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How
will the FairTax reduce evasion?
The old saying that nothing is certain except death and taxes should
be modified to include tax evasion under the current tax code! The
IRS estimates that at least 40% of Americans no longer comply with
the current tax code. Most of this non-compliance is unintentional
and due to the enormous complexity of the present system. And because
of those who aren't in tax compliance, whether intentional or not,
the tax burden on the rest of us increases. These IRS figures do
not include taxes lost on illegal sources of income. Disrespect
for the tax system and the law has reached dangerous levels, which
makes for a system based on taxpayer self-assessment less and less
viable.
The FairTax
will greatly reduce the problem of tax evasion. The FairTax is simple
and straightforward. The increased fairness, transparency and legitimacy
of the system will induce more compliance. The roughly 90 percent
reduction in filers will enable tax administrators to address non-compliance
more narrowly and effectively, and will increase the likelihood
that tax evasion will be uncovered. The relative simplicity of the
FairTax will reduce confusion and promote compliance.
Businesses
will need to answer only one question to determine the tax due:
how much was sold to consumers?
Those who are
able to easily evade taxes under the current income tax system will
not be able to do so under a federal sales tax.
Finally, because
tax rates will decrease, tax evasion will become less profitable,
and because of the dramatic reduction in actual tax filers, tax
evaders will be more easily caught under the FairTax system.
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