COLUMN: POINT-COUNTERPOINT: Fair Tax Act not fair, nor a solution

Robert Lee

One cannot be blamed for missing the introduction in Congress of HR 25 - Fair Tax Act - since it occurred on Jan. 9, two days after the speaker was elected following 15 votes.

That is unusual in itself, but another unique aspect of this chaotic scene was the three-page list of "concessions" that Speaker McCarthy had to make to get sufficient votes to ascend to the speakership. The new speaker denied the existence of such a list, but is alleged to have included offering a floor vote for HR 25, an action that had been denied by other speakers.

The reason? It is a very controversial topic that would, according to, replace all federal income taxes - including the alternative minimum tax, corporate income taxes, and capital gains taxes; payroll taxes, including Social Security and Medicare taxes; gift taxes; and estate taxes with a single broad national consumption tax on retail sales.

It sets the rate at 23%. However, other sources suggest it is really as high as 30%. Then it goes on to assign collection duties to the states, eliminate the IRS, and terminates the sales tax after seven years if the 14th Amendment - authorizes the income tax - is not repealed by then. It also allows a monthly rebate depending on your income, so low-income families would get some of the tax back. Imagine that; you have to pay 23% tax on every item you purchase at the time of purchase.

Unlike some states - not Oklahoma - there is no exemption for food or medication. That would be on top of state, county, and city sales tax, so in Tahlequah, that would be 32.5%, possibly higher. It is paid at the time of the sale/transaction, so you have to have the money "in hand" at the time, not next month after receiving your "rebate." In the resolution, purchase of investments are excluded from taxation, but are not defined. What that tells me is you and I will be paying the sales tax on what we buy, but those buying/selling stock will not - at least not at a 23% rate.

And who is going to collect these taxes? The states are charged with this duty since the IRS is gone, so state infrastructure has to be developed to collect the taxes and monitor to make sure businesses are sending them in. What of the cash economy? If I'm an independent craftsman or entrepreneur and I sell you something for cash, am I obligated to turn in the 30%?

Have you ever received a "cash discount"? I know I have, and according to the, "Each state's sales tax base varies…States could conform to the national sales tax base definition or administer two separate sales tax systems - emphasis added. Ensuring compliance would also be difficult due to the relatively high national sales tax rate, which would create a large incentive for evasion."

Included in the resolution is the elimination of FICA or the Social Security and Medicare payroll tax. Once that dedicated funding is eliminated, Social Security and Medicare become annual budget items with no guaranteed funding. That would achieve what Sen. Rick Scott proposed last year in his plan to "rescue America," which according to WAMC radio, "So - if Scott actually understood his own proposal, the entire Social Security Act - including Medicare and the Social Security Pensions almost all Americans over 70 are receiving monthly - would either disappear (that's what 'sunsetting' means) or have to be re-enacted by Congress."

And guess who benefits the most? Yes, you guessed it: the top 10% of households would see a tax reduction. The rest of us, not so much. I'm sure our tax system could be more fair, but this is not the answer.

Robert Lee is a retired social worker with interests in history and politics. He lives in Tahlequah.

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