Skip at GraniteGrok explains why Democrat Moonbats like CSP want to keep the current income tax while Jeb Bradley believes replacing the current tax with either a flat tax (as championed by Steve Forbes as a Presidential candidate) or the FAIR tax (championed by Presidential candidate Mike Huckabee). Having looked closely at both plans and talked to Forbes, Huckabee and others I do believe that the flat tax would be easier to get passed through some future Congress.
Skip seems to be a little off on the description of the Forbes flat tax. He says it would be a consumption tax, possibly a VAT. The flat tax as proposed by Forbes would essentially be an income tax with one rate (therefore flat) and virtually no deductions. It would not eliminate the IRS (but neither would the FAIR tax). It would not eliminate the need for employers to report income and there would be a need for tracking incomes and ensuring compliance. The difference is that it would eliminate the ability of Congress to meddle in the code – doing the social engineering they seem to love so much. But it would still be an income tax, but filing would be much simpler and you would not need a tax preparer and there would be no need to keep all those receipts and records – take the total income, multiply by the tax rate (Forbes suggested about 17%) and that is the tax. Since it is very unlikely the Congress would do away with Social Security and Medicare tax withholding by employers the process would probably be the employer simply withholds the 17% and there is no need to file at all for most taxpayers.
The FAIR tax is as Skip says a consumption tax or sales tax. It is envisioned as taxing all consumption at the retail (end user) level. So it would eliminate several layers of tax on corporations. Raw materials would not be taxed. The profits of suppliers would not be taxed. The thinking is that the tax (again estimated at 17% by some) would actually result in lower prices and therefore the end user’s cost would be the same – ie: GM now builds a car selling for $20,000 under the FAIR tax GM would not be taxed on their profits, they don’t have to hire hunderds or thousands of people to track their tax obligations or manipulate the corporation’s activities to minimize tax obligations, they could pay their employees less since the employees would not be sending 25% or 35% of their income in taxes, their suppliers profits are not taxed, and the theory is that the price of the car GM produces would drop to $17,100 – the customer would pay the $17,100 plus the 17% – $20,000. Would it be that simple? Hardly likely, but the point is the consumer gets to choose how much they pay in taxes because they decide what they buy (and under most explanations I’ve seen – used items would not be subject to the tax so he could buy a used car and pay no tax, buy used clothes, buy used furniture, etc).
The clinker in the whole thing is that you have to get over 50% of the US House, 61 Senators and the President all on board with one plan in order to get either plan through. Also the FAIR tax would virtually require a Constitutional amendment preventing an income tax or you would assuredly have both. The flat tax would also probably require an amendment preventing Congress form adding back in all the loopholes and social engineering.
The only real possibility I see of either being implemented would be if a Presidential candidate – who can win without that as a major issue – taking it on as a secondary issue. Forbes focused on the flat tax and even with all his money could get no traction. Mike Huckabee had most of his campaign wrapped around the FAIR tax and although the FAIR taxers were almost as rabid as the Ron Paul crowd he did not gain enough traction.
Electing members like Jeb to Congress who are willing to support either plan will help but it is only one step on the path. There are too many current members of Congress (in both parties I have to admit) who want to keep the ability to manipulate the tax code. Without a truly viable candidate at the top of the ticket willing to take on the battle it will not happen.
It can happen and electing Jeb and others like him is the right thing to do.