The FAIRtax vs. Our Growing National U.S. Debt
This week’s Chairman’s Report is written by Randy Fischer, an AFFT vice-president and board member.
After President Trump’s re-election on November 5, 2024, there has been a heightened sense of urgency as it relates to our national debt. As I write this article, according to usdebtclock.org, our national U.S. debt is over $36 trillion.
Perhaps the renewed attention is due to the belief that there may never be another opportunity like this with the incoming administration’s contingent. It’s as if everyone can feel, just under the surface, that a massive and destructive recession is looming just at the outskirts of our financial foresight, just inside the caverns of an almost forgotten place in our mind that keeps flashing a faint warning light.
The advisory committee known as the Department of Government Efficiency (“DOGE”) has been launched and has been tasked with identifying and eliminating inefficiency and waste in our federal government. This has certainly heightened the attention and excitement many feel about the prospect of spending the over $4 trillion in funds the U.S. Treasury receives each year, in a more efficient, less-wasteful way.
Some last facts and reminders before we dive in. In 2011, S&P downgraded our U.S. debt from AAA to AA+. We’re nearing the point where our debt holders might begin to want their money back. That means there would be fewer entities willing to purchase more treasury notes and T-bills to handle our insatiable spending appetite. This would lead to what is called a failed auction. If this occurs, the entire house of cards falls down. Oh, by the way, in 2011, our national debt was $14.8 trillion and again, as highlighted above, we’ve more than doubled that to over $36 trillion in debt now. Let that sink in.
Let’s look at how enacting the FAIRtax would affect our national debt, since the topic has received the aforementioned renewed attention.
Of course, the FAIRtax only affects the nation’s inflows, not our out of control spending. However there are several indirect effects that will lead to an eventual decrease of our growing national debt. These concepts include, among others:
- Tax evasion;
- U.S. economic expansion; and
- Transparency.
Tax evasion
The FAIRtax is estimated to reduce illegal tax evasion by 90%, relative to our current income tax system. The FAIRtax would almost singlehandedly erase our annual budget deficit. For 2023, the U.S. annual budget deficit was $1.7 trillion, and our annual tax gap (illegal tax evasion that should have been collected by the IRS), was estimated at $1 trillion.
Under any system of taxation, evasion will still exist, but the configuration of our tax collection system changes everything! The FAIRtax does not tax what is sacred to us, (i.e., our income). Retailers are great at collecting cash and taxes, and the FAIRtax enables retailers to collect all our nation’s tax receipts, drastically decreasing the number of tax collectors (retailers rather than all businesses and individuals).
Economic Expansion:
Decades of thorough economic research has strongly indicated that enacting the FAIRtax would result in real wages, disposable personal income, consumption and U.S. GDP all increasing significantly. Just imagine the effect that a 10% increase in real wages would have on our national morale, working families, our lower middle class and the overall economy as it relates to consumption, and increased disposable personal income.
The FAIRtax accomplishes this in several ways including increasing the current tax base of $5 trillion to $9 trillion, with no exclusions, exemptions, deductions or loopholes. The incentive to keep trillions of dollars offshore suddenly evaporates. That money will come rushing back into the US economy as America becomes the world’s tax haven (think 0% corporate income tax rate). Although criminals will exist for as long as the sun rises in the east, the criminal underground and anyone in the U.S. illegally will finally pay their full federal tax burden as they consume at the retail register.
Also, the trade deficit will shrink drastically when the prices of American goods on the world market no longer contain the 22% embedded cost of the current income/payroll tax system. The resulting surge in demand for American made products will lead to even more good paying American jobs being created.
Transparency:
With one national FAIRtax rate and prebate schedule, any changes to the tax system will receive unprecedented sunlight, scrutiny and public interest.
Currently, there is federal spending, but there is also the ability to reduce net treasury receipts through tax credits, deductions, adjustments and exemptions. This reduction to our Treasury’s coffers through reduced collections will be completely eliminated under the FAIRtax. A great deal of the smoke and mirrors of the current income tax system will completely vanish. Only true federal spending will be at issue, which will by default will be more transparent and receive heightened attention and scrutiny.
Let’s think about how this would play out. After enactment, if a crafty politician wants to exclude certain expenditures from the FAIRtax to pander to a particular interest group, for example excluding all purchases of prescription drugs from the FAIRtax, he or she will need to either reduce the prebate (good luck getting a groundswell of political support on this idea), or raise the uniform FAIRtax sales tax rate (again, not likely a winner with the U.S. public, given every person who consumes in the U.S. would be personally affected).
This fact, along with the protection of the prebate un-taxing spending on life’s necessities, provides an incredible natural disinfectant to future potential meddling with the FAIRtax.
Conclusion:
The FAIRtax will:
- drastically reduce tax evasion and by default increase tax receipts;
- create a booming economy the likes of which we’ve never seen before and by default, increase tax receipts; and
- elegantly create the most transparent tax system ever conceived.
All of this results in a perfect incubation chamber to reduce our national debt. The FAIRtax will increase Treasury receipts and by default, bring forth the greatest amount of sunlight, transparency and scrutiny to our federal spending that America has experienced in recent memory. This will undoubtedly lead to a significant curtailment of our run-away federal spending and ballooning national debt. Bring on the FAIRtax. Mr. President, tear down that (income tax) wall!
The choice is easy—do we want a system for funding the federal government:
- That is so simple everyone can understand it.
- That shows the costs of the federal government on every retail receipt so all of us understand what we are paying.
- That helps U.S. companies compete with foreign competitors.
- That keeps jobs in the U.S. rather than exporting them to other countries.
- That permanently establishes the solvency of Social Security and Medicare.
- THAT IS THE LARGEST TRANSFER OF POWER FROM D.C. TO THE PEOPLE SINCE THE CONSTITUTION WAS ADOPTED.
D.C. is ignoring the one real solution that allows us to remain citizens and not subjects, the FAIRtax. The FAIRtax is simple, non-invasive, but most of all, IT WORKS!
THE SOLUTION—PASS THE FAIRTAX!
Please go to this link to invest in AFFT and help us pass the FAIRtax. It’s an investment in your and your family’s future.
THE SOLUTION—PASS THE FAIRTAX!
Why would D.C. pass the FAIRtax and give up this almost unlimited source of donations? The only way that they will is if the rest of us demand it!
Isn’t it time to end this ludicrous tax collection system and the IRS?
HELP BRING ABOUT REAL TAX REFORM AND STOP FUTURE IRS ABUSES
By contributing (investing) $10.40 per month, you help provide a financial base to AFFT. If you can make larger contributions (investments), these will be used not for salaries, as we are all volunteers, but for the needed updates to our economic studies which will be vital for all future years.
Please go to this link to invest in AFFT and help us pass the FAIRtax. It’s an investment in your and your family’s future.