FAIRTAX

Yes ... I've been reading the columns and editorials that have been appearing in newspapers across the country. Whoever first said that the FairTax would be easy to demagogue sure had it right.

For instance, there's this article by Janet Hook writing in the Los Angeles Times. In some newspapers this column appeared with the headline "Huckabee Campaigning for 23% Sales Tax." Now we all know that not all that many people read newspapers anyway .. and many who do only scan the headlines. Can you imagine what someone would think if they just read that "Huckabee Campaigning for 23% Sales Tax" headline? Why, it would positively scare them to death! There is no way in the world an uninformed (government educated) person reading that headline would vote for Huckabee.

Is this intentional or just carelessness? Is the headline accurate? As far as it goes, yes. But it certainly doesn't even begin to cover the story, and this is what we're facing in the fight for this tax revolution.

In this article Janet Hook wrote that the President's tax reform commission rejected the FairTax. If she didn't know that, why not? Did she just fail to do her job? Or did she get that line about the tax reform commission from someone else, and just copy it?

I read another column in the past few days where the FairTax critic said that poor people would have to report their income to the federal government every month. Where do they come up with this complete nonsense? Why are so many people writing such absurd things about the FairTax? Doesn't anyone do any research out there any more? It seems that now when you write a column you just collect a bunch of things others have said on the subject you wish to address and repeat them without any further inquiry.

I'll have more to say about this when we come back. In the meantime .. "FairTax, The Truth" will be hitting the book stores on February 12th. You can order a copy now from Amazon.com.

This is obviously a tough fight. There are a lot of people out there who have much invested in our current tax system, and it is clear that they are going to fight like hell. Congressman Linder and I think that you'll find this new FairTax book will answer your questions, and it certainly will give you the ammunition you need to respond to the critics.

The FairTax Rate: a 23% tomato or a 30% tomato?

05/31/2007

tomato As the FairTax gains more national attention, questions have again arisen about whether the FairTax rate is 23 percent or 30 percent. In the toxic environment that often accompanies public policy debates, FairTax.org has even been accused by some of misleading the public, even though full descriptions of "tax-inclusive" and "tax-exclusive" calculations abound on our Web site. We hope the following explanation puts all such questions to rest -- at last.

Let’s use an example to illustrate the difference between tax-inclusive and tax-exclusive tax rates.

Assume there is a worker named Joe who earns $125 and spends all of his earnings. Let’s further assume that the government requires him to pay $25 in taxes.

If the government put a tax on Joe’s income, he would earn $125 before tax and would have $100 after tax to spend at the General Store. Thus, Joe has to earn $125 to have $100 to spend. Joe would also have to file an income tax return.

If the government put a tax on what Joe spends, he would earn $125 and would have $125 to spend at the store. Of the $125 paid by Joe to the storekeeper, $100 would be for the goods he bought at the store and $25 would be taxes that the storekeeper would send to the government. Joe would not have to file a tax return, as the storekeeper sends the tax in to the government.

Either way, Joe pays $25 in taxes and the government gets $25 in taxes. With a tax on income, Joe pays the $25 directly to the government, and with the tax on spending (sales tax), he pays the $25 in taxes indirectly when he buys something from the General Store. The General Store sends the tax that Joe paid to the government.

chart - Joe's taxes - example

We may report the tax rate as $25/$125 = 20 percent, which is the tax-inclusive rate (meaning that the tax is included in the base). Alternately, we may think of the tax rate as $25/$100 = 25 percent, which is the tax-exclusive rate (meaning the tax is excluded from the base). The 23 percent FairTax rate set out in HR 25/S 1025 is a tax-inclusive rate, as is the current personal income tax, whereas most state-level sales taxes are quoted on a tax-exclusive basis. For ease of comparison, FairTax.org gives the tax rate both ways. Both rates are relevant, since the FairTax is replacing an income tax system, and 23 percent correctly represents the tax burden compared to the current system.

Turret Gunner A20: "Did Janet Hook know that the terms of the Executive Order creating this commission prohibited them from considering the FairTax?"

Really??? Where???? And the report did include the fairtax, so what are you talking about????

Executive Order: President's Advisory Panel on Federal Tax Reform

By the authority vested in me as President by the Constitution and the laws of the United States of America, and to assist in reforming the Federal Internal Revenue Code to benefit all Americans, it is hereby ordered as follows:

Section 1. Establishment. There is established the President's Advisory Panel on Federal Tax Reform (Advisory Panel).

Sec. 2. Membership. (a) The Advisory Panel shall be composed of up to nine members appointed by the President. (b) The President shall designate one member of the Advisory Panel to serve as Chair and one member to serve as Vice Chair.

Sec. 3. Purpose. The purpose of the Advisory Panel shall be to submit to the Secretary of the Treasury in accordance with this order a report with revenue neutral policy options for reforming the Federal Internal Revenue Code. These options should:

(a) simplify Federal tax laws to reduce the costs and administrative burdens of compliance with such laws; (b) share the burdens and benefits of the Federal tax structure in an appropriately progressive manner while recognizing the importance of homeownership and charity in American society; and (c) promote long-run economic growth and job creation, and better encourage work effort, saving, and investment, so as to strengthen the competitiveness of the United States in the global marketplace.

At least one option submitted by the Advisory Panel should use the Federal income tax as the base for its recommended reforms.

Sec. 4. Administration. (a) The Department of the Treasury shall provide, to the extent permitted by law, administrative support and funding for the Advisory Panel. The Advisory Panel is established within the Department of the Treasury for administrative purposes only.

(b) The Chair of the Advisory Panel shall convene and preside at the meetings of the Advisory Panel, determine its agenda after consultation with the Vice Chair, and direct its work. The Advisory Panel shall have a staff headed by an Executive Director who shall be selected by the President and report to the Chair.

(c) Members of the Advisory Panel shall serve without compensation for their work on the Advisory Panel. Members of the Advisory Panel who are not officers or employees in the executive branch, while engaged in the work of the Advisory Panel, may be allowed travel expenses, including per diem in lieu of subsistence, as authorized by law for persons serving intermittently in Government service (5 U.S.C. 5701 through 5707), consistent with the availability of funds.

(d) Consistent with applicable law, heads of executive departments and agencies shall provide to the Advisory Panel such assistance, including assignment or detail of personnel, and information as may be necessary for the Advisory Panel to perform its functions.

(e) The Advisory Panel may conduct meetings in appropriate locations throughout the United States to obtain information and advice from Americans of diverse backgrounds and experience and from a diverse range of American entities, including large and small for-profit and non-profit organizations, State, local, and tribal governments, and from other individuals and entities as appropriate. Public hearings shall be held at the call of the Chair.

(f) Insofar as the Federal Advisory Committee Act, as amended (5 U.S.C. App.) (the "Act"), may apply to the Advisory Panel, any functions of the President under that Act, except for those in section 6 of that Act, shall be performed by the Secretary of the Treasury in accordance with the guidelines that have been issued by the Administrator of General Services.

Sec. 5. Report. The Advisory Panel shall submit to the Secretary of the Treasury a report containing policy options in accordance with section 3 of this order as soon as practicable, but not later than July 31, 2005.

Sec. 6. Provisions. (a) Nothing in this order shall be construed to impair or otherwise affect the functions of the Director of the Office of Management and Budget relating to budget, administrative, or legislative proposals.

(b) This order is not intended to, and does not, create any right or benefit, substantive or procedural, enforceable at law or in equity, against the United States, its departments, agencies, entities, officers, employees or agents, or any other person.

Sec. 7. Termination. The Advisory Panel shall terminate 30 days after submitting its report pursuant to section 5 of this order.

GEORGE W. BUSH
THE WHITE HOUSE,
January 7, 2005.

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