Posted on 01/06/2011 3:52:22 AM PST by phil_will1
Washington, DC—On Wednesday, January 5, 2011, Congressman Rob Woodall (GA-07) introduced H.R. 25, the FairTax. The FairTax legislation eliminates the current income tax paradigm and replaces it with a system of taxation based on consumption. The bill was introduced on Wednesday with 47 original co-sponsors—the most original co-sponsors the bill has ever had for its initial introduction.
“I committed to the Seventh District of Georgia that my efforts in Congress would focus on reclaiming freedom for the American people. It is for that reason that I am proud to make the FairTax—the only bill that restores transparency and simplicity to our tax code—my very first action in Congress. I have said since its inception that the FairTax is not a tax bill; it is a freedom bill,” Woodall said.
Woodall, who was sworn-in to Congress earlier in the day, played an integral role in crafting the original text of the FairTax as former Congressman John Linder's Chief of Staff when the bill was originally introduced in 1999.
"Our current tax system is a bloated, convoluted mess that gives government power over Americans' pockets. With 47 Members of Congress and counting signing their names to the FairTax, we are closer than ever before to voting on legislation that eliminates the frustrating mess that is the IRS."
Although the FairTax was introduced with 47 original co-sponsors, Woodall anticipates adding many more Members of Congress to the bill. Once the FairTax is introduced with the original co-sponsors, Members are able to sign on to the bill as co-sponsors throughout the 112th Congress.
"The number of signatures on the FairTax this time around is a testament to the will of the people. It is clear that Americans do not want to have their hard-earned money taken away and they want to reclaim the freedom to spend their money how they choose and when they choose.”
The list of original co-sponsors is as follows:
1) Tom Price (GA)
2) Brian Bilbray (CA)
3 ) John Carter (TX)
4 ) Michael Conaway (TX)
5 ) John Duncan (TN)
6) Virginia Foxx (NC)
7) Steve King (IA)
8) Michael McCaul (TX)
9) Pete Olson (TX)
10 ) John Sullivan (OK)
11 ) Mac Thornberry (TX)
12) Phil Gingrey (GA)
13) Roscoe Bartlett (MD)
14) Don Young (AK)
15) Ander Crenshaw (FL)
16) Todd Akin (MO)
17) Lynn Westmoreland (GA)
18) Tom Graves (GA)
19) Gus Bilirakis (FL)
20) Ted Poe (TX)
21) Randy Neugebauer (TX)
22) Jeff Miller (FL)
23) Robert Wittman (VA)
24) Jack Kingston (GA)
25) Marlin Stutzman (IN)
26) Jeff Flake (AZ)
27) Billy Long (MO)
28) Cliff Stearns (FL)
29) Tim Walberg (MI)
30) Dennis Ross (FL)
31) Dan Boren (OK)
32) Mo Brooks (AL)
33) Darrell Issa (CA)
34) Richard Nugent (FL)
35) Tim Scott (SC)
36) Blake Farenthold (TX)
37) Jeff Duncan (SC)
38) Rob Bishop (UT)
39) Mike Pence (IN)
40) Sandy Adams (FL)
41) John Mica (FL)
42) Sue Wilkins Myrick (NC)
43) Dan Burton (IN)
44) John Culberson (TX)
45) James Lankford (OK)
46) Mike Pompeo (KS)
47) Gary Miller (CA)
###
-- Jennifer Drogus Communications Director Congressman-elect Rob Woodall
Seventh District of Georgia 202.225.4272 | jennifer.drogus@mail.house.gov
“I have to admit that I have not been active in the discussions for awhile, so I may have lost touch. How would the federal law eliminate state income tax?”
I mistyped it. I meant to say that it would eliminate individual and corporate (federal) income taxes.
This is one of the complexities of introducing the Fair Tax that is most times not addressed in discussions. The examples with the automobile is when the system is fully in place and functioning. Right now, all inventory, both finished and in process has embedded tax value. A methodology to transition from embedded tax value to point of sale taxation would be required. There are several options available that would work and since the overall trend has been toward just in time inventories, the transition period would not necessarily very long, probably less than two years in even the most complex businesses. Yes, there would be some foolish businesses that would think of it as a bonus and not realize that the funds reclaimed from the tax flow are not a bonus but must be used to maintain wages and dividends. If the Fair Tax system is set up as revenue neutral, the consumer still needs the same size pay check since their tax burden has not gone down, they will just be paying the tax in a different way.
If you believe prices are set by competition and the laws of supply and demand, then prices will come down as the embedded tax burden is eliminated. For anyone who doesn't believe that, then there is no point in further discussion. The prupose of the example was to indicate what an economic windfall the transition to the Fair Tax would be. Take the current total trade deficit and multiply it by 10%. This would be a good approximation of the lost revenue that the US consumer would regain. The number is huge and it is there for the taking.
That could very well be true, but it would still be a very huge improvement over the current state. In addition, every piece of legislation could be framed with the % increase in the sales tax.....
OK, thanks. It is good to know that I am not giong crazy.
I do think that ultimately state income taxes would be elimated once the fed income tax is eliminated. The State’s would find it much easier to “piggy back” on the fed system.
Fair Tax bump - any income tax is wrong! Tax spending, the underground economy. I am proud to see so many Texas sponsors.
Wrong again Lewis! That is what the LAW requires of any replacement tax plan Lewis!No, once again, as always, I am not wrong.
Fairtax:
The FairTax will not be revenue neutral (i.e. bring in the same revenue as the current system) at 23%"The truth: The FairTax rate of 23% (when calculated inclusively like income tax rates) has been thoroughly researched to provide all the revenues now collected under both the income tax system and through FICA payroll taxes. Reports otherwise are largely based on the President's Advisory Panel on Tax Reform which declared the rate would have to be much higher. What the Panel failed to make clear in an amazingly shameless sleight-of-hand is that they never studied the FairTax legislation as it exists in pending legislation. They ignored $22 million of FairTax research and, instead, quietly devised their own national consumption tax which they loaded with the exemptions and deductions they felt were "politically realistic". They also failed to calculate the effects of elimination of the FICA tax on annual taxpayer burdens or on the distributional effects of the FairTax across the income spectrum. Upon completion--and after declaring a national consumption tax flawed--they then refused to publish their underlying assumptions.
That does not disprove a ting I said Lewis.
If you think it does so be it but you are just plain WRONG! AGAIN!
And when they get through grandfathering all the decisons that were made under the old system, the new system will be 120,000 pages had have a few more loopholes.
1) It assumes the rich spend everything they make. If they don't spend it, there is not tax.
Example: Avg Joe makes $60,000 a year as an accountant. Joe lives paycheck to paycheck and spends practically everything he makes. Assuming a 25% so-called Fair tax rate, Avg Joe tax $60,000 * (.25/1.25) = $12,000. Effectively a 20% tax rate.
Rich George makes $10,000,000 a year as a CEO. George despite his income, doesn't live extravagantly. He also spends $60,000 a year. (Of course he has a lot of perks from the company but they don't count.) Rich George's rate is $60,000 *(.25/1.25) = $12,000. Effectively a 0.1% tax rate.
George benefits more from the system than Joe does, yet George pays a fraction of what Joe does. George's taxes are effectively deferred until he spends his income, which he may never do. Which brings us to problem #2.
1) During economic downturns, government revenues will drop precipitously. When consumption falls off, the very time that government could help mitigate a consumer panic, government will either be forced into layoffs exacerbating the downturn or they will take on truly huge amounts of debt to keep basic services running. If you think debt growth is bad during this recession, wait till you see it on the Fair Tax plan. The income tax is far more stable than a sales tax. It doesn't vary with consumption, but rather with employment. And employment is more stable than consumption.
“And when they get through grandfathering all the decisons that were made under the old system....”
That makes no sense at all. You don’t have all the complications of defining what taxable income is under a sales tax system. For example, depreciation methods, useful lives, depreciation recapture, the earned income tax credit, various and sundry itemized deductions and a whole host of other complications are irrelevant under a sales tax.
If you are going to defend the status quo, you need to come with a much stronger argument than that.
You don't?
Are you going to tax medical services? Because TN doesn't. Is the Unfair Tax going to raise the cost of being sick by 25%
What about food? A lot of states tax that differently than other goods? Is the Unfair Tax going to raise the cost of food for the elderly by 25%?
What about sales of equipment used by businesses to make other goods and services? Businesses are usually exempt from paying sales tax here in TN. Are you going to do that nationally? Or maybe it's just certain equipment? Is the Unfair Tax going raise the cost of business investments?
What about the internet sales? Are you going to tax them? Interstate transactions? Is the Unfair Tax going to apply to those?
UnFair tax advocates say the UnFair Tax will be collected by state Sales Tax departments. So how are they going to collect when people make out of state purchases? Are there going to be reciprocal agreements between states?
Etc.
Etc.
Etc.
etc.
etc.
TX sales tax law is 161 pages. And that's just the code. Who knows how much the regulations and interpretations behind it are.
All consumption purchases are taxed. The FairTax uses a rebate, rather than exempting specific items or classes. It is much simpler and fairer. No one pays taxes (on a net basis) up to poverty level purchases; everyone is a net taxpayer who consumes above the poverty level.
Business inputs are not consumption and are therefore not taxed. The idea is to tax a product once and only once during its life cycle.
Internet sales would be taxed the same way brick and mortar sales are. The idea is to stop playing favorites with the tax code and stop all the economic distortions and political games of the current system.
The sales tax will be collected in the same state that the sale takes place by the business making the sale. It doesn’t matter if the buyer is from down the street or from France.
“TX sales tax law is 161 pages. And that’s just the code. Who knows how much the regulations and interpretations behind it are.”
I have never seen the TX sales tax statute, but I am guessing you could reduce that by at least a third if you substituted a rebate system, such as the FairTax has, for the exemptions/exclusions that I assume Texas uses.
The FairTax bill is, I think, around 140 or so pages. Even if Treasury supplements that with regs that are 3 times that long, you still would have less than 1,000 pages in the system. CCH counts the current system at over 70,000 pages. Are you really implying that you don’t consider that a significant simplification?
I mention this because the Fair Tax works way different than this. With the Fair Tax:
1. Tax is paid when I buy something and it is over. I don't have to tell the government where I got the money, or how many dependents I have, or what I gave to charity, or how much property tax I paid. I pay tax every time I buy something at retail. (Used items are tax-free.) There is no “tax season”. April 15 is just another day.
2. I don't have to keep track of where my money comes from, or how much tax has been withheld. Salary, profits, capital gains, dividends are all the same. I pay tax when I spend it, not when I earn it. And the government no longer cares about depreciation, or which formula was used to calculate it for a particular item.
3. Cute little gimmicks to defer taxes, like IRA’s (standard or Roth) or 401(k)’s or 403(c)’s, are totally unnecessary. Saving accounts are savings accounts. Income from them is not taxed until it is spent.
4. I don't have to keep track of donations to charities or worry about whether they are registered as a 501(c)(3) with the IRS.
5. It is no longer any of the government's business how much income I have. Fair Tax payments are anonymous, so they don't know how I spend it either.
As I read these posts, I see very little discussion of how much life would be simplified by the Fair Tax. That is a major benefit for me. Depending upon whose flat tax proposal is used, very little of the complexity of the current system goes away. What does a flat tax really gain us?
“What does a flat tax really gain us?”
You are right about that. The flat tax is appealing to the inside the beltway crowd because it essentially wipes the slate clean and enables the lobbyists to go right back to work peddling influence and reinstating the tax preferences that “the flat tax” wiped out. This is what history has taught us.
Read the bill. and then you can talk.
Statement of Billy Hamilton, Deputy Comptroller,
Office of the Texas Comptroller of Public Accounts,
on behalf of Honorable Carole Keeton Cylinders, Texas State Comptroller of Public Accounts
Testimony Before the House Committee on Ways and Means
Hearing on Fundamental Tax Reform
April 11, 2000
---------
As you know, H.R. 2525 would permit states to collect and administer the Fair Tax on behalf of the federal government. In my opinion, Texas would be well-equipped to administer the Fair Tax based on our experience in administering our own sales tax. Even though the base, rate and other characteristics of the Fair Tax are significantly different from the Texas sales tax, it would be feasible for our office to collect the Fair Tax by expanding and enhancing the systems we currently have in place. For example, we would:
· Expand our current system for registering Texas retailers to include registration of sellers under the Fair Tax (615,000 businesses are currently registered as sellers in Texas; under the Fair Tax, 1.5 million Texas businesses would have to be registered);
· Expand our taxpayer assistance efforts to respond to a larger volume of telephone, letter and e-mail inquiries from sellers who collect the Fair Tax and individuals who pay it;
· Expand our Revenue Processing Division to process more returns and tax payments on a more frequent basis and to remit tax collections to the federal government on an almost-daily basis;
· Expand our current audit team and train all auditors to examine businesses for both the Fair Tax and the Texas sales tax; and
· Expand our information technology systems to collect and maintain the computerized records critical to effective administration of a consumption tax like the Fair Tax.
The expansion of our systems to administer the Fair Tax, in the manner I've just described, would be sizable. Under the Fair Tax, we would serve approximately 900,000 more filers than we do currently. We estimate that serving that many additional taxpayers would require 1,100 to 1,600 more full-time employees. The Texas Comptroller currently employs about 2,700 people on a full-time basis.
In spite of this large expansion, the compensation for collecting the Fair Tax that would be provided to states under H.R. 2525 would likely cover our projected costs. As a first approximation, we estimate that the cost to the Texas Comptroller's office for collecting the Fair Tax at full implementation would be $100 to $150 million per year. I emphasize, however, that there would be significant costs to begin collection, including the cost of facilities to house the additional processing facilities, the capital costs of information technology and revenue processing equipment, and the costs of notifying, registering and educating taxpayers on the new tax.
In closing, I believe that if the Fair Tax is to become a reality, the U.S. government would be well-served to make use of the existing expertise of the states. Many states have administered consumption taxes since the 1930s and have developed particular capabilities in this area. We also have extensive experience in dealing with the affected businesses. As long as the administrative fee paid to the state is adequate in relation to the costs of collection, I see no reason that the State of Texas could not effectively administer the Fair Tax.
You're naive if you think that the type of enforcement you'll get with a Fair Tax won't be far more intrusive than the existing system. The very assertion commonly made on this thread to that it captures everybody's expenses displays the level of comprehensive enforcement envisioned.
Unfortunately, most of the evasion will be done by low-income people who now pay no income taxes. Paying nearly 50% on a transaction (as they would in California) is a LOT of money to them (the law of the diminishing marginal value of money being what it is). So this law will criminalize vast numbers of people who now face no such complications.
Worse, for you to make such a hand-wave assertion of "far less bartering," when I cited an existing example of bootleg cigarettes and alcohol, begs for an example. You offered none. I promise you, the majority of people in this country don't worry about 67,500 pages. They fill out a short form or an EZ.
I was an NRST advocate long before there was a Fair Tax proposal. No more. Cut spending. That's the real problem.
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