Tax Plan Comparisons

So far we've introduced the Fair Tax and talked about the monthly rebate. Now, let's compare the current system with the Fair Tax ... and, just for fun, let's include the Flat Tax as well.

To be honest, others have done the comparison in much more detail than I ever could and I would refer you to two links at the end of this post for a side-by-side comparison. What I would like to do is to discuss some of what I see as the most appealing points.

1. Bye-bye Internal Revenue Service
As much as we'd like to see the IRS just go away, it won't happen with any of the three plans. However, under the Fair Tax plan, the IRS will be much smaller and only be positioned to administer the collection of the National Retail Sales Tax (NRST) revenue from the individual States. The IRS will NOT be seeking out individuals.

2. Complexity and Cost of Compliance
With the Fair Tax there is no complexity or cost of compliance ... zero. Everything you buy at the retail level will be taxed ... how's that for simplicity. And, there are no forms to file ... none! The cost to comply with filling out no forms? Zero! While the cost to comply with a Flat Tax would be significantly less than it is today, there still would be some costs - after all, you would still need to file a return. The Fair Tax is the only alternative of the three which totally eliminates any cost of compliance.

3. Your Money Is Now Really Your Money
Ever found yourself in a bind where you need some short-term cash and the only place to get it is by taking it from your IRA or 401(k) plan? I've been there. And what happens if you pull some dough out of one of these accounts? Excessive tax? Penalties? You bet! Guess what? With the Fair Tax this completely goes away. First, there is no such thing anymore as pre- or post-tax income. There's just income. Second, you can put as much away for retirement as you want - without having to worry about potential penalties if you need to pull some money out before retirement age. Third, when you do pull money out of these accounts, guess what? It's tax free ... until you spend it.

4. Congress Can Still Muck Things Up
The proponents of the Fair Tax are also advocating the repeal of the 16th Amendment to the Constitution. This would forbid the imposition of an income tax by Congress. Keeping the current system or moving to a Flat Tax, however, still allows Congress the ability to muck with the tax code, providing breaks, or "incentives" as they like to call them, to their favorite special interest group. When the tax code was simplified in 1986 we, essentially, had a two-tiered flat tax system. Since then the tax code has been modified over 10,000 times by Congress! Most of these modifications go unnoticed by the Average Joe. The Fair Tax has only one number ... and everyone knows what it is. If Congress starts to muck with this number ... everyone will know about it.

I encourage you to take a look at these comparison links. The information is basically the same, just presented in a different fashion.

- Americans For Fair Taxation
- Congressman John Linder

In my next post, we'll take a look at some of the complaints that have been levied against the Fair Tax ... and blow most of them out of the water.