 (http://thomas.loc.gov/cgi-bin/query/z?c111:H.R.25: a.k.a. "The Fair Tax Act of 2009"). You say it is more complex than the name implies. A bill before Congress that is only 131 pages long? That doesn't sound too complex. Perhaps a reading is in order? You say it does not require repeal of the 16th amendment, but when I read Title IV of the bill, I see: "If the Sixteenth Amendment to the Constitution of the United States is not repealed before the end of the 7-year period beginning on the date of the enactment of this Act, then all provisions of, and amendments made by, this Act shall not apply to any use or consumption in any year beginning after December 31 of the calendar year in which or with which such period ends, except that the Sales Tax Bureau of the Department of the Treasury shall not be terminated until 6 months after such December 31."

Doesn't that satisfy your requirement for prevention of double taxation? You may be wondering why the 7-year period? You mentioned the difficulty and time-consuming process to repeal a Constitutional amendment, so the authors of the FairTax is given Congress enough time to complete that process.

I don't know why you would consider the "prebate" as a "quirky entitlement program." It is meant to make the FairTax simple, and immune from special-interest manipulation. If we exempt basic necessities, to unburdon the working poor, how do we stop special interests from lobbying Congress to be considered "a necessity?" Is milk a necessity? If so, how about cream, cheese, milkshakes, ice cream, caramel lattes, etc.

The prebate does make the FairTax progressive. I have no trouble helping the working poor, while giving them an incentive to strive to better their lot in life (increased earnings aren't taxed under the FairTax, just increased spending).

You mention that a flat tax should be tried. I'm sorry, we already did that... in 1913, when the 16th amendment was ratified. It's time for something new.

Ms. Spellerberg, your comments about the "Fair Tax" are to say the least, sophmoric!  Have you read the book?  Politicians are always trying to dispell anything that interferes with their power.  The "Fair Tax" would certainly turn this around, and give the power to the citizen.  Our present and most of the past congresses, instead of working for the people, have put themselves on a higher plane, and have now dictated compliance to the government!  It is legislate and tax, legislate and tax!  We have to put an end to this power!  I wonder why a politician would spend millions of dollars, to get an office that pays two hundred thousand dollars???
The perks must be awesome!  It's past the time to stop this steam-roller, and the "Fair Tax" would be the best start.  It's time to get our manufacturing and business back into the United States.  We have exported all of out technology and manufacturing and are now buying it from foreign contries!  What a shame!  I hate this expression; "Get Real" but it certainly hits the spot.   

Doug--You have the cart before the horse. To give the big-spenders in Congress a Sales Tax BEFORE the Sixteenth Amendment (Income Tax) is repealed would be a gross miscarriage of trust. How many taxes, once in place, have ever been repealed? Double Taxation would be the inevitable result.

Amerigo, I would prefer to be called "sophomoric" and be right, than to be deluded into thinking that a Fair Tax (consumption tax) would ever be repealed after a seven years or more wait for repeal of the 16th Amendment (the Income Tax.) The big-spenders would want to keep both! Now, which one of us needs to "Get Real?" :)

The FairTax Act (HR-25/S-296) specifically repeals the income tax and abolishes the Internal Revenue Service.  We multiple taxation under our current tax code.  You can invest your after-tax money in securities and get taxed again (and again) on capital gains and dividends. You get taxed on Social Security if you exceed a certain income threshold.

Pelosi, Reid and Company are looking to impose a value added tax (what a misnomer!) on top of the income tax code. 

None of these things could happen if FairTax becomes law!  Get onboard!

I don't think anyone who supports the Fair Tax would go for allowing both to be enacted. Assuming theFair Tax has been enacted and, for the first time in decades, workers can bring home their entire paycheck, I doubt that the American people, as apathetic as they can be, would want to have that taken away and go back to the old system or anything resembling it. I could be wrong but, why go back to what is, in essence, slavery under the income tax if one has found freedom under the Fair Tax.?

Roughly half the population files no returns, pay no income tax and have no "skin in the game." Under the Fair Tax, everyone does. Why not give the Fair Tax a chance? Do you have a better plan that doesn't involve the usal tinker with the income tax method of giving this group or that group tax breaks? The income tax started out as a flat tax.

Upon enactment of HR 25-the FairTax legislation--the IRS begins shuttering its offices. All records are stored and all IRS collections from wages, investments and savings growth ends. Upon enactment every citizen begins taking home paychecks free of all federal withholding and payroll taxes.

Companion legislation to the FairTax then repeals the 16th amendment. Will there be the votes for this? Yes. The FairTax breaks so many rice bowls in Washington, DC, it can only win enactment with overwhelming public pressure. That citizen pressure will also carry the vote to repeal the 16th amendment. Under the Constitution the states then have seven years to ratify repeal. With every citizen taking home far fatter paychecks and the economy booming, citizen prsssure at the state level will make that a reality in short order. State legislators, after all, are not recipeints of the corruption of the House Ways and Means Committee when it sells off pieces of the broken tax code.

Experts extimate that at least 10 trillion dollars of private investment, now offshore, rush into our economy after enactment because we will become the most favorable tax environment in the world. That means Americans go back to work and our economy starts growing again. We will have lifted all federal taxes from manfacturing, labor and investment. The federal government will get out of the way of the genius of American invention, high productivity labor and innovation.

Most importantly, every citizen will see the cost of the federal government on every sales receipt and connect that cost with their own wealth. That creates a brand new consumer force to restrain spending at the federal level and ends the fiction that such spnding is somehow "free money". With the FairTax, if Congress wants to increase spending, the rate--the highly visible rate--must go up. Think highly visible postal rates--every consumer will want a word about that, unlike taxes that are hidden from plain sight today when withheld from paychecks.

The income tax system in crippling our economy and fueling ever higher government spending. The FairTax can save the nation, get us all back to work, pull in trillions of dollars of offshore investment and restore the proper role of the American citizen in controlling out-of-control spending. 80 economists, including a Nobel Prize winner (Vernon Smith) say it is the very best way to create a new era of American economic strength and growth.  The alternative is a continued headlong rush toward a national fiscal cliff (the federal debt now amounts to more than $500,000 per household) and continued corruption of the tax code that profits Washington richly while undermining every citziens pursuit of happiness and the future of the nation.

The income tax system is very good for Washington and very bad for us. The FairTax won't be perfect, of course, because no national tax system can be. But it has $22 million of high level, peer reviewed research behind it and is far, far better than what we have now and promises to do more to shift power from the federal government to the individual citizen than any other single piece of legislation since the Republic was founded.

This article is wrong.  the 16th amendment would go away.  That's what the fair tax is all about.  I like to call it the flat luxury consumption tax.  Same percentage for everyone up front.  Same prebate amount on the back. The Rich purchases more, the poor purchases less. If you even consider taxing fair, this is as fair as it gets-at least to make the broad spectrum of political parties happy.  Face it repubs, you won't be happy till your money stops being taken from you. I know I won't be happy.  and Face dems, you won't be happy till the poor get's their so called share of fairness, well that's what the prebate is for.  The rich spend more, they will get taxed more. So it won't get anymore fair than this, and stop bickering because we're all in this together. Let's transfer the power of taxation to the people and give people the power to be taxed by choice of purchase.

I wish everyone would simply read the bill. The Fair Tax would suspend the 16th Amendment (Income Tax) for 7 years allowing us time to amend the Constitution. No Double Taxation!
I believe that when every citizen begins receiving their entire paycheck without any Federal Taxes withheld, passing the amendment change would be quite easy.

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