Subject: Tax Reform Comment: Tom Wright, executive director of FairTax.org, stated, “Congresswoman Pelosi hit the nail on the head when she stated that the President should ‘act now so that tax reform can move us toward a system that is more fair, less complex, and that adequately funds the budget without perennial deficits.’” Mr. Wright said, “We anticipate an early report from the tax reform panel for various reasons; the most important being that the people of America are asking for results – the public outcry for tax replacement is growing to a roar within the grassroots. This is further evidenced by the press release sent out yesterday by the minority leader’s office.” Mr. Wright commented further, "We were pleased to see the Democratic party leadership’s release and that they have fully realized the need for genuine tax replacement. The FairTax offers an ideal vehicle for resolving the partisan divide that exists in our country. Our nonpartisan organization is made up of over 550,000 supporters of every possible political affiliation, educational, and economic background. At our grassroots level, union rank-and-file march side-by-side with our most Libertarian supporters. You know, Congresswoman Pelosi stated, ‘Democrats were committed to the following principles – Fairness, Simplicity and Fiscal Responsibility.’ We couldn’t agree with her more on that comment and The FairTax legislation meets and surpasses all of those principles. I must also add that all Americans regardless of political affiliation would like to see those principles applied to the tax system. And our plan does just that.” Here are a few of the many reasons why Democrats, Republicans, and every other party should embrace our full tax replacement alternative as a progressive and equitable means of solving many of the current inefficiencies and abuses of the income tax system, as well as providing a much needed stimulus to our economy. 1. The FairTax ends federal paycheck deductions of all kinds; the workingman or woman gets a full paycheck. The plan is a total replacement for all income and Social Security taxes: Personal, gift, estate, capital gains, alternative minimum, earned income tax credit, Social Security, Medicare, self-employment, and corporate taxes. As you know, Social Security taxes are the most regressive element of our current system. 2. The FairTax plan is revenue neutral; it neither raises nor lowers taxes. The rate is set to raise the same revenue the replaced taxes raise today. For many taxpayers, that means no overall loss or gain. As an organization, we wish to remove ourselves from battles over tax hikes or cuts, special interests, winners and losers. While the FairTax makes federal taxes very, very obvious (and easy for taxpayers to control themselves), there is no intention to give large groups any break over what they are paying now, or to burden another group. 3. The FairTax is a progressive tax. Only the biggest spenders pay the maximum rate; those at or below the poverty level pay an honest and transparent nothing. No one living at or under the poverty level, according to guidelines set by the Department of Health & Human Services, pays any federal tax (hidden or obvious) on any of their spending. Today our working poor are burdened with the most regressive tax of all, Social Security, which they pay with every paycheck their entire working lives. The FairTax ends that. Those same people are targeted by unscrupulous tax preparers and the IRS due to the complexity of the earned income tax credit. According to Dale Jorgenson, Harvard economics professor, people on fixed incomes (and every other consumer in America) pay an average of 22 percent in hidden corporate taxes and compliance costs with every good they buy. Hidden taxes on services average 25 percent. The FairTax ends this. Competition forces the prices on goods and services to come down once the providers of these goods and services find that they can produce them at lower cost. The FairTax does not tax used goods. And finally, a rebate zeros the tax up to the poverty level. 4. The FairTax encourages American manufacturing, creating good jobs at home. By removing the embedded cost of the income tax system, American-made goods are more affordable at home and more competitive overseas. This brings good jobs back to our shores, as well as keeping those we have, here. In addition, the FairTax is levied on imports sold in this country. The preference that our current system provides to foreign producers in both our own market, as well as foreign, ends. This has enormous implications with respect to our trade deficit. 5. Taxpayers decide how much tax they pay above the poverty level. The wealthy are finally taxed according to their lifestyle, which the income tax has miserably failed to do since its inception; those who choose to live modestly pay less (both as a percentage of spending and overall taxes paid). And the FairTax successfully taxes accumulated wealth, which the estate tax usually fails to do. 6. The FairTax does not tax education or training, thereby promoting upward mobility. Estimates are that a college education is as much as 50-percent less expensive under the FairTax compared to today. Why? College costs are paid for with pre-tax dollars as opposed to post-tax dollars. There is no tax whatsoever on any education expenses; prices on education items drop on average 22 percent. In addition, since there are no penalties on savings or investment under the FairTax and workers keep their full paychecks, the opportunity to save for a college education or work training is significantly enhanced. 7. The FairTax triggers a very significant economic expansion. Dr. Dale Jorgenson, former chairman of Harvard University’s economics department, forecast a 10.5 percent GDP growth in the first year after enactment with decreases each year thereafter, leveling off at a rate that is slightly higher than under a continuation of the current system. That leveling off occurs after the economy has increased to between 1/4 and 1/3 larger than under a continuation of the current system. This has enormous implications for the federal budget deficit and the job picture, among others. “FairTax.org has spent more than $22 million over the past decade researching both the marketing and economic aspects of implementing the FairTax,” stated Wright. “We were originally a research organization. Using some of the most qualified institutions in the country, we went to the American people first and asked them what tenets were critical to them in a tax system. As a whole, they requested fairness, simplicity, transparency, and protection for the poor and the elderly. Our tax replacement proposal – the FairTax – is based fully on that research and was created to comply with the needs and desires of the American people, regardless of their political or economic affiliations. We look forward to the discussion which we are certain will ensue over the coming months on our nonpartisan bill and we welcome the opportunity to share the pristine aspects of the FairTax legislation as written.” |