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Up | Fairness | Efficient | Behaviorally Neutral
I wanted to start with this one as I
strongly believe that for any tax alternative to
move forward, there must be a both a perception and
a reality of fairness. We don’t want or need a
revision of the current system with a fresh coat of
paint. We need a system that people can buy into and
accept. While it is difficult to define fairness, I
do believe the following:
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I
believe most people can more readily accept a
system where all that benefit also contributes.
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I
believe that when more and more of the burden
falls on fewer people, a perception of
unfairness grows and divides. That is the case
today where a dramatically smaller percentage of
Federal Tax revenue is coming from companies and
greater percentage coming from a smaller and
smaller percentage of individual tax payers.
This gets back to the concept of wide
but thin which I believe people would embrace. Let’s
look for a second at some of the ideas of the Sales
Tax bunch. They correctly believe money travels in a
circular path. However, they incorrectly believe
that it doesn’t matter where in that path taxes are
extracted. They are close but their 15 second sound
bite answer is just wrong. They believe that the
National Sales Tax would in fact engage those people
that benefit from our great economic engine. They
don’t believe that companies need be taxed because
all their profits are funneled through people that
would pay the National Sales Tax. That is flat
wrong! This fact also affects the flat tax as many
who benefit are not citizens and would never be
impacted by the tax!
In 2004, foreign owned assets totaled
$ 2.7 Trillion in this country. Profits generated
from those assets go back to the parent company and
their owners and stockholders. Those people, in
general, would not help support this economic
environment through sales taxes or flat income tax.
An even larger group, which I was
unable to quantify but is huge, are stock holders of
US corporations. The United States has been a haven
for foreign investors in our stock markets since the
beginning of those markets. These investors include
foreign nationals along with government entities.
All of these people derive benefits from our economy
and yet would not participate in its support at all.
This is not a trivial issue and one not addressed by
the sales tax supporters. It severely impacts the
perceived fairness of that program and does help
illustrate the fairness of
The American Income Tax
Simplification Plan. These benefactors of
the American economy would contribute through the
taxation of the companies. This would include
taxation of foreign owned companies operating in the
United States plus taxation of the American owned
companies in which they are shareholders. Nothing is
perfect but this would help include those who would
fall between the cracks in other tax proposals.
The other fairness issue pertaining
to the National Sales Tax will be covered in more
detail in Behavior Neutral discussion but when one
segment of society perceives that it is
overburdened, it believes it isn’t fair and changes
its behavior, normally not for the best!
The American Income Tax
Simplification Plan:
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Spreads the burden wide and thin.
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There are limited opportunities for the
government to unfairly target specific groups
and/or businesses.
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If it looks, acts and feels fair; it just might
be!
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