Those of us Americans who remember a time without the modern income tax are a dying breed. Enacted through the 16th Amendment in 1913, the income tax has become a fixture and a central point of revenue collection of the federal government. States have obviously adopted this way of financing their governments, as well.

In looking at the full history of the income tax in this country, there is at least one parallel--war. The first income tax was levied during the War of 1812, after the Revolutionary War, the Continental Congress and the US Constitution. It was later repealed, but appeared again in 1862, during the Civil War. It resurfaced again in 1894 and 1895 but disappeared both times (no major involvement of the United States in a war). Just over a hundred years after it's first major implementation, the income tax was reintroduced to stay. World War I followed shortly thereafter.

Not always has income tax been levied for the express purpose of financing a war, but in some cases it definitely has. In 1943, tax withholdings of wages was instituted, causing the number of people who paid taxes to soar to 60 million. It has not looked back since.

I bring this all up because we are yet again in the middle of tax season. I read once that 70% (of tax filers, I assume) receive a tax refund of some kind. In other words, through deductions, people are able to show they've paid more income tax than what they owe, so they get a portion, all or more of the taxes removed from their paychecks back.

To me, preparing an income tax return has always been a royal waste of time. Keeping track of every last deductible item to reduce my taxable income just so I can get back money which was mine and really should have never gone to the US government in the first place. They don't pay me interest on the money withheld while it's sitting in their coffers, yet they'll charge me interest and penalties if I don't have my wages withheld during the course of the year and then pay it the following year when my taxes are done, or they'll charge me if I end up owing more and arrange to pay it over time.

I've tried to imagine a world without income tax, and it's hard. Keeping track of all income and expenses in my business revolves around taxes. Sure, it's a sound business practice to know what's coming in and what's going out, but for those of us who aren't a part of the stock market or the Fortune 500, the only entities which are going to care about how much we earned during the course of the year, other than ourselves, are our federal and state governments.

Who knows if the fair tax is the answer. I like the idea of a consumption tax if it's capped, if can go down, and if all other taxes are eliminated. I think it has great potential for greater revenue and greater prosperity. What's the likelihood of it coming into being any time soon, or will it go the way of the flat tax and every other simplified tax plan? Meanwhile, the IRS rolls on, and so does the tax code, to 60,000 pages strong, easily the largest book on one subject in existence.

We can send people to the moon, clone sheep, cure all matters of diseases, hurtle particle waves across an expanse and create digital replicas of life but we can't simplify the tax code? We can't make it so April 15 doesn't exist because sufficient tax has been taken out from our paychecks.

The more I think about it, the more I'd love to experience a world with only a sales tax. Not only would it be simpler come tax time, it would be simpler the rest of the year, when I have to keep track of my expenses so I can justify my deductions. I've been audited once. It is not a fun thing, and it can take months to undo something. Fortunately, in my circumstances, everything came out fine in the end. For several months, though, it didn't look like it would.

Those of us who are essentially using the US government as a place to save money, interest free, so they can spend it in mid-April (if they don't just turn around and use it to pay bills, which they would have done anyway), need to realize there are better uses of their money. That $3,000 or whatever it is could have been sitting in an interest bearing account, an investment, part of a down payment on a property or a car. It costs money for the US government to collect it, and it costs the US government money to return it. You can all be happy that you're getting a refund, but why give it, or as much of it, to the US government in the first place?

I say let's get the fair tax implemented, and then get it going in every state in the Union. And instead of 23% for just the federal resale tax, force the federal government to gradually but markedly reduce itself back to what the Founders intended, and do the same thing with State government, so that a combined sales tax would shrink below 20%, maybe below 15%.

Otherwise, the federal government is just going to keep growing, if we the people don't stop it.

I ended my first post on this subject without drawing any conclusions on the Fair Tax, so I'll do that here.

Is the Fair Tax a better way to go then our current system?

Perhaps the better question would be, is it worth a try? I would have to say yes.

Trying it would be the only way to find out if it indeed does all what its proponents say it will. That's a major overhaul to bring millions of people on line with, but of the alternative tax system proposals to date, it goes the farthest in eradicating everything that is wrong with the current tax system. Anything that takes 60,000 pages to explain is sorely and woefully awry.

The vast majority of states in the union have their own sales tax. Piggybacking onto those systems would seem to be appropriate. Enforcement would seem to be easier than what it is now, where you have millions who can potentially accidentally or purposefully withhold incorrect amounts of taxes, not file returns, and spend all kinds of taxpayer money and their own time getting it corrected.

Placing the tax on retail goods and services makes more sense in a free enterprise system then taxing someone's wages or assets. It would seem to encourage more consumption then less, which would seem to be good for the economy as well as good for the government. The more the economy grows, the chances of their being more consumers with more money to spend increases. Even if they do get money to spend via a prebate, even the poorest among us get an opportunity to contribute.

It will put more of the tax burden on those who are the wealthiest. It has that as a selling point on the homepage of fairtax.org.

The wealthiest among us are the ones who have the most capital to do things. They also tend to consume more. Where we might be fortunate to have one home, they might own two or more, and ones which are more expensive. They will have other toys and gadgets, employ others to make their lives easier, etc.

What if they decided to consume less? Because they can, what would happen if they were to take themselves off the grid--revert to their own means of generating energy to power their own homes and businesses? What if they started dealing exclusively in second hand yachts and homes?

In fact, what if the entire nation emphasized buying more used things then new things?

Well, it couldn't exclusively do that. The manufacturing of new items would not come to a screeching halt, but it could conceivably slow the new product business. It wouldn't all go away because eventually used things break down and would need to be replaced. Repair shops might make a comeback.

However, we've been trained since our infancy now to consume. Most of us living don't remember the depression. While there's been periods of bumps along the way, the United States has not experienced the likes of a decade long depression. We've become accustomed to our luxuries. Many of them we would call necessities.

Personally, I'm not going to feel bad if the federal government has to suddenly start downsizing because not enough revenue is coming in.

If this Fair Tax did do all that it says it would, then we wouldn't be able to borrow from China any more because we'd be competing more aggressively with them, and putting more of their factories and companies out of business in the process, because corporations would return to the US rather than shipping overseas.

I think the economy could thrive quite well on a second hand industry. While it's outgrown it's current model, eBay has been doing pretty well for itself, and so have places like Craigslist.

What I would wonder more about is if this went the other way. I'm not an environmentalist or a conservationist, but as a realist, there is a realization that there's a finite amount of resources. You either need to renew them quicker, or you need to consume at a lesser degree than what they would naturally renew, assuming they do.

We're already accused of being a consumer culture. We're already derided for being the most wasteful. Great strides have been made over the course of the last half century to work on pollution standards, and smaller footprints for all kinds of projects. The technology and know how is there, or being put into place. However, if consumption was unleashed on even greater scale than it is right now, and we all bought into it, at some point, as the population gets larger and human expansion continues, at some point, whether it be 10 years down the road or several centuries, you do come to the end of the road.

Most likely, that's too much to read into this. Rarely does anything have such transcending effect on a nation. Of course, that might have been what people thought when the income tax amendment was ratified, or when social security and medicare were mandated.

If the highest this Fair Tax can go is 24%--if it's actually written into law as the ceiling--and if a concerted effort will still be made to shrink the size of the federal government, not just grow it, then I can see this as being the best thing that could ever happen to us. Having the cost of living decreasing while our wages potentially increase, along with our savings and our investments, would all seem to be a good thing. The amount needed to run government could go down because fewer and fewer people would rely on social security and medicare. Less people would be on welfare. And, according the website, this would also discourage illegal immigration!

As I said at the top of this blog, it's hard to tell just what drastic effects this might have on us. While there may be negatives, they don't seem to outweigh the positives. Government, business and consumer would all have to do their part.

I think it's worth a try.