Comment: The President's Advisory Panel on Federal Tax Reform 1440 New York Avenue NW Suite 2100 Washington, DC 20220 Dear Tax Commissioners; If we are to compete in the international marketplace, we must remove the tax component from our price system. A value added tax (VAT) system will do this to a degree but will add to the tax compliance cost component of our price system. Today, our corporate/business income taxes and payroll taxes are included in the cost of producing a good or service, just as are the cost of rent, utilities, raw materials, etc. This cost has been determined to be an average of 22% of the retail price of American produced goods and 25% of the retail price of American produced services, by a Harvard University study. This places US produced goods and services at about a 23% competitive disadvantage. In addition to the tax cost that is imbedded in our production cost, the CBO has estimated that the cost to comply with the current tax code is in the neighborhood of $500 billion annually. The business portion of this compliance cost is substantial and it, also, is passed on in the price of US produced goods and services. This inefficiency of our current tax code causes us to be even less competitive internationally. The estimated tax compliance cost of the FairTax is only $12 billion annually. The end result of imbedded tax cost and imbedded tax compliance cost in our price system is the loss of companies and jobs to foreign competition. Not only are we exporting manufacturing and service jobs, we are sending our research overseas at an increasing rate. This transfer of today's technology and future technology will soon cause us to lose our technological leadership position. This impacts directly on our ability to compete economically and degrades our military technological lead. Once we lose an industry, it is unlikely that we can recapture it, especially if we lack the latest technology. We will become a second rate economy with a second rate military. That will mark the end of our freedom, as we know it, as we will lack the ability to defend it. The FairTax Bill removes federal income and payroll taxes from the cost of US produced goods and services, resulting in a decreased cost of US production by an average of 23%. The business portion of the reduction of tax compliance cost, from $500 billion to $12 billion, will further decrease the cost of production in America to between 25% and 30% conservatively. Caterpiller, General Motors, Pfizer, and Ernst & Ernst will be able to decrease their prices by 25% to 30% and make the same profit. The US will be a magnet for businesses, our economy will soar, our security will be enhanced, our standard of living will increase, and we will be able to continue to be a bastion of freedom for the world. Thank you for your consideration of my views on tax reform. Best regards, Roger Buchholtz |