The “Fairness” of Taxation

10-4-2013 3-39-49 PM

10-4-2013 3-39-20 PMAthens Now is pleased to welcome Melissa Kirby as our newest contributing columnist. Melissa owns her own writing business called Way With Words, and the
links to her blogs can be found above. We are excited we have a Gen Y thinker, and Melissa, we’re glad you’re here!

The income tax system, most of us would admit, is broken. Even Lois Lerner thinks so. And when a government agency tells you that the government agency is malfunctioning, you might want to pay attention.

Out of frustration at an archaic system that punishes you for having a job, working at it, and producing money, comes a new kind of tax law. They call it “Fair” Tax.

I am all for tax reform, and I think this one is long overdue. I wouldn’t even pitch a fit if the IRS was abolished, and a For Rent sign hung on Daniel Werfel’s office door.

10-4-2013 3-38-46 PM

The premise seems pretty straightforward. Fair Tax intends to totally eliminate income tax, and with it the IRS, explaining that, “Under the FairTax, every person living in the United States pays a sales tax on purchases of new goods and services, excluding necessities due to the prebate.” This “prebate” is a monthly allowance, meant to cover food and basic supplies, much like the current personal exemption and standard deduction. Since individuals aren’t filing tax forms at all, this allows lower-income families to purchase basics without paying sales tax on them.

Under Fair Tax, you will take your entire paycheck home, and only pay taxes on what you spend. They hope that removing the taxes from income will encourage people to make more money,which is a great concept. But making more money isn’t the only necessity in an economy that requires an active market. If people are punished for spending money, then they won’t spend it.

10-4-2013 3-39-01 PM

Which sets us back to where we started: out of work, low economy, and having trouble making ends meet. If being punished for working doesn’t make sense, does being punished for providing jobs?

With a few exceptions, such as education or a second-hand home, all of what we currently spend our money on is taxable, since Fair Tax covers services as well as retail merchandise. “That includes,” according to Dr. Karen Walby, a research consultant with, “legal, health services, utilities, lawncare, haircuts, trash pickup, appraisals, postage or other shipping fees, internet service provider, plane tickets, cabfares, accounting services, etc.” Not to mention rent, groceries, gas, clothes, dining out, entertainment, electronics, a new vehicle or home and the maintenance after purchase, furniture, personal care, and alcohol and tobacco.

In their defense, buying at the same rate we do now, some people could save money. According to the Bureau of Labor Statistics, in 2012 the average household spent about 77% of their income, and made $62,481 during the year. If you assume a 2-adult, 2-child household, and no tax credits – which are only applicable under the IRS system – then a switch to FairTax would save that average family about as much as one child tax credit: $987.87.

But the truth is, with a government that is such an incredibly heavy burden to support, spends everything it collects, and still goes broke, we have a bigger problem than a re-distributing of taxes will cure. As long as we have a monster in Washington, somebody will have to feed it.

To effectively eliminate the cost of taxation on the American people, we don’t need to start with the IRS, with tax law, or with more exemptions and deductions. We need to stop the leak, and fix the spending habits of a government gone wild. Then will be time enough to lower the burden of taxation, and, if we like, reorganizing it so that it makes more practical sense.
By: Melissa Kirby