The biggest problem we Americans face, other than the fact that we can’t seem to get along with each other, is tax code. No matter how you configure taxes, a lot of people will be left feeling unsatisfied and unhappy.
AI tells me that 30 to 40 percent of Americans favor a Flat Tax where everybody pays-in the same. My best friend likes the Fair Tax which would tax spending instead of income.
The real problem may not be how we tax but what we spend it on. The Democrats and Republicans, in their never-ending attempts to be seen as opposites, have created a spending competition in a race to outspend each other. The Democrats like to spend our money on social programs, and the Republicans prefer the military and defense.
Proposed:
Let’s put a cap on insane spending one-up-manship and put lid on the debt. Let’s start by freezing spending at 2025 levels, or the previous year’s figures from when we institute the revised system.
Proposal #2:
Cut next year’s spending by 3 percent across the board, discretionary and non-discretionary. Let each department make their own cuts.
Proposal #3:
Modify the Graduated Tax code to include a Graduated Rebate configuration:
The Lowest quintile would be rebated all of the tax they paid in, the second quintile would get a 4% rebate, the third quintile would get a 3% rebate, the fourth quintile would get a 2% Rebate, and the highest earning fifth quintile would get a 1% rebate. Every year!
AI affirms that the government would lose around 3 percent, and the American people would gain approximately the same amount.
The Flattened Tax
Whatever is taxed, its costs go up, and demand for it decreases. The payroll tax suppresses work and raises prices. The business income tax imposes costs on business owners, employees, and customers. The personal income tax reduces household income, savings, and wealth accumulation. These taxes hinder production. This is indeed a real, large, and chronic problem that afflicts our people.
Citing a 2024 IRS report, The Tax Foundation estimated that IRS tax compliance costs the US Economy $546 billion annually. Divide that by 134.8 million households for an average of $4050 per household every year.
The FairTax Act, HR25, in its current form, will replace all federal income, payroll, business, estate, and gift taxes with one 23% inclusive sales tax on retail services and new goods. All legal residents will be eligible for a monthly rebate from the Social Security Administration to untax spending up to the federal poverty level, provide a marriage benefit, and to make the sales tax progressive.
The IRS will be abolished because the states will collect the federal sales tax and keep a processing fee.
A majority of the June 2025 Quantas Insights Survey respondents believe that this progressive consumption tax is better than what they experience now: Main Street’s Verdict on the Tax Code. And they are right.
John Gaver, initially a FairTax skeptic, compared the FairTax with flat income tax proposals according to twenty-two goals. For each goal, he included an ideal flat tax for that goal. He found the FairTax to be superior in every goal. His book is called The Tax Deception: Tax Reform in Plain Language.
And just because the Communist Manifesto prescribed a graduated income tax 178 years ago does not mean that we must perpetuate economic oppression.
Jim S:
Thanks for your insightful commentary.
Yes, I see your point about the disadvantages of taxing income! The Fair Tax, with progressive Rebates makes a lot more sense.
I also see your points about the potential benefits of the Fair Tax. Ideally, every person’s tax burden would be the same as everyone else.
Why not the best, indeed?!?! The Fair Tax would be better, but the Fair Tax is a Sea Change from where we are. A Flattened Tax (with a graduated rebate) is a more doable step given the reality we currently find ourselves in.