Keep Your Entire Paycheck. Make April 15 Just Another Day

Wednesday, June 08, 2005

Response to Wm Gale and Peter Orsag's article titled, U.S. Economy: We're All Living on Borrowed Time

June 1, 2005.
"The situation is pretty simple. The private sector is saving next to nothing."" Do you have ANY idea how hard it is to save when a hefty chunk of your paycheck is taken out to pay the IRS and social security, not to mention employee taxes? The income tax is so bad that families with two paychecks have to be extra careful not to work hard enough to get boosted into a higher tax bracket where the AMT hovers. I don't think you do. Too many high income people like yourselves find ways to cut your taxes through loopholes, etc.

"The federal government continues to borrow substantial amounts. As a result, national saving ? the combined thriftiness of government, businesses and households ? is at its lowest level since the Depression, and the nation is borrowing massive and growing amounts from abroad. All of this is coming at the worst possible time, as the nation prepares for the tremendous pressure on Medicare, Medicaid and Social Security created by the imminent retirement of the baby boomers and rising healthcare spending." Frustrating, isn't it. And it's so true. Strangely enough, there's a solution, one that the Brookings Institution refuses to consider seriously, presumably because it was developed by your competition -- economists from Harvard, MIT, Stanford, Rice, and others. It's called the FairTax.
The FairTax would rid us of the fearsome, regressive, repressive and unfair income tax and give everyone 100% of their paycheck to spend, save or invest as they choose with BEFORE tax dollars. Because the FairTax taxes only new goods and services (and at a rate that keeps the price of goods the same as they are now), it taxes everyone fairly. It's a progressive tax because everyone, rich and poor and in-between, gets a rebate so that no one pays tax on necessities up to the poverty level.
Most important to your concerns, however, since the FairTax is a consumption tax, those who now evade paying their taxes (the IRS says that's $350 BILLION annually -- they recover $50 Billion of that, leaving $300 Billion UNcollected), members of the drug and porn industries ($ Trillions of dollars), illegal immigrants and 40 million foreign tourists annually would pay into the system, broadening the tax base enormously.

"Because our foreign creditors have to be paid back, foreign borrowing mortgages whatever future income the country generates." The FairTax would make the US the only country that doesn't tax productivity. Think what an attraction that would be to foreign investment. Then we wouldn't even consider borrowing from them! They would be here paying consumption taxes like everyone else.

"The big deal is that we are even less equipped to deal with the deficit problems now than we were in the Reagan era. Nor did the problems just disappear on their own. They were resolved through difficult political choices and some good luck." Yes we are. And we'll have a lot of good luck going for us if you and Brookings would just remove the blinders from your eyes and back the FairTax.

One thing is for certain: You can complain all you want about the condition of the economy but unless you are willing to get in there and fight to correct it -- and the FairTax ) is really the best offer on the table so far -- you're part of the problem. Complaining doesn't do any good unless you back a viable solution.


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