Linder argues that the current system of tax collection discriminates and infringes the principle of fairness. The special rates currently in operation supposedly catering for special circumstances breach the original constitution and are unreasonable. The fair tax scheme would ensure that all citizens pay their taxes based on the same rate but their responsibility would be controlled through spending ability (Boortz & Linder 2006). The amount of tax paid by an individual would greatly depend on his or her standard of living hence the amount of tax paid would be directly proportional to expenditure.
Fair Tax Position Mr. Boortz in his book, fair tax, seems to exaggerate his claims that the scheme would greatly motivate increase in economy growth rate. He explains that once implemented, the fair tax plan would encourage savings among individuals and this would transform into investments and hence creation of capital and speedy economic development. With a steady economic growth, there are greater chances of creation of employment and the problem of unemployment would be significantly reduced.
Mr. Boortz estimates that the scheme would increase the size of the current economy by a multiple of two and the capital investment would rise by approximately 76% with reduced bank interest rates to up to 30% less and all this developments will contribute to the growth of the economy to a growth rate of 10. 5% (Boortz & Linder 2006). The fair tax seems to incline its benefits to the poor and the middle class as it’s postulated to reduce their tax burden.
The fair tax would enable the poor and the middle class to acquire about 50% raise on take-home pay a very strong reason as to why the poor and the middle class ought to support the implementation of the proposed scheme. Though Boortz does not support economic class warfare, his support for the fair tax that would benefit the poor is quite strong and says even though there would be probate checks; it would only take care of necessities of life and some money would be left for the underprivileged to advance in their own future investments.
It’s been criticized that the rich would pay a greater portion of tax just as they do the current system. (Boortz et. al. 2008) On the international implication, once put in place, the fair tax plan would create an environment that would encourage foreigners to invest in America to sustain their market competitiveness (Gingrich et. al, 2008). This situation is described as an opportunity for the U. S to establish a tax collection system that would spread freedom globally. Limitations of Fair Tax The fair tax is portrayed as an independent and voluntary system of tax payment.
The citizens would have the freedom of choice as what they want, when they want, and how to spend their money allowing people to make tax payments when they want to. A serious problem may from the freedom accorded by fair tax, say if one decides that he/she does not want to pay any tax. The same repercussions as in the current systems will be applied (fine or Imprisonment) therefore fair tax is not voluntary after all (Hufbauer & Grieco 2005). Boortz insists that fair tax would be 23% and later comes to admit that it actually be 30%.
The fair tax guarantees to bring to an end the Internal Revenue Service (IRS). These could be seen as a very crucial achievement since the body is very inefficient however, in reality, tax collection would still be done by another body, logically it looks like a mere change of name. This does not get rid of the functions of the revenue collectors and critics assert that Income tax will be substituted by fair tax and IRS would be substituted by some kind of federal bureaucracy to watch over tax collection bearing in mind that fair tax is still National sales tax in reality (Gingrich et. al, 2008).