Dec 042006
Authors: Nick Hemenway

Last week, we discussed the problems with our current tax system and how desperately we need to change it. The solution is to adopt a new movement circulating through our government as we speak.

It’s called the Fair Tax Plan.

Currently, we are used to encountering taxes in many forms, whether income, property, capital gains or other. The Fair Tax Plan would throw every single one of those out the window.

Then how would the government get its money? A simple national sales tax of 23 percent will be implemented on all new goods and services.

Right about now, you are probably getting a little worried, thinking that we will be paying so much more than we do right now. But let’s think about a few things first.

Where do you think every company you buy something from is getting the money to pay all their taxes? They get it from you. When you go to buy a car from your local dealership, they are charging you extra for the countless taxes they face. The economists involved with the plan found embedded costs to the consumer to be roughly 22 percent.

When companies’ taxes are gone, the forces of the competitive free market will lower consumer prices so that we will see very little increase, if any.

The other major component to the Fair Tax Plan is its power to fight poverty. To alleviate the tax burden on the lower class, the government will pay each head of household a monthly “prebate” that will amount to an annually calculated sum ensuring that no one living below the poverty line pays any tax on the necessities of life.

So not only do lower class families get to keep every penny they earn, they will pay significantly less tax.

Perhaps the most important concept to grasp about this plan is that you will pay taxes only when you choose to buy something, not just because you earn a certain amount. That way, those of us who buy very little will pay very little while the wealthy will pay comparatively more due to their increased spending.

This means all the money we talked about last week that is taken from you by the government without you doing anything could now be put away into savings or other investments. That way you are the beneficiary of the interest earned.

Due to my space limitations, I can barely scratch the surface of the benefits of the Fair Tax Plan. However, if you look for yourself, you will see the countless reasons to change the way we think of taxes.

Every tax evasion loophole that exists will be closed, denying the underground economy and offshore accounts to be tax free.

Instead of leaving the country to avoid a mountain of taxes, companies will be coming to the United States for freedom from taxes, potentially creating more jobs for Americans.

While the Fair Tax Plan is an amazing concept, it is revenue neutral, meaning that it is designed to give our government exactly the same amount of money that it gets now; it only changes the method for collecting it. It is not meant to change the spending habits of our government, although we could use reform in that area as well.

So if I have done my job right, you are at least interested in this great idea. If so, I would highly encourage you to go pick up a copy of the “The FairTax Book” by Neal Boortz. It is one of my favorite books and goes into detail about the plan and how it works, along with answers to frequently asked questions. Who knows, maybe you’ll become a believer, too.

Nick Hemenway is a senior mechanical engineering major. His column appears every Tuesday in the Collegian. Replies and feedback can be sent to

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