The FAIRtax is back!
John LinderOur Chairman’s Report this week is written by John Linder. John was the original sponsor and proponent of the FAIRtax and led the fight to keep the bill before Congress. He is extremely gratified that the House has agreed to submit the FAIRtax to an up or down vote in this session.
John is also starting a substack to enhance his ability to comment on the FAIRtax and other issues of importance. Here is the link. There is no charge to join John and he invites all of you.
Here is his article.
THE FAIRTAX IS BACK!
The FAIRtax is back on the front burner of the Congress! Thanks to the hard work of the Freedom Caucus in the U.S. House of Representatives the Speaker has said that the FAIRtax will get a vote in committee.
This, of course, has moved the Democrats quickly to the front of the news cycle declaring that a “new 30% tax on gasoline, groceries and medicine” will be a tragedy for the poor.
This trope has been around for as long as the FAIRtax bill has. I first introduced the bill in July of 1999. Neal Boortz and I, with Rob Woodall’s help, wrote two books responding to these arguments, but the tropes remain. And we will respond again.
One of the things we learned after commissioning many studies is that there is a significant part of the price system that is represented by the embedded cost of the IRS. More heavily manufactured products, like automobiles, may have to increase their selling prices by more than 20% because of embedded tax costs. Other products that do not go through so many manufacturing steps may only have increases of 10% to 15%.
A company has no way to pay any of their bills other than the price system, and the person who buys a product or service and uses it personally pays the labor, rent, heating, cooling, distribution and, yes, tax costs of every company it took to get that product to the cash register.
Think about a loaf of bread. There is an oil company which gets oil out of the ground to make gasoline or diesel, an ore company that gets the ore to sell to a steel company to make steel to sell to a manufacturer to make trucks and tractors and rubber companies that sell to tire companies. Seed companies, farmers, bakeries, distribution companies and grocery stores, plus many more, are all involved in getting that loaf of bread to you. All have tax costs that you pay when you buy and consume the bread.
In fact, the only taxpayer in the world is the consumer who consumes the product or service and cannot pass on the costs. Let us just be honest and levy the tax at that point. All of the current complication is to pretend that someone else is paying the bill.
The FAIRtax eliminates the IRS and the embedded costs get driven out of the price system giving everyone more purchasing power.
Additionally, the FAIRtax gives an advance to every household, based on the size of the household, to totally offset the cost of the FAIRtax up to poverty level spending. That is defined as the amount of spending needed for that family to buy their necessities. Today that number for a family of four is about $39,440.00. Those living at or near the poverty level will be totally untaxed.
How much is the tax? It is 23% of what you spend. Now the opponents call it a 30% tax. Let us deal with that confusion. I use that word advisedly. They are trying to confuse you.
There are two ways to treat a tax as to its impact on your personal costs. The income tax you currently pay is called an “inclusive tax” because the tax is included in your promised pay. If you have a salary of $50,000 per year, the tax is included in that amount and taken out before you see what you have left.
State sales taxes are treated as exclusive taxes. They are on top of the cost of the good or service you buy. If the hammer costs $10.00 and your state and local sales taxes are 10%, then you will pay $11.00.
There was a significant debate among the original founders of the FAIRtax whether to treat it as an exclusive tax such as state sales taxes are treated, or to treat it as an inclusive tax like the income tax. We chose to express the tax in the same way as the tax we are replacing is expressed.
The opponents quickly jumped to the worst case - 30% on top of what you spend. Then it is fair to ask them to tell us what the cost of the income tax is when treated the same way. In other words, what percent of your income goes to the government on top of what you have left to spend.
The Tax Foundation concludes that the average tax rate is 14.6% for the top 50% of taxpayers who pay 97% of all taxes, and 3.4% for the bottom 50%. The average tax rate overall is 13.3%. Additionally, all income earners pay 15.3% of their earnings in payroll taxes. While half of that amount is remitted by the company one works for, virtually every economist considers it part of the employee’s earnings and thus the employee’s cost.
Treating the income tax exclusively, just as the opponents insist on treating the FAIRtax, the average of those paying 97% of all taxes is: 14.6+15.3 divided by 70.1 = 42.7%. Average of all, including the bottom 50% which collectively pay about 3% of all taxes, is: 13.3+15.3 divided by 71.4 = 40.1%
So, comparing both taxes as the cost of the government above cash available we get 30% for the FAIRtax and over 40% for the income tax. You decide.
John’s article clearly makes the case for why we need to enact the FAIRtax now!
We now have the opportunity to force all Members of the House to either vote for the present income/payroll tax system or the FAIRtax.
They either support the corrupt income tax and the IRS or they want to get rid of it. It can’t be any simpler than that.
They either believe in being transparent and showing Americans the true cost of their government or they don’t. They either support the largest transfer of power from government to the people, the FAIRtax, or they don’t.
If they think that the FAIRtax needs to be changed, then they can propose the change. Don’t condemn the entire bill because it has a “flaw” that can be easily addressed. And don’t think for a minute that there aren’t any flaws in the income tax.
Please stand with us and demand that your representative support a much fairer, much simpler and much more efficient way to fund the government—the FAIRtax!
The FAIRtax doesn’t pick winners and losers. Because it taxes spending, not earnings, the FAIRtax lets everyone save for their retirement tax free.
The FAIRtax collects the revenue that the federal government needs to operate but does it in a way that has the least impact on our individual freedom and the least impact on our economic prosperity.
There are no tax returns to file and no records to keep. We pay our federal taxes when we make retail purchases of new goods and services, and there is no need for the IRS. If you sell a used couch or used jet ski online, there is no FAIRtax due on that transaction.
The FAIRtax will allow us to TAKE BACK CONTROL.
The income/payroll tax system is broken and no longer working—we can’t repair it but we can replace it with the FAIRTAX!
Join us and TAKE BACK CONTROL OF OUR COUNTRY AND OUR LIVES—NOT WITH BULLETS BUT WITH THE ELIMINATION OF ONE OF THE BIGGEST THREATS TO OUR LIBERTY AND ECONOMIC PROSPERITY—THE INCOME/PAYROLL TAX.
We all should remember Edmund Burke’s warning that applies to our efforts to TAKE BACK CONTROL,
“Nobody made a greater mistake than he who did nothing because he could do only a little.”
We should also remember this quote from George Orwell's 1984, which, if we do nothing, may foretell your and your children's future:
“If you want a picture of the future, imagine a boot stamping on a human face—forever.”
WHAT CAN EACH OF US DO?
We can write letters and make calls to our elected representatives and attend Zoom town hall meetings demanding that if they really want to allow Americans to “TAKE BACK CONTROL”, the first step is to eliminate the income/payroll tax system and enact 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 Ruling Class and their minions in D.C. will decide how much federal tax we pay!
WE will know how much tax we and everyone else are really paying because taxes will no longer be hidden from us. It will be clearly shown on every retail receipt.
If you have friends who don’t know about the FAIRtax, send them to FAIRtax.org. 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.
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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