Fair Tax -- Would it Rid Us of the IRS?

Today was the Republican Debate's, and with three kids running around I wasn't able to listen to much of the debate. One part I was able to listen to was regarding the idea of a fair tax. Under the fair tax, we would pay a national sales/consumption tax of 23% and there would be no more income tax, Social Security tax withholding and we would all live in a magical world where there would be no IRS. Although there are many issues with the fair tax that I dislike (the propensity for this tax being a tool of special interests and lobbyists just to name one) one issue that is easily clarified is the fair tax will not rid the nation of the IRS.


It is true that, individual wage earners would be rid of any dealings with the IRS, but small business owners would have a much more powerful and demanding partner in their businesses'. Their are certain state and Federal taxes that are called trust fund taxes (Social Security, Federal Withholding, Medicare tax, and sales tax are a few of them) these taxes carry a powerful punch for those who fail to fully comply with the legal requirements of these laws. The penalty can amount to as much as 100% of the tax that was owed, add on interest and these types of taxes have been the death of many a business enterprise. Another problem with trust fund taxes are the propensity for misappropriation of trust funds -- entrusting 100% of the nation's tax funds to struggling small business owners creates a huge opportunity for fraud. Another problem is the vagueness of most states sales tax laws (after which I assume the national fair tax would be modeled). For example, Utah's sales tax rules (as far as I have experienced) are some of the most vague tax rules I have ever come across I have detailed the vagueness of Utah sales tax at least once or twice in the contents of this blog, and I don't feel like going through it again.

Although a large percentage of the nation would be rid of dealing with IRS, small business owners would find a much more ruthless and powerful IRS reaching its hand into their daily business dealings. This tax would raise the taxes of the poor and the middle class by raising the cost of living, it would be extremely costly to implement, and it would raise the cost of doing business and have a discouraging effect on entrepreneurship in this country. I don't believe the fair tax would be a wise choice for the tax policy of this country.

Healthcare -- My Paradigm Shift

As most paradigm shifts occur, mine comes due to very difficult personal issues.

Out of school my first job (the one which I am still employed) is in a very small firm that hasn't provided health care coverage for its employees. I don't curse my employer -- small employer health care plans are about as affordable as the individual employees providing their own insurance. It was soon after this that my doctor noted that my second child didn't gain sufficient weight in her first year, the doctor noted concerns that she may be susceptible to host of different conditions. In this case my wife and I were left with prayer and faith as the strongest source of comfort -- it worked our daughter is robust and healthy. Now my one year old son has been diagnosed with a possibly debilitating disorder known as leukodystrophy (there are several classes of this disorder and the doctors are still uncertain as to the exact type) Fortunately, CHIP enrollment opened again and the income requirements have raised to a level that my children finally qualify.

However, it has been a heart-aching experience over the past year being unable provide my son with all of the health care that his caring physicians have suggested. Not to mention lacking health insurance on my wife and myself has been frightening at times, lets just say I exercise religiously and I drive extremely cautiously. There are many benevolent organizations that have provided my son with therapeutic services virtually cost free, for all of which I am extremely grateful. These events have led me to question my long-held stance that health care needs to remain a fully privatized venture.

Although, I am well acquainted with inefficiencies of a few despised Federal agencies I'm growing (in small steps) to believe that nationalized health care my not be as bad as I have sometimes lamented. I'm not suggesting that the idea of Walter Reed Medical Center's nationwide doesn't repulse me, but a system in which anyone can get (grantedly sub par) health care as opposed to no health care is gaining some appeal to me.

I still have some strong points in opposition. The horror stories of VA medical centers are one example, and the needed increases in tax revenue to pull off such a policy shift are colossal. I heard somewhere the absurd suggestion of a "fat" tax, an idea in tax policy that may create a whole host of new eating disorders.

Something needs to be done to provide affordable health care to all Americans, I'm afraid we all know the answer and for some of the reasons cited above we are loathing to admit it.

Heritage Foundation -- Tax Increase

I got an email from my mother this morning linking to a YouTube video of "Heritage in Focus", these are short 2 minute episodes about various current issues. Some might call these videos "propaganda," but this one was fun, my cousin is the announcer in this episode.

I agree quite strongly with the Heritage Foundation on this subject. Surprisingly, under George W. Bush revenues in the US Treasury have reached some of the highest highs in recent decades and it has happened without tax hikes. (Apology -- this is information I heard during a tax practitioner conference and I don't recall (or am too lazy to) recall the sources) It would appear that one of the largest contributing factors in increasing revenues is one of the strongest efforts in history to give the Internal Revenue Service the needed resources to close the tax gap. The Democratic party rhetoric that the Bush tax cuts were only for the wealthy is very misleading, I have seen a vast majority of my client-taxpayers, and I would argue most people have, benefited under the tax cuts enacted during the past 6 years. Make the Bush tax cuts permanent!

Update: I received some criticism on this post, and I wrote as if I had nothing but praise for the Bush Administration fiscal management of our nation. Federal spending by Bush and the formerly GOP Congress has been inexcusably high especially on earmarks and nonessential, entitlement, non-defense programs. However, I disagree that tax cuts are the problem. If we would have had a GOP congress that would have stuck the fiscal conservatism GOP'ers claim to embrace (low taxes and low federal spending) the current debt/deficit situation could be much different. If congress and the President reigned in non-essential spending (I believe) a balanced budget would occur.

I have at times in my life believed in Santa Claus so why not believe Congress and the President can stop its addiction to over-spending.

I hope that lowers the critically high propaganda levels of this post. I posted this more because I thought it was neat that my cousin was in the video.