Subject: Tax Reform Proposal Comment: I. Description of Proposal The FairTax proposal (HR25 / S25) would replace the current federal income tax system with a federal consumption tax system. It has been determined that a 23% inclusive or 30% exclusive rate will provide the expected revenue neutrality. There shall be no exemptions, deductions, or exclusions, which will prevent the abuses by lobbyists inherent with the federal income tax code. The tax burden will be shared by everyone, since for the most part, in today's society, money earned is money spent. A change from income-based tax to consumption-based tax will reach a broader base, including those who do not pay income tax now. The FairTax proposal provides a monthly prebate to insure no one pays tax on consumption up to the poverty level as determined by Health and Human Services. There will be no special need for treatment of charitable giving or home ownership or other exemptions, deductions, or exclusions, since there will be no income tax to compute. With states collecting the tax from retailers who have collected from the people, then passing on federal shares to the U.S. Treasury, collection is taken care of anytime anyone steps up to a cash register, and there would be relief to all businesses, since no business will pay taxes. At present, no business truly pays taxes. All taxes are passed on to the consumer. The FairTax also includes the repeal of the 16th Amendment, which will prevent the institution of another federal income tax at the same time as the FairTax. All of these are better described on the FairTax website at www.fairtax.org and fully documented in HR25 / S25. II. Impact of Proposal Relative to Current System. The FairTax consumption tax is a more stable tax system than our present income tax system, since everyone spends. It is transparent. Everyone will see exactly how much tax they are paying each time that cash register rings. It is fair. Everyone will pay, since there will be no way to lobby around payment at the cash register. Everyone will decide how much they will pay by deciding how much they will save or invest. The FairTax will spur economic growth and competitiveness, since money presently sheltered offshore and invested in foreign lands will be wholeheartedly brought back to the U.S and foreign companies will come by the droves to invest here seeking a truly tax-free investment. Since compliance will occur at the cash register, which is the standard for 45 of our 50 states already, there will be no need for the IRS. How many billions of dollars will the elimination of this bureaucracy save the U.S. Government? Please look at HR25 / S25, the FairTax from the Americans for Fair Taxation organization. This has been well-researched and worked on for over a decade now. III. Transition, Tradeoffs and Special Issues With the removal of tax costs to businesses and the return of income to the U.S., it is estimated that the GDP will increase by roughly 15% the first year. Saving and investing in our nation will grow dramatically as people decide what they would prefer to do with their money. There are no organizations, industries or other sectors that would be favored more or less than any other, as the base for the FairTax will be the individual at the cash register. Without the need to recoup the losses due to corporate or payroll taxes, prices will drop dramatically allowing our products to compete once again with foreign products. Since, most people spend what they earn, we will finally see a properly progressive tax system with the FairTax, with those at the poverty level paying nothing due to the prebate, and those that earn more paying more, since the prebate will be a smaller portion of their income. HR25 / S25 covers this all in greater detail. |