Thursday, February 17, 2005

The FairTax and the Poor

There are many reasons why I am a grassroots supporter of the FairTax. The FairTax Act, or H.R. 25, will abolish all federal income taxes, including payroll taxes, estate and gift taxes, capital gains taxes, corporate, and self-employment taxes. These taxes will be replaced with a National Retail Sales tax which is projected to be approximately 23%. H.R. 25 was introduced by Congressman John Linder and has been referred to the House Ways and Means Committee. In short, it is one of the tax bills being considered when the Committee is discussing the Bush promised Tax Reform. The FairTax is not simply a tax reform, however, it REPLACES our current income tax system, that's right, it will no longer exist and the beauty of it all is that it repeals the 16th Amendment and it ABOLISHES the IRS. In Red State language this is "Yeeeeeeeee Haaaaaaaaaaw" territory! I am going to make an effort to do a little in depth series of posts on different ways the FairTax will affect different aspects of our economy as well as social issues.

In this in depth post I am going to address the effects which can be reasonably predicted regarding the FairTax and the poor in our Nation. I will be discussing this in common layman's language, quite frankly, because that is all I am capable of doing, but I will provide links to information upon which I base these predictions. The reason I have chosen this particular topic to address first is because, in all honestly, it is the aspect of the FairTax which warms my heart the most. In light of the fact that I have spent my entire life short of money and living pay check to pay check I can see the promise for people like myself contained in the FairTax Plan.

The majority of my life I have spent working for "the other guy," beginning with working in a theater's concession stand, fast food restaurants and later in life as an Executive Administrative Assistant. In the whole of my career I was able to count on the fact that an approximate 30% of my paycheck would be withheld in order to pay for federal and state income taxes, Social Security, Medicaid and later on in matching payments for health insurance coverage. Under the FairTax I would receive 100% of my paycheck. There would be no deductions for any of the items listed, except of course, insurance deductions if I so chose. This would translate into an approximate 30% pay raise for myself and my family.

Add to the 30% increase in my weekly paycheck a monthly Pre-bate which will be figured based on my household's income and figured and paid by the Social Security Administration (and if you think about that statement a little while you should have an epiphany moment which I will expound on at a later date). This pre-bate check should cover the costs of essential goods and services purchased by myself and my family for the month. Now, if, as I have always found the case to be, a person is living paycheck to paycheck they will likely spend the amount allotted to them in the form of the pre-bate check on those essential goods and services and have an additional increase of at least 30% on their weekly paycheck with which to, initially, purchase a few things for the house which they have been forced to go without due to their financial situation, pay off existing bills, or invest in a retirement account. Sweet, huh?

Another advantage of the FairTax, in regards to the poor, is that it is the poor among us who are purchasing used goods. Used goods are not taxed. If the poor are wise and they continue to purchase re-sale clothing and used cars and goods they can self-control the amount of consumption taxes they will pay. Only NEW goods and services are taxed. If you buy a used car there will be no tax to pay. If you purchase a used item of perfectly good clothing at a re-sale clothing outlet, there will be no tax. Can you see where this is going?

On the other hand, it is the wealthier among us who have expendable income. For instance when you go to the grocery store and buy a can of coffee which is a regular consumer brand you pay that price. It is the wealthier among us who are more likely to buy the specialty whole bean coffee, custom ground and twice the price. It is the wealthier among us who are going to go to the butcher counter at the supermarket and ask for that special cut of 100% Angus beef and it is the poorer among us who are going to purchase the ground beef and stew meat. In the same fashion, the wealthier among us are going to continue to purchase new designer clothing at exclusive clothing stores. In short, the wealthy will continue to live in the lifestyle to which they are accustomed but rather than finding loopholes to avoid paying taxes when they buy a new good or service they WILL NOT be able to avoid paying the National Retail Sales tax.

I want to see the FairTax pass, I want my 30% increase in wages, my pre-bate check and I want to pay off bills, invest in my future and look forward to a comfortable retirement. How 'bout you?

For information regarding details of how the FairTax will affect the poor, go to, click on the link there for information and under the Frequently Asked Questions link read numbers 12 through 14.


Momma Twoop said...

A great rundown, Jacke, and it's easy to see you're passionate about a National Retail Sales Tax. I referred to it in another comment as a "consumption tax." Are those two things the same?

Also, I like the idea of people being able to control the amount of taxes they pay! The way I view it is this: A taxpayer would be able to control the amount of taxes paid by buying used goods whenever possible, much in the same manner a homeowner can, to a certain degree, control his/her gas or electric bill by setting the thermostat a few degrees cooler in the evenings, shutting off lights, TV, etc., whenever they aren't being used.

This would allow the taxpayer more control over his/her own finances which, in my opinion, can't be anything but GOOD! :) Twoop

Jacke M. said...

Yes. Consumption and the National Retail Sales Tax are one and the same. When you hear discussion on a National Retail Sales Tax or NRST it's a given they are talking about the FairTax.
The thing about controlling how much you spend in taxes by buying used goods is what I think will benefit the poor so much because most of the poor are accustomed to that lifestyle anyway. The wealthier among us, however, are accustomed to a different lifestyle and continuing in that lifestyle they can't help but pay more in taxes. :)