Chairman’s Report – April 29, 2016

What Is A Border Adjustable Tax?
 
A nation’s tax that is border adjustable is one that taxes imports and domestic goods the same way but does not tax the nation’s exports.  This is a subsidy from the nation to make its exports more competitive.
 
General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO)
 
After World War II there was an agreement between 23 of the countries with the largest economies on a more sensible way to handle international trade.  At that time, tariffs varied from country to country and product to product and there were other barriers to international trade.

In 1947, the countries agreed on the General Agreement on Tariffs and Trade (GATT). The GATT treaty created a set of rules to govern trade among those nations that reduced the use of tariffs.  In 1995, GATT became part of the World Trade Organization (WTO) which now has 156 members who account for approximately 97% of the world’s trade.

Direct and Indirect Taxes
 
One of the provisions of GATT and now the WTO is the ability of the countries to subsidize their exports and tax imports based on their tax policy.  The members have agreed to treat direct taxes like payroll taxes and personal and corporate income taxes differently from indirect taxes like retail sales taxes and value added taxes.
 
Under the GATT/WTO rules, member countries are allowed to refund the indirect taxes to exporters while taxing imported goods the same as domestically produced goods.  This means that an indirect tax is border adjustable while a direct tax is not border adjustable—meaning that indirect taxes can be rebated to an exporter.
 
Payroll/Income Tax Compared to the FAIRtax
 
Because the payroll/income tax is a direct tax, it is not border adjustable, but the FAIRtax is an indirect tax and is border adjustable.  The FAIRtax is probably the clearest form of an indirect tax for trade purposes because it only taxes retail sales of goods and services in the U.S. 
 
How Does A Border Adjustable Tax Affect An Economy?
 
To answer this question, let’s compare a bottle of wine produced and exported from the U.S. and a bottle of wine made and exported from France that has a retail selling price of $20 in U.S. dollars.  (Obviously, the wine from both countries will generally not go directly to a retailer but through a wholesaler but the principles are the same.)  While France has income taxes, they also have a value added tax of 20%--an indirect tax. 
 

What Would Be The Difference After The FAIRtax?
 
It is hard to establish how much passage of the FAIRtax will reduce the prices of U.S. goods and services.  However, it is generally agreed that the prices of U.S. products will likely be reduced by at least 10%.  We are assuming that the $20.00 retail price of the U.S. wine is now $18.00. 
 

Conclusion
 
While we have assumed that income taxes, payroll taxes and the cost of compliance only increase the prices of U.S. goods and services by 10%, the real price increases attributable to our antiquated system are likely higher.  By looking at the benefits to U.S. companies of having a tax system that is border adjustable, it is obvious that this is one of the major reasons why jobs are not staying in the U.S.  
 
It is also significant that of our main trading partners that are part of the Organization for Economic Co-Operation and Development (OECD), the U.S. is the only one that does not have an indirect tax that can be rebated to make their exports more competitive.
 
Our payroll/income tax system actually subsidizes imports and penalizes U.S. exports.  In the increasingly global economy, it is time that the U.S. adopts a form of taxation that places our U.S. companies on equal footing with international competitors.  It is time to have a tax system that encourages jobs.
 
As Deputy Secretary of the Treasury Kenneth W. Dam in his testimony to the Senate Finance Committee in 2002 said, The bottom line is clear and simple. Our economy is truly global. U.S.-based companies must be able to compete in today’s global marketplace. Our system of international tax rules should not disadvantage them in that competition. If we allow our international tax rules to act as an impediment to successful competition, the cost will be measured in lost opportunities and lost jobs here at home.
 
The FAIRtax is the solution not only to this problem but to all of the other problems of the payroll/income tax system.
 
America’s Big Solution
 
One of the things that is upsetting to most of us is that our leaders in D.C. act like the solution to our problems is more of the same.  They are ignoring Albert Einstein’s definition of insanity, Doing the same thing over and over again and expecting different results.

We have a 20th century tax system when we need a 21st century tax system.  That is why we created BigSolution.org.   America does need a big solution and the FAIRtax is the big solution!   Please send your friends to FAIRtax.org and Bigsolution.org. 
 
1040 Club and Contributions
 
To those of you not familiar with the 1040 Club, AFFT is asking people to contribute $10.40 per month to AFFT. This provides a steady funding platform and allows us to spend our time not trying to raise money but actually working with groups to help make passage of the FAIRtax a reality. Thanks to each of you who have joined the 1040 Club.  You are ensuring that Americans For Fair Taxation can continue to promote the FAIRtax.
 
If you are not a member of the 1040 Club, or if you are a member but want to join for someone else, please go to this link and sign up.
 
If you believe that all you can contribute to our efforts is $10, please go to FAIRtax.org and donate.  We have our best chance now and need your help.  Many of us prefer to make one donation as opposed to monthly donations and this greatly helps.
 
FAIRtax Power Radio
 
There are many ways in which people can help us educate more Americans about the FAIRtax.  In Programs 29 & 30, the FAIRtax Guys describe how listeners can support and promote our efforts. Program 29 concentrates on simple but effective things for people with busy schedules, whereas Program 30 suggests some activities that might take a little more time.  The programs are free to the listeners.  Please share these links with your friends and relatives.
 
To listen to FTPR on SoundCloud (free and audio only) go to these links:
 
FTPR Program 29 on SoundCloud: http://bit.ly/1ZGihQp
 
FTPR Program 30 on SoundCloud: http://bit.ly/1RwsPfF
 
FTPR Program 29 on YouTube: http://bit.ly/1PAAKXb
 
FTPR Program 30 on YouTube: http://bit.ly/1Rnxrbi

To listen to FTPR on SoundCloud (free and audio only) go to these links:
 
FTPR Program 29 on SoundCloud: http://bit.ly/1ZGihQp
 
FTPR Program 30 on SoundCloud: http://bit.ly/1RwsPfF
 
FTPR Program 29 on YouTube: http://bit.ly/1PAAKXb
 
FTPR Program 30 on YouTube: http://bit.ly/1Rnxrbi
 
AFFT National LOGO Store
     
The Store is pleased to offer to supporters an autographed copy of the FairTax book entitled The Truth, Answering the Critics, which was issued in 2008. This book was in response to the original FairTax Book issued in 2005.

Unique in many ways, and sure to be a collector’s item, each book was personally signed in March/April 2016 by the original authors Neal Boortz and Congressman John Linder plus the 2015-16 Congressional Sponsors of The FairTax Bill, Senator Jerry Moran and Congressman Rob Woodall. The authenticity of these four signatures on the first page of each book is guaranteed by the FAIRtax℠ Store.

Books are limited to one per customer since our supply is extremely limited. Don’t miss out on this once in a lifetime opportunity, order your collectable book today. The price includes US Priority Box Shipping/Handling.

WWW.FAIRTAXLOGOSTORE.ORG
 
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