To The Citizens of the United States of America:

(This is a research paper I wrote for a class at BVU, just my thoughts, sorry if the citations are written incorrectly, but I'm a music major, not an English major. Enjoy the information for what it represents.)
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I want to encourage you to think about how our current tax structure can impact our global climate, how renewable energy sources can move us away from the use of oil, and provide ideas on what we, as a society, can do to help improve the situation we find ourselves in as far as global warming and a loss of our natural resources.

With our current income tax structure, we are essentially being taxed three times on our income: once with our federal taxes that are taken from our paycheck, once from our state if we work in state that has an income tax, and once when we take our leftover income and go to the store to purchase items.

In this situation, a family in Iowa that earns $60,000 a year before taxes is required to pay 28% in federal taxes ($16,800) (cnsnews.com) and 15% in state taxes ($6,480) (taxesplusiowacity.com) leaving them with a net income of $36.720. This money is then used for purchases, most of which are taxed (at 7% in Iowa). If a family lives within their means, this could be up to an additional $2,400. That $60,000 has been brought down nearly 50% to $34,318.

Consider a proposed Fair Tax. Fair Tax is based on consumption or use. Under this system, there is no longer a federal income tax, and in many instances no state income tax due to benefits that will be discussed.

In this situation, the same Iowa family with a $60,000 yearly income will go home with $60,000. If this family lives within their means, they have $60,000 of income to be used for purchases. A federal sales tax would 23% ($13,800) and most states with a sales tax would simply choose to piggyback on their own sales tax, which in Iowa is 7% ($4,200) (fairtax.org), giving this family almost an additional 20% of income to make purchases with.

Under Fair Tax, all purchases of new items will be taxed while used items would not be. This would help with waste in our nation. People who shop at second hand stores such as Goodwill and other places where they sell used items: clothing, movies, books, games, sporting equipment, household items, would not have to pay sales tax on these purchases. These items will be more likely to be “recycled” rather than thrown in our landfills.

Under the current system, taxes are placed on companies in many areas, requiring them to raise prices in order to cover their costs. With Fair Tax, the “final product” is what is taxed, so businesses are able to save money to get to that point, which may offer them the flexibility to lower prices (fairtax.org).

The current system also requires businesses to pay additional taxes for their employees. With Fair Tax, those taxes would be abolished, which may allow employers to raise their wages (fairtax.org). This leads to raising income levels and bringing more families out of poverty and allowing them to save more money.

Consumption tax is not a new idea. The idea for this tax has been around for almost 500 years. In fact, Alexander Hamilton wrote in his Federalist #21 paper “There is no method of steering clear of this inconvenience, but by authorizing the national government to raise its own revenues in its own way. Imposts, excises, and, in general, all duties upon articles of consumption, may be compared to a fluid, which will, in time, find its level with the means of paying them. The amount to be contributed by each citizen will in a degree be at his own option, and can be regulated by an attention to his resources. The rich may be extravagant, the poor can be frugal…” (constitution.org).

With a consumption tax, not only could incomes be raised and prices for goods fall, but there would no longer be a need for filing personal income taxes, saving resources and money. Under our current tax code, which is over 73.6 thousand pages long, loop holes and other means of evading your portion of income taxes cost individual tax payers $2,500 every year (fairtax.org) and compliance measures cost businesses over $600 billion every year (youdebate.com).

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References

Bartlett, B. (n.d.). Consumption Tax Theory. Free Republic. Retrieved November 6, 2012, from www.freerepublic.com/focus/news/840372/posts

Brown, L. R. (2011). World on the Edge. New York, New York: WW Norton & Company.

Fair Tax: FIre Up Our Economic Engine. (n.d.). Fair Tax. Retrieved November 6, 2012, from httphttp://www.fairtax.org

Hamilton, A. (n.d.). The Federalist #21. Index. Retrieved November 6, 2012, from http://www.constitution.org/fed/federa21.htm

National Sales Tax Debate. (n.d.). Political Debates and Polls Forum. Retrieved November 6, 2012, from http://www.youdebate.com/DEBATES/TAX_NATIONAL_SALES.HTM

Raggio, G. (2012, September 26). A National Consumption Tax. We Consume Too Much. Retrieved November 6, 2012, from weconsumetoomuch.com/a-national-consumption-tax/

Street, J. (n.d.). Report: What Tax Bracket Will You Be In For 2013? | CNS News. CNS News. Retrieved November 5, 2012, from http://cnsnews.com/news/article/report-what-tax-bracket-will-you-be-2013

Taxes Plus : Newsletter. (n.d.). Taxes Plus : Home. Retrieved November 5, 2012, from http://www.taxesplusiowacity.com/newsletter.php?nid=16196

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