Subject: Response to Request for Comments # 2 by the Federal Tax Reform Panel. Comment: Dear Chairman Mack and Tax Reform Panel members, I suggest that the existing income tax system be replaced with a National Retail Sales Tax in the form of the FairTax as proposed by Congressman Linder and others in both the House of Representatives and the Senate (HR 25 / S 25). The FairTax is the only proposed solution that addresses all the points specified by President Bush as required in a new tax system. The FairTax distributes the burden of taxation in a more progressive manner, over a much wider tax base, than currently exists. The newfound tax base would include tourists, the underground economies of the drug trade and pornography as well as taxing illegal aliens, something the current system cannot do. The FairTax makes accommodation for the poor by providing a monthly check to pre-pay the sales tax they, and every other American, spend on basic necessities up to the government-established poverty level. Charitable giving in America will increase as Americans have more to give. It has been shown that charitable giving increases in times of prosperity. Americans will be allowed to give all they wish in untaxed dollars. A small percentage of Americans currently use the mortgage interest deduction as most Americans do not itemize their taxes. With the NRST, home ownership will be made more easily attainable when the costs of embedded taxes are eliminated from home construction. More Americans will be able to afford a home. Collection of the NRST specified by the FairTax will be easily accomplished since retail systems provide for the addition and billing of a sales tax. The modification of these systems would be a one-time, tax-free expense and would pale in comparison to current tax-reporting requirements. Under the FairTax, businesses would incur no tax liability as they interact business-to-business. Businesses would be responsible for collecting the NRST from retail customers and forwarding the revenue to tax authorities. No other proposal is fairer to all Americans than the FairTax. Anyone that makes a retail purchase will be participating in funding the government. The rich won't be able to avoid it. The poor (and all others) will receive recompense for tax on purchases of basic necessities. The underground economy will be required to participate, illegal aliens will be taxed as all others, and tourists to our land will help fund our government. The FairTax will allow the American economy to boom. Trillions of dollars kept offshore because of taxes will come home. Businesses won't have to make decisions based on a tax-benefit basis, America will be more able to compete in the world market when embedded tax costs are eliminated from the prices they must charge for their product, and America will become home to world-wide corporate industry because of the lack of business-to-business taxation. Compliance and administration costs will amount to a small fraction of current levels for business, government, and for taxpayers. The FairTax eliminates 98 percent of reporting requirements. Over 20 million dollars was spent to develop the FairTax. The best economic minds in America were employed to develop the plan. Since then, The FairTax has been endorsed by over 75 economic scholars including a Nobel Laureate. The FairTax works. I support this system and so does my family. I hope that you will also. Thank you for allowing me to participate in this discussion. James C Clayton |