IPOCAMPUS

 

 

 

By Mr Odoni, Ipocampus Holding Odoni Partner, Dubai based.

 

To most American citizens that the U.S. Tax Code has become a truncheon used to beat the American people into lockstep by an increasingly truculent political class. The actual legislative code is more than four times the length of the Christian Bible and is full of incomprehensible and contradictory exceptions and exemptions.

 

It is an unjust piece of legislation that hinders and manipulates economic activity.

 

It is enforced by an agency that is far too often the antithesis of the basic American principles of due process and equitable justice.

The time has come to replace this punitive tax system, which seeks to appropriate a portion of our income with a tax system that collects revenue on positive economic activity only. In that way, legislators would be less inclined to pass laws that inhibit economic growth or penalize success. Their actions would have a direct impact on the amount of revenues generated.

In July 1999, a conservative congressman from Georgia named John Linder introduced the FairTax proposal (HR 25).

 

In 2005, Linder joined with syndicated talk show host Neal Boortz to write "The FairTax Book: Saying Goodbye to the Income Tax and the IRS," which proposes that the current system be replaced by a single-rate personal consumption tax that would be collected only on purchases of new goods or services.

It offers Americans the option of opting out of taxable activity without inhibiting economic activity. It also fairly distributes the burden of supporting government across everyone who reaps the benefits of our society, everyone who chooses to purchase something new without regard to the source or amount of the customer’s income or other personal information.

 

The FairTax gives everyone an automatic pay raise because of the elimination of all forms of income tax, including individual and corporate income tax, capital gains tax, and estate taxes.

 

It is not a value-added tax (VAT). It is a replacement for the existing tax system with an embedded personal consumption tax of 23 percent of all goods and services sold at the retail level.

 

It is not collected on the sale of used or previously owned items, only new transactions. -- And that includes government procurement of new goods and services.

 

This would have the effect of being a competitive disadvantage to the government and cause them to divest themselves of businesses that could be run more effectively in the private sector.

 

Low-and middle-income families would be protected from being taxed on the basic necessities by the inclusion of a monthly prebate—a monthly stipend based on the government’s published poverty levels for various-sized households, which would probably be credited to a person’s purchasing card.

So, people would have all income and payroll taxes abolished; if you worked 40 hours for $10 per hour, your paycheck would be for $400, instead of the $292 it probably is now.

 

The average 22 percent of business taxes that are currently embedded in everything we purchase would be eliminated. And everyone would receive a monthly payment to cover the sales tax up to the poverty level.

 

For the low-income families, this plan would be all benefit and no burden. This plan would also capture the shadow economy that currently pays no taxes at all. It wouldn’t matter how or where your income was generated; if you purchase something new in America, you will pay the FairTax.

Once enacted, the FairTax law would immediately repeal the Sixteenth Amendment, and the Internal Revenue Service would effectively become a bookkeeping department for the Treasury. The number of attorneys in Washington, D.C., would plummet because there would be no reason for many of the lobbyists on K Street to continue operations.

 

It is infinitely better than any of the flat-tax proposals because Congress has shown that if given the choice between incrementally increasing the tax rate and dealing head-on with overspending.

 

Mr Odoni is president and CEO of  Ipocampus Holding Odoni Partner, Dubai based.