Fair Tax Nation

Replace All Federal Taxes on Income with the Fair Tax Act , HR 25

Response to those who say FairTax unconstitutional

 
FairTaxers:

I have seen some information posted in a various places (including some tea party type sites) that the FairTax is unconstitutional.  Here are the basics from the Constitution regarding taxation. The language in section 9 aboutdirect taxes does not apply to the FairTax because the FairTax is an an indirect tax.  Below I have a quote from a CBO paper defining it as an indirect tax.  

Karen Walby, Ph.D.

The US Constitution sets forth only a few criteria regarding taxation. 

Section 8, Clause 1 states that “The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States.”  Section 9, Clause 5 states that “No Tax or Duty shall be laid on Articles exported from any State.”  . 

The FairTax is by definition a form of excise tax (see the definition of excise tax below) so it meets the first criteria of the type of taxes that Congress can levy. Since the FairTax rate and definition of the tax base would be the same in every state, it meets the second criteria that excises shall be uniform throughout the United States.  In addition, the FairTax does not tax exports.  Therefore, the FairTax appears to meet both the spirit and the letter of the Constitution, and would therefore be in compliance with the Constitution.

In the case of the income tax, it is a different story.  Section 9 states that “No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or Enumeration herein before directed to be taken.”   The income tax is a direct tax, but the only direct tax that the Constitution allows would be one that is based on the population, for example, what is known as a “head tax”, i.e. so much money per person.  That is why the 16th amendment was necessary.   

Definition of excise taxes:

Excise taxes are categorized into two categories by their structures:   (1)  Ad Valorem - A fixed percentage charged on a particular good or service.  These are normally referred to as sales taxes.  This is what the FairTax is.  (2) Specific - A fixed dollar amount dependent upon the quantity purchased.  Today, these are still referred to as excise taxes, i.e. so many cents per gallon of gas.  

 

[“An indirect consumption tax in which the base consists of the sales of businesses to non-businesses (a value-added tax or the retail sales tax)”  Quote from Congressional Budget Office paper, “Comparing Income and Consumption Tax Bases,” July 1997, page 37. 

 


Excerpts from the US Constitution related to taxation powers of federal government.

Article. I.

Section. 2.

Clause 3: Representatives and direct Taxes shall be apportioned among the several States which may be included within this Union, according to their respective Numbers, which shall be determined by adding to the whole Number of free Persons, including those bound to Service for a Term of Years, and excluding Indians not taxed, three fifths of all other Persons.

Section. 8.

Clause 1: The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States; [The FairTax is uniform throughout the US.]

Section. 9.

Clause 4: No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or Enumeration herein before directed to be taken. 

Clause 5: No Tax or Duty shall be laid on Articles exported from any State.  [The FairTax does not tax exports.  It only taxes goods/services consumed in the United States.]

16th Amendment

The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration. [This is further evidence that an income tax is a direct tax; a consumption tax is an indirect tax, it is not levied directly on the individual himself or herself but only indirectly as the individual consumes.]

-- 
Karen Walby, Ph.D.
Consultant

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Comment by Jamie Wheeler WA on April 5, 2011 at 4:27am

THANK YOU Marilyn!  This is a part of the Constitutional Parties reasoning for being against the FairTax.  We are educating them!!!  Actually have an appointment to talk with one who ran as a candidate in that party in the '10 election.

 

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