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PrintSince the late 1980s, income inequality has grown in most parts of the country, according to a report by the Center on Budget and Policy Priorities and the Economic Policy.
The richest Missouri families have had the greatest income gains in that time period. The gap between Missouri’s richest and poorest families is the 22nd-largest in the nation, and the gap between the richest families and families in the middle is 14th-largest.
In light of these statistics, consumption tax legislation — known as the “fair tax" — says it would reconcile these disparities by replacing income taxes with a system that taxes spending rather than income. This would in essence establish a wide-scoped sales tax.
The consumption tax compensates for the increase in sales tax by giving every taxpayer a rebate. Those who are earning below the poverty level — below $20,000 — will not have to pay at the same level as those above.
But the Institute of Taxation and Economic Policy, a Washington-based policy research organization that has an office in Columbia, is strongly against the consumption tax. It says the new sales tax rate would have to increase to about 12.5 percent — up from 5.11 percent — for the bill to be truly revenue-neutral.
ITEP also says the burden of the increased sales tax will fall on lower income and middle-class families, while Missouri's wealthiest 1 percent would see the highest tax cuts.
In a report by FactCheck.org, a project of the Annenberg Public Policy Center of the University of Pennsylvania, “consumers would pay taxes on a great many things that may not intuitively seem like consumption,” such as rent, medical bills, utilities, gasoline and legal fees.
While federal legislation is still in committee, Missouri is on the forefront of this tax issue and has garnered interest from around the country. FairTax.org is even hosting the Midwest Fair Tax Rally from 8 a.m. to 4 p.m. on Saturday at the Boone County Fairgrounds.
State Rep. Chris Kelly, D-Columbia, an active advocate for the consumption tax, believes that compared to the income tax, the sales tax is more difficult to cheat and, logistically speaking, less expensive to collect than income taxes.
Why do you support or oppose the consumption tax legislation?
Comments
Thorough economic analysis debunks the ITEP paper often quoted in campaigns when a
national retail sales tax is mentioned. According to sophisticated research by Dr. Laurence
Kotlikoff (http://people.bu.edu/kotlikof/), noted public finance economist of Boston
University, the FairTax national retail sales tax at a rate of 23 percent significantly reduces
marginal taxes on work and saving, substantially lowers overall average lifetime burdens
on current and future workers at all income levels, and enhances overall progressivity.
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1 “The Effects of Replacing Most Federal Taxes with a National Sales Tax: A State-by-State Distributional
Analysis,” Institute on Taxation and Economic Policy (ITEP), Citizens for Tax Justice, September 2004.
2 Condensed version of Kotlikoff, Laurence J. and David Rapson, “Comparing Average and Marginal Tax Rates
under the FairTax and the Current System of Federal Taxation,” October, 2006.
3 Average remaining lifetime tax rates are based on the total tax payments net of Social Security benefits that the
household will pay in its remaining years of life. They measure the household’s future tax burden under the FairTax
compared to what it would have to pay if the current tax system remains in place.
Don't judge it till you totally know and understand it. I thought it was a gimmick until I studied it. It's truly awesome.
Everyone is complaining about the fair tax but doing nothing to get rid of the present income tax with all of the imbedded taxes.Don't you think it is time "We The People" took back this country? At least with the Fair Tax everyone would be paying taxes including visitors from other countries. Doesn' that make more since than us paying taxes for them?
The average federal tax burden for Americans is about 30-32% of every dollar earned (when also considering the Social Security and Medicare payroll tax and embedded federal taxes in retail prices). The very most someone pays for federal taxes under the FairTax is 23% of what is spent (and that level is only reached when a taxpayer spends hundreds of thousands of dollars). So is 30% of what is earned better than 23% of what is spent? No.
People can pay less under the FairTax and still raise every penny now collected because the tax base grows broader under the FairTax. Illegal immigrants, the underground economy and even foreign tourists contribute under the FairTax. Billionaires and big business loopholes close under the FairTax bringing in more revenues and a more fairly distributed tax burden for the common good. All federal taxes on the poor are reimbursed and the middle class sess a dramatic tax reduction--despite the distorted analysis by ITEP and other income tax defenders.
It also eliminates the potential for Congressional corruption whereby Congress trades tax breaks and gimmicks for contributions--about three a day every day they are in session. Removing this abused power from Congress has both Republican and Democratic representatives and Senators fighting against the FairTax. They find willing allies in ITEP and others who are "players" in the DC culture that now surround Congressional tax writing committees. Tax lobbing is a $1.5 billion a year industry in Washington. Legislators are generally unwilling to expose the cost of the federal government to taxpayers, preferring to keep payroll taxes and income tax withholding hidden from plain sight so that citizens remain in the dark about the personal cost of increased government spending--which helps "buy" reelections.
Essentially, the income tax system provides a campaign useful, lucrative and powerful living for those in Washington as it bedevils individual taxpayers and damages the national economy. This is clear-cut case of self-interest in Washington trumping the national interest.
Some state legislators also apparently prefer to keep taxes hidden from taxpayers despite the clear advantages of the FairTax.
As the FairTax movement grows more citizen pressure is building to trump the self-interest of legislators. That is the genius of our system of government and the Founding Father's vision of self-rule. Given the desperate need for repair of our economy, more jobs created and a restoration of the proper role between citizen and government, such pressure can't come a moment too soon.