AFFT gets local Kiwanis to consider Fair Tax Resolution

Taxes are not fair, but they could be. That was the message brought to the Kiwanis Club during a meeting Monday at the Quality Inn Hotel in Houma.

“What we have with the current tax system is taxation without comprehension,” said Americans for Fair Taxation 6th Congressional District Director Laura O’Halloran as she fielded questions from those in attendance.

“We all know what the problems are without current system,” O’Halloran said. “We’ve had it for almost 100 years now and we’ve got about 72,000 pages of tax code that nobody understands.”

O’Halloran has been an advocate for the Fair Tax Resolution for the past five years and has worked to build a base of support among businesses and individuals in the southern half of the state. AFFT is a national, nonpartisan, nonprofit, grassroots organization solely dedicated to replacing America’s tax system with the Fair Tax Act of 2011.

A fair tax, often referred to as a consumer tax, would replace income and payroll taxes on federal and state levels. Basically a sales tax, the amount collected from a fair tax would involve anyone purchasing products or services, and is touted as capable of generating greater public revenue than income taxes while involving the entire population.

The fair tax initiative was launched in 1998 and most recently introduced in Congress with HR-25 and in the Senate with SB-13. A joint House resolution, HJRes-16, calls for a repeal of the 16th Amendment. Many state legislatures, including Louisiana, have begun investigating fair tax options.

The federal Fair Tax Act, which involves HR-25 and SB-13 (both call for replacement of the federal income tax code), is non-partisan legislation that has received both backing and opposition from each side of the aisle.

It would abolish all federal personal and corporate income taxes, gift, estate, capital gains, alternative minimum, Social Security, Medicare, and self-employment taxes. Those charges would be replaced with a single federal retail sales tax at 23 percent of each dollar spent on purchases.

Opponents complain that the federal sales tax would be a burden on the poor, but supporters contend that it evens out the tax burden based on the theory that people living within their means would be spending accordingly, and as a result make the tax burden more shared across economic lines.

According to O’Halloran, the evening of the sales tax playing field would be accomplished with the government offering prebate checks to citizens that pay them a living allowance based on the size of their households. How that money is spent falls on the responsibility of the consumer.

“If you spend all your money on a big screen TV, maybe you should buy a smaller TV,” O’Halloran said.

Some contend that higher up front taxes would reduce spending, but others claim having extra dollars on the paycheck would enhance commerce.

Supporters argue that the fair tax would allow workers to keep their entire paycheck rather than having withholdings from their employment compensation. Retirees would be able to keep entire pensions and long-term savings plans without those being taxed.

Social Security and Medicare shares would be included in the consumer tax so as to continue funding of those programs.

Fair tax proponents contend that the tax base would widen revenue collected by including consumer spending from an underground economy, an estimated 40 million tourists annually from other nations, and even drug dealers and illegal immigrants who spend money for retail goods.

“There is not enough that has been laid out as a plan to make an intelligent assessment as to whether it would be a good thing or not,” CPA Bryan McElroy of Houma said. “I think there are some good components of it, but what most people don’t realize is that whether you are paying income taxes or some other type of national sales tax, fair tax, whatever you want to call it, it is all going to fall to the consumer in some shape or form.”

“I don’t think it will ever pass Congress,” CPA Mark Felger of Houma said. “Congress has too much power through tax policy. It would take away too much of their social engineering power.”

O’Halloran contends that the fair tax is a benefit to small business as well as the consumer and deserves serious consideration.