Keep Your Entire Paycheck. Make April 15 Just Another Day

Tuesday, April 26, 2005

The Fair Tax: The Great Equalizer Part 2

One of the things that liberals take greatly to heart is that the wealthy (aka the Evil Rich) don’t pay their fair share of taxes. The Evil Rich, cry the liberals, have the funds to pay professionals to do their taxes and find loopholes and tax havens to shelter their money. This is true, at least to a certain extent. It would certainly explain why Teresa Heinz Kerry (if she’s using Kerry this week) paid less in taxes last year than I did (she made considerably more than I did, by the way, but paid a lower percentage). Ms. Heinz is not the only one; most of the Evil Rich hire tax professionals to do their taxes for that very reason. And, by the way, the Evil Rich are not the only ones to pay professionals. I have paid a professional to do my taxes for the last three years. I want to pay the very least in taxes that I legally can. Most of my friends also pay professionals, and we are not wealthy by any monetary definition.

I don’t know about you, but when I have extra money I put it into a Mason jar, hermetically seal it and bury it in Funk and Wagnall’s backyard. Oh, sorry, I think I was channeling Johnny Carson for a moment. No, I don’t bury it in the backyard. I don’t put it under the mattress, or in a cookie jar, or anything like that. I either spend it or put it in the bank. In either case, it goes into the economy.

If I spend it, it goes to buy clothes, food, gas for my car, pay bills, or maybe I’ll replace something in the house, like the stove or hot water heater. If I bank the money, it doesn’t go into the bank with a sticky note on it saying it belongs to me. The bank makes a notation that I deposited that amount of money into my account. It’s a promise that if I want that money the bank will give it back to me. If I’m lucky I’ll also get a little bit extra as interest. The bank’s way of saying, “thank you for letting us use your money.”

The bank takes the money that I deposited and puts it with the money all the other bank customers deposited and gives it to other people. Sometimes as loans, sometimes to other customers making withdrawals, sometimes to their employees as salary.

Now, back to how the Fair Tax is an equalizer. If I decide I need another car I go to the dealership and pick out the car I want and they’ll tell me how much the car costs including tax. Now, under the Fair Tax plan, I have two options. If I can afford to buy a new car, I’ll pay tax on it. (Under the Fair Tax, tax will only be charged on new items sold by the retailer to the individual.) If Bill Gates wants another car, he’ll most likely buy new (you think?). He and I will pay the same tax rate on our cars. He will probably buy a much more expensive car than I will. The bottom line (so to speak) is that we will pay the same rate, even though the tax rate on his car will be much higher than mine. If for some reason we pick out the same car, we’ll pay the same rate. Uh, oh…we pay the same rate. Is that fair? Yeah, it is…because we’re buying the same car. If he buys a fully loaded Hummer and I buy a bare bones Toyota, we’ll still pay the same tax rate. See the difference? The dollar amount paid in taxes will depend on the cost of the car.

We both have another option. Either or both of us could decide to buy a used car (my personal favorite option). In this case, neither of us will pay taxes because the first owner has already paid the taxes on the car. If the car costs $10,000, there is no tax, the cost of the car is $10,000 (I’m sure you will still pay dealer prep and that kind of thing, but you will not pay sales tax on the car).

Getting back to the tax havens and loopholes that the Evil Rich have access to that you and I don’t, well, they won’t need them because they won’t need to shelter their money from the IRS. But, they will pay the same tax rate on whatever they buy. Just like you and I would do under the Fair Tax. Not only you and I and the Bill Gates of the world, but anybody who makes a purchase. That includes tourists from other countries, illegal immigrants, and the underground world where people don’t have traditional jobs with paychecks and deductions from those paychecks. The drug dealer would pay the same rate of sales tax for his tricked out Hummer as the cop who buys a Toyota.

Can it get any fairer than that?


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