With the ‘alleged’ crisis in income taxes I think that the time has come for Minnesota to jump on board the FairTax bandwagon.  FairTax is a consumption tax system which begins by eliminating the Federal and State Income taxes and the bureaucracy that has grown up around it as well as the rules and regulations that Congress and the State Legislature debate interminably ad nauseum.

At the Federal Level a consumption tax of 30% was proposed which, by eliminating all of the rules and regulations, thereby freeing up all of the time of tax accountants and tax lawyers to put their time to positive accounting and legal work.  At the state level I propose a 10% State FairTax.  The state FairTax would eliminate the state Income Tax (and its bureaucracy) which is part of my plan to eliminate an additional 3500 bureaucrats in Minnesota to build a better business environment.

The Federal FairTax, as well as the proposed Minnesota FairTax begins with eliminating the Federal and State Income Taxes and THEN replacing them with the 30% Federal and 10% State FairTaxes.  In addition the following Federal taxes would be eliminated: Death Tax, Estate Tax , Inheritance Tax, Gift Tax, all  Federal payroll taxes (which will give you your whole paycheck), taxes on savings and investment and Corporate Income Taxes.  The State FairTax would eliminate Minnesota Income Tax withholding, Sales and Use Tax, taxes on savings and investment, liquor and cigarette excise taxes.  Under the proposed plan food and clothing would still be exempt under the State plan, but not the Federal plan.

The recent alleged crisis over overseas trusts would be solved because the trusts are set up to avoid Income Taxes and if there are no Income taxes you should be allowed to avoid a 0% Income Tax.  The FairTax would only tax services and NEW GOODS not old goods and used goods. So . . . if you buy a NEW house, a NEW car, a NEW yacht, a NEW toy, get accounting work done, consult your lawyer, buy an IPO or new stock, go to the doctor, the dentist, get your hair cut, THEN you would PAY THE TAX.  BUT if you bought a USED house, a USED car, a USED yacht, a USED toy, a USED painting, THEN PAY NO TAX.

The extra income will come from taxing the Trillion dollar underground, criminal, drug and porn economy.  More income will come when trusts, which now pay no income tax or estate tax buy a pencil (and pay the FairTax) or consult and attorney (and pay the FairTax) or hire an accountant (and pay the FairTax). If the trust buys a USED car, a USED plane, a USED yacht in the US or Minnesota then still no tax

The Fair Tax has several advantages are that by using the FairTax to eliminate tax rules and regulations and compliance then the cost of goods would remain about the same (maybe 1% higher).  Another advantage is that everyone would get to pay taxes like the rich who can choose WHEN they pay their taxes.  If you want to buy a new car you can decide to buy it on Monday or wait until Tuesday or Wednesday.  If your child is sick and you have to go to the doctor, you can decide to pay in cash or credit card and pay the tax immediately, write a check and pay when the check clears or pay through your insurance company and pay maybe a month later. It will be nice to decide WHEN to pay your taxes, not just EVERY PAYDAY.

Under the Federal FairTax you keep almost all your paycheck and under the Minnesota and Federal FairTax you can keep ALL of your paycheck; at least until you decide (and it will be YOUR DECISION) to spend some of the money.  In addition under the Federal and Minnesota FairTax if you buy USED GOODS you still pay no taxes.

To be fair the Minnesota FairTax would exempt Food and Clothing as well as fuels (you would still pay the 20 cents a gallon gas tax) because 1) We are not New York State that taxes gasoline based on the price and 2) The state does not need the extra fuel tax because transit will be privatized.