What is the FairTax?

Three friends discuss taxes over lunch.
How can I pay less taxes?

Ask yourself, are tax breaks for the protected class legal under our Internal Revenue tax code and was it fair they got special tax privileges?

No one is wild about paying more taxes, but traditional paycheck earners pay more than their fair share. They do not write the tax code and can not buy the high priced legal assistance to avoid taxes. The wealthy can always afford the best tax lawyers who can search the tax code and locate loopholes that shelter  wealth.

The tax code does not cover investment income the same as earned income. The rich and famous pay less than average citizens because the uber wealthy have income from tax sheltered investments.   Our tax code is riddled with special tax provisions that protect wealth. Here are a few examples.

• Teresa Heinz Kerry, wife of Senator John KerryThis inconvenient story appeared during the 2004 Presidential campaign. To date, Heinz Kerry has declined to disclose her personal tax returns, citing family trusts and privacy. She is estimated to be worth between $750 million and $1 billion. According to her most recently released income tax of 2003, the Kerrys paid an effective federal income tax rate of 12%. Most of her income was derived from tax free municipal bonds, which explains the low rate.
• Edwards and Kerry want to raise taxes, but aren’t wild about paying them.Senator Edwards talks about the need to provide health care for all, but that didn’t stop him from using a clever tax dodge to avoid paying $591,000 into the Medicare system. While making his fortune as a trial lawyer in 1995, he formed what is known as a “subchapter S” corporation, with himself as the sole shareholder.Instead of taking his $26.9 million in earnings directly in the following four years, he paid himself a salary of $360,000 a year and took the rest as corporate dividends. Since salary is subject to 2.9% Medicare tax but dividends aren’t, that meant he shielded more than 90% of his income. That’s not necessarily illegal, but dodging such a large chunk of employment tax skates perilously close to the line.
• Tax cheat Rangel caught on tape: “Why don’t you mind your goddamned business?”
  
• Charles Rangel Looks Like a Tax Cheat

The Income Tax only punishes middle and high income earners at the confiscatory IRS rates because average tax payers don’t qualify for sweetheart deals. Under a National FairTax, both John Kerry and John Edwards would pay 23% sales tax same as the rest of us pay for the new things they consume. The super rich get sweet heart tax breaks hidden in the tax code which benefit themselves and the rest of the protected class. Under a FairTax system, as the super rich purchase the new gulf stream private jet, new mansion, or a brand new yacht, they would pay the same sales tax as everyone else.