"One of these things is not like the other..."

Remember the old Sesame Street bit about finding patterns among items and figuring out which thing in the group doesn't belong?

"One of these things is not like the others,
One of these things just doesn't belong,
Can you tell which thing is not like the others
By the time I finish my song?..."

I loved that bit as a kid and I'm sure it helped hone my analytical skills as an adult. Sometimes it helps to compare things that seem similar side by side to get a clearer view of them. This week's FairTax Blogburst from Terry and Jonathan does just that.

Check the various issues below and see how the Income Tax, a Flat Tax, and the FairTax would affect each situation.

16th Amendment

FairTax - Proposes repeal.
Federal Income Tax - No change.
Flat Tax - No change.

Complexity

FairTax - Individuals do not file. Businesses need only to deal with sales tax returns.

Federal Income Tax - Very complex; 20,000 pages of regulations; I.R.S. incorrect over half of the time.

Flat Tax - Withholding continues. Individuals and businesses must still track income and file income tax forms.

Home Business

FairTax - Record all business expenses and is subject to IRS audit? No.
Federal Income Tax - Record all business expenses and is subject to IRS audit? Yes.
Flat Tax - Record all business expenses and is subject to IRS audit? Yes.

Congressional Action

FairTax - 23% Linder/Peterson FairTax Act of 2001 (H.R. 25). Employees receive 100% of pay. Social Security and Medicare funded from consumption tax revenue, not your paycheck. (H.J.Res45) - Will repeal the 16th Amendment.

Federal Income Tax - Used by lobbyists and the wealthy for tax-breaks and loopholes. Used by bureaucrats for social engineering.

Flat Tax - Rep. Armey’s H.R. 1040 has some problems, but is far superior to current law.

Cost of Filing

FairTax - No personal forms are filed. Significant cost savings.
Federal Income Tax - $225 billion in annual compliance costs.
Flat Tax - Significant simplification ­ costs are somewhat reduced.

Economy

FairTax - Un-taxes wages, savings, and investment. Increases productivity. Produces significant economic growth.

Federal Income Tax - Taxes savings, labor, investment, and productivity multiple times.

Flat Tax - Imposes a tax burden some of which is still hidden in the price of goods and services.

Equality

FairTax - Taxpayers pay the same rate and control their liability. Tax paid depends on lifestyle. All taxes are rebated on spending up to the poverty level.

Federal Income Tax - The current tax code violates the principle of equality. Special rates for special circumstances violate the original Constitution and are unfair.

Flat Tax - The flat tax is an improvement over the current income tax, but it is still open to manipulation by special interests.

Foreign Companies

FairTax - Foreign companies are forced to compete on even terms with U.S. companies for the first time in over 80 years.

Federal Income Tax - Current tax code places unfair tax burden on U.S. exports and fails to neutralize tax advantages for imports.

Flat Tax - A flat tax taxes exported goods and does not tax foreign imports to the U.S., creating unfair competition for U.S. manufacturers and businesses.

Government Intrusion

FairTax - As the Founding Fathers intended, the FairTax does not directly tax individuals.

Federal Income Tax - Current tax code requires massive files, dossiers, audits, and collection activities.

Flat Tax - A flat tax still requires personal files, dossiers, audits, and collection activities.

History

FairTax - 45 states now use a retail sales tax.

Federal Income Tax - The 1913 income tax has evolved into an antiquated, unenforceable morass, with annual tax returns long enough to circle Earth 28 times.

Flat Tax - A flat tax just won’t stay flat. Starting out nearly flat in 1913, the income tax grew out of control with top rates over 90% until the Kennedy administration.

Interest Rates

FairTax - Reduces rates by an estimated 25-35 percent. Savings and investment increase.
Federal Income Tax - Pushes rates up. Biased against savings and investment.
Flat Tax - Reduces rates 25-35 percent. Neutral toward savings and investment.

Investment

FairTax - Increases investment by U.S. citizens, attracts foreign investment.
Federal Income Tax - Biased against savings and investment.
Flat Tax - Neutral toward savings and investment.

IRS

FairTax - Abolished.
Federal Income Tax - Retained.
Flat Tax - Retained with reduced role.

Jobs

FairTax - Makes U.S. manufacturers more competitive against overseas companies.Escalates creation of jobs by attracting foreign investment and reducing tax bias against savings and investment.

Federal Income Tax - Hurts U.S. companies and decreases available jobs. Payroll tax a direct tax on labor.

Flat Tax - Positive impact on jobs. Does not repeal payroll tax on jobs.

Man-hours required for compliance

FairTax - Zero hours for individuals. Greatly reduced hours for businesses.
Federal Income Tax - Over 5.4 billion hours per year.
Flat Tax - Reduced.

Non-filers

FairTax - Reduced tax rates and fewer filers will increase compliance.
Federal Income Tax - High tax rates, unfairness and high complexity harm compliance.
Flat Tax - Reduced tax rates and improved simplicity will improve compliance.

Personal and Corporate Income Taxes

FairTax - Both are abolished.
Federal Income Tax - Retained.
Flat Tax - Retained in a different form.

Productivity

FairTax - Increases.
Federal Income Tax - Inhibits productivity.
Flat Tax - Increases.

Savings

FairTax - Increases savings.
Federal Income Tax - Decreases savings.
Flat Tax - Increases savings.

Visibility

FairTax - The FairTax is highly visible and easy to understand. No tax is withheld from paychecks.

Federal Income Tax - The current tax code is hidden, embedded in prices, complex, and incomprehensible. Taxes are withheld from paychecks.

Flat Tax - The business component of the flat tax and payroll taxes are hidden and would be embedded in prices. Taxes are withheld from paychecks.

Any questions?

The FairTax Blogburst is jointly produced by Terry of The Right Track Blog and Jonathan of Publius Rendezvous. If you would like to host the weekly postings on your blog, please e-mail Terry. You will be added to our mailing list and blogroll.