FAIR TAX BLOGBURST 09-06-06

by Debbie of The Right Truth

A reader here at Right Truth, Ralph Ekwall, who doesn't like the Fair Tax sent me an email. He seemed to think that I would not be interested in hearing his opinions, but that could not be further from the truth. I think healthy debate is good and encourage it. Below are his arguments and our reply:

I doubt you will print this since it is in opposition to the "Fair Tax." The "Fair Tax" is really unfair because it taxes middle and low income people at a higher rate than wealthy income people. Here is an example.

Let us consider a tax rate of 30% for the so-called "Fair Tax." Let us look at how it affects two different American families: Mr. Average Joe and Mr. Rich.

Mr. Average Joe makes just $45,000 per year. At that salary he must spend everything that he makes to support his family. So, almost all of his income is taxed. His rate of taxation is between 27- and 30% He may give money to his church or to a charity and that would not be taxed.

Now consider Mr. Rich who has an income of $10,000,000 per year. He is really rich. Most of his income will be reinvested in his business and not taxed. He will put some of his money into an education trust for his children and that is not taxed. It may be possible that he will spend $1,000,000 of his income, but that is doubtful. If so then $1,000,000 of his income is taxed and he has $9,000,000 of income that is not touched by taxation. His rate of taxation is about 3%. I ask you - is that a fair tax?????????

We now have a progressive income tax system that imposes a higher rate of taxation for high income earners. The so-called "Fair Tax" would impose a higher rate of taxation on middle and low income earners and allow most of the money earned by wealthy people to be untaxed.

It does not seem fair to me. --by Ralph Ekwall

Our reply:

You fail to mention that Mr. Average Joe will benefit tremendously from the PREBATE included in the FairTax. Your statement that "almost all" of his income would be taxed is erroneous. I cannot off the top of my head tell you how much of a prebate Mr. Average Joe and his family would receive, but it would be substantial.

You also fail to consider that Mr. Rich who will not have to pay tax on his income or on returns from his investments will now have more money to re-invest and he will probably have more money to return to his business which in turn creates jobs for people like Mr. Average Joe. The economy prospers, Mr. Rich is rewarded rather than punished for his entrepreneurship, and Mr. Average Joe and his friends would be assured of good jobs.

Hmmmmmmmmmm, I'm doing a little math here:

If Mr. Average Joe spends all of his 45,000 dollars and is taxed at say 23 percent he would pay $10,350 in taxes most of which he would get back in the prebate.

If Mr. Rich spends a million dollars at 23 percent his tax would be $230,000 and his prebate would be insignificant to the tax that he paid.

Hmmmmmmmmmmmmm, sounds fair to me.

Also, don't forget that the tax is paid ONLY on NEW goods and services. If Mr. Average Joe buys that decent used minivan for his family, guess what! NO TAX! --by Thomas Hamilton

We welcome any other comments or opinions, and thanks Mr. Ekwall for this opportunity to address your questions.

The FairTax Blogburst is jointly produced by Terry of The Right Track Blog and Jonathan of Publius Rendezvous. If you would like to host the weekly postings on your blog, please e-mail Terry. You will be added to our mailing list and blogroll.