What If You Never Had To Pay Income Tax Again?

Tuesday, February 26th 2008, 1:35 pm
By: News On 6

Chances are you've filed your income taxes already, or you're getting all of your paperwork together to make sure you don't miss the deadline. But, what if the IRS didn't exist and all income taxes were eliminated and replaced by a national sales tax? News On 6 anchor Craig Day went to Atlanta, Georgia and spoke with one of the Fair Tax movement's biggest proponents and investigated the arguments for and against it.

At least one presidential candidate supports the idea. Some say the Fair Tax movement would be the biggest transfer of power from government back to the people since the Revolutionary War.

Figuring your taxes is a challenge no one looks forward to. Add this line to that line; deductions, dependents; W-2's and worry. Many say there has got to be a better way.

"Washington can't stop it. The American people are ready," said U.S. Representative John Linder.

Republican Congressman John Linder from Georgia has introduced legislation each session since 1999 that would replace income taxes with the Fair Tax, a national 23% sales tax. Representative Linder says we spend way too much time and money trying to comply with the thousands of pages of tax code.

"That isn't inefficient, that's stupid. It's like paying for a dead horse. You get nothing from that," said Representative Linder.

Linder believes the Fair Tax is a better option and many others are getting on board including Republican presidential candidate, Mike Huckabee.

"I want to be the president that gets to nail the going out of business sign on the front door of the IRS," said Republican presidential candidate, Mike Huckabee.

The Fair Tax movement's most vocal supporter is nationally syndicated radio talk show host, Neal Boortz. The Neal Boortz show originates in Atlanta, Georgia and airs in more than 200 cities across the nation, including Tulsa. Boortz says under the Fair Tax, we would keep everything we earn and only pay a national sales tax on things we buy.

"Nobody pays any income tax. Social Security tax, Medicare tax, death tax, capital gains tax, dividend tax, they're all gone," said Radio Host, Neal Boortz.

"The best way to compare it is to say currently, the average income earner gives the government 33 cents of every dollar they earn. Out of the Fair Tax, they give them 23 cents of every dollar they spend," said Representative Linder.

Supporters believe the economy would boom because small businesses would no longer be overwhelmed with tax code, and large companies won't move overseas to avoid paying taxes.

"Businesses will make their decisions on what is good for their employees, their customers, and their shareholders, not what is good for the government," said Representative Linder.

Supporters also predict the cost of consumer goods would go down, because the taxes businesses currently have to pay would no longer be passed on to consumers.

"The 22% embedded tax goes away, it is replaced by the 23% Fair Tax, you're paying essentially the same for everything, but you get 100% of your paycheck and you only pay the Fair Tax when you spend money," said Boortz.

Supporters say the Fair Tax also protects the poor by providing a prebate check to everyone each month to cover basic necessities of life. Illegal immigrants wouldn't get the prebate, but would still have to pay the Fair Tax when they spend their money, just like everyone else. So, the nation's tax base would be larger.

"Whenever you buy something at the retail level, you pay the Fair Tax, period. Whether you are here as a tourist, or an illegal immigrant; no matter how you are here," said Boortz.

Opponents aren't so sure the Fair Tax movement will work. Dr. Mickey Hepner, an Associate Professor of Economics at the University of Central Oklahoma, says he likes some parts of the Fair Tax, but questions whether a 23% consumption tax would be enough.

"I think as we get more information, as policymakers get more information, they realize that, well we're not really talking about a 23% tax. We're talking about something that is going to be much higher to keep government constant," said Associate Professor of Economics at the University of Central Oklahoma, Dr. Mickey Hepner.

Hepner also says while it would be easy to audit large retailers who would collect the bulk of the Fair Tax, he fears there would be extensive tax evasion.

"You would have a lot more transactions taking place under the table or off the books," said Associate Professor of Economics at the University of Central Oklahoma, Dr. Mickey Hepner.

Other opponents are concerned about eliminating current deductions, like mortgage interest and child care credits.

"That's like walking into a grocery store with a 20% off coupon for bread and finding out that bread is free and raising hell because your coupon is worthless," said Boortz.

While agreeing improvements need to be made, Hepner says the IRS can easily be reformed through lower income taxes, and a smaller national sales tax instead of the Fair Tax.

"Once there are more voices that step out and point out these problems with this proposal, I think more likely this proposal will start to die out," said Dr. Hepner.

Others disagree. They say although there is powerful opposition to the Fair Tax from Washington lobbyists who make a living by manipulating the tax code, the grassroots effort is strong. They say change can, and eventually will happen.

"I would love to have some sort of a legacy that goes beyond just running my mouth on the radio day after day, and if I can do anything to bring this to pass, I think that would be wonderful," said Boortz.