The Chairman’s Report August 13, 2021

  • by:
  • Source: FAIRtax
  • 08/30/2021

As more and more people begin looking at the FAIRtax to replace the failing federal income tax system, one of the questions people ask is why does the FAIRtax tax government.

4.14 cents of the 23 cents comprising the FAIRtax rate is derived from taxing government entities. This means that if we were to exempt government from the FAIRtax, which we can do, then the FAIRtax rate will have to increase to 27.14% for the rest of us.

What many people don’t understand is that the government is already being taxed under the income/payroll tax system. The FAIRtax would simply make that more transparent.

The following information is derived from a paper prepared by Dr. Karen Walby entitled WHY THE FAIRTAX IS COLLECTED ON GOODS & SERVICES PROVIDED BY GOVERNMENT.
  • Just like private sector goods and services, the cost of the existing federal tax system is embedded in the cost of providing government services.
  • Government employees are subject to the same income tax withholding and employee payroll taxes (Social Security & Medicare) as private sector employees.
  • Government employers have to pay the employer share of these taxes.
  • Just like the private sector, governments pay their workers higher wages than they would otherwise have to pay if these taxes did not exist.
  • Governments also purchase substantial amounts of goods and services from government contractors.
  • A road contractor, for example, must pay corporate income and employer payroll taxes, and also has to pay its employees higher wages than it would otherwise have to pay if there were no individual federal income and payroll taxes.
  • Through higher wages paid to government employees and higher payments to contractors, governments pay federal taxes today.

Dr. Walby then explains how the FAIRtax is assessed on governments:
  • The FairTax Act of 2021 (HR25) requires each governmental unit to pay the FairTax on the total value of compensation paid to all its employees.
  • HR25 imposes the FairTax on the value of all goods and services purchased by each governmental unit.
  • Government enterprises that operate as quasi-businesses and sell services directly to consumers are treated the same as the private sector. Take the US Post Office and Amtrak, for example.  Consumers pay for stamps, express mail and train tickets directly.
  • These governmental entities would add the FairTax to the price they charge their customers for their services and remit the FairTax that they collect on a monthly basis just like the private sector.
  • Because they charge sales tax on what they sell, these types of government enterprises do not pay the FairTax on the wages paid to employees; and, like private sector businesses, they do not have to pay the FairTax on goods and services they purchase from vendors.
  • The definition of wages and salary is all compensation paid for employment service including cash compensation, employee benefits, disability insurance, or wage replacement insurance payments, unemployment compensation insurance, workers’ compensation insurance, and the fair market value of any other consideration paid by an employer to an employee in consideration for employment services rendered.


If you look at it objectively, you have to admire the genius of the people who created the present federal income tax system. They have devised a system under which the government itself is taxed, but it’s done in such a way that it’s all but completely hidden.

People look at you aghast when you tell them that the FAIRtax will be applied to the government. They think that all that’s going to do is increase the cost of government services. They don’t see that the cost of government programs and services is already being driven up by the income/payroll tax system.

The government is a major consumer of goods and services, and people don’t realize that the prices the government pays for those goods and services is higher because the prices contain the hidden costs of the income/payroll tax system. Consequently, the government is paying income/payroll taxes every time it buys something.

There is another reason that Dr. Walby points out:
  • If one does not tax government consumption, it would encourage more government activity thereby crowding out private sector activity.
  • For example, if the government, at any level, built cars and then gave them to consumers for free, before long all cars would be built by the government.
  • The private sector could not compete. When the proxy can pass the cost on to others by using the income/payroll tax as the source of revenue to cover the cost of providing a government service, such activity is hidden from the final consumer.
Henry David Thoreau said, “It is not what you look at that matters, it’s what you see”.

We are not supposed to see that our personal consumption is limited to just the amount we have left over after paying our income taxes, payroll taxes and all other local, state and federal taxes. More and more of us are starting to see what is really “there” and not what the Ruling Class and their minions in D.C. want us to see.

We can understand how frightening it is to the Ruling Class and their minions that people are realizing the true cost to their ability to provide for their family because of these layers of local, state and federal taxes.

Informed people are the greatest threat to the Ruling Class and their minions. This is why the Ruling Class and their minions so oppose the FAIRtax.

Take back control! Help us PASS THE FAIRTAX!

The IRS will be gone and we will pay our taxes when we make purchases.

WE and not the the Ruling Class and their minions in D.C. will decide how much federal tax we pay!

If you have friends who don’t know about the FAIRtax, send them to  Have them watch the white boards under “How It Works” and, if they agree, ask them to please join us.

Then contact your Members of Congress and the President and demand that Congress pass -the FAIRtax—the only fair tax.

Remember, if we don't continue to tell the truth and demand a change, then this quote from George Orwell's 1984 may foretell our children's future:

“If you want a picture of the future, imagine a boot stamping on a human face—forever.”

Is it hopeless?  When confronted with a seemingly impossible problem, remember the statement attributed to the author George Bernard Shaw who wrote, You see things; and you say “Why?”  But I dream things that never were; and I say “Why not?”

Isn’t it time for us to ask, “Why not?”
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