This week’s Chairman’s Report is written by Jade Walle. A practicing CPA has been on the American For Fair Taxation board of directors.
FAIRtax- It is Big and it is Beautiful!
As President Trump’s big, beautiful bill works its way through Congress this June, let’s not lose focus on a taxation system that is far superior to the current income and payroll tax system, the FAIRtax. Yes, having lower income tax rates stimulates the economy.
Yes, it would be better not to have significantly lower estate tax thresholds as will happen if the 2017 Tax Cuts and Jobs Act is allowed to expire at the end of 2025. No questions here. As the most pointed questions on major tax legislation generally relate to its economic effects, let’s take a quick look at how the FAIRtax stacks up.
First, nearly all credentialled economists agree that three primary factors inevitably promote economic growth. No matter what these are, we should pause and ask ourselves, does the currently contemplated legislation adhere to these three factors?
The three keys to promoting economic growth are:
-Replacing the income tax with a consumption tax
-Replacing a graduated rate system with a flat marginal rate system
-Lower marginal rates and establish a broader tax base
The big beautiful, bill clearly fails the first factor. It keeps the income and payroll tax construct that we’ve had since 1913. For factor number two, no dice there. The income tax remains a graduated rate system. As for number three, the tax base remains woefully small thanks to the income tax system’s numerous deductions, adjustments, credits, exclusions, exemptions, and loopholes that allow existing wealth to generally remain untaxed.
What about the FAIRtax? The FAIRtax is the embodiment of the first requirement. HR-25, the FAIRtax Act is the only proposed and drafted consumption tax-based bill in the U.S. Congress. It repeals all of the statutory authority that allows the federal government to collect an income tax. Furthermore, permanent implementation of the FAIRtax is contingent on repealing the 16th Amendment. When that happens, the Constitutional authority to collect an income tax is gone as well.
Second, the FAIRtax does away with the graduated rate system where productivity is punished with an income tax that not only results in more swats from the paddle, but each swat coming at higher velocity and accompanying pain.
Lastly, the FAIRtax elegantly address the third factor as well. The 23% inclusive FAIRtax rate, which after the prebate is effectively 11% or lower for the more than half of U.S. wage earners accomplishes this goal. More importantly, the FAIRtax creates a significantly broader tax base with consumption as its foundation rather than income.
In 2005, the U.S. personal consumption expenditures (“PCE”) base of spending was $8.7 trillion compared to $5.1 trillion in “taxable income.” That’s a 70% larger and broader taxation base. Fast forward a couple decades and according to the Federal Reserve Bank of St. Louis, 2024 PCE was $79.3 trillion. An incredible increase!
The Tax Foundation noted the latest full year data available shows 2021 Adjusted Gross Income at $14.7 trillion. That’s a general approximation of taxable income although further deductions reduce this amount even lower before income tax is calculated. The disparity in U.S. PCE over taxable income has ballooned and is now at least 439%!
A taxation system based on consumption is more predictable, even in recessions and down times relative to the income tax. A key reason for this phenomenon is that consumption has more sources—income, savings, borrowing and even theft, whereas income only has one source, income.
Furthermore, the FAIRtax isn’t riddled with a myriad of deductions, exclusions, credits and exemptions that infect the income tax. The only spending that is not taxed under the FAIRtax is investments (including post-secondary education tuition), charitable giving, spending of insurance proceeds, and of course used goods.
The income tax has so many loopholes, deductions, and exclusions that it takes 80,000 to 90,000 pages of Internal Revenue Code to contain them all. And every one of them works to effectively reduce taxable income and reduce U.S. Treasury tax inflows.
Lastly, since waste, fraud, and abuse dominate the headlines in 2025, the FAIRtax is projected to reduce illegal tax evasion by over 90%, from approximately $1 trillion per year currently to $50 billion, an amazing reduction. So, after comparing these two alternatives, which piece of legislation, the big, beautiful bill or the FAIRtax Act, seems truly more beautiful to you?
CONCLUSION
Jade has demonstrated that the FAIRtax is fairer to the average Americans than the present income/payroll tax system. It is also much better for all Americans because it will grow the economy much more than the present income/payroll tax.
Many of you have labored tirelessly for freedom from the federal income tax and the IRS. You deserve a great deal of credit for your efforts to educate the American people on the need to fund the American government in a way that is good for America and returns freedom to the American people.
It is imperative, though, that we don’t replace the current income tax and the IRS with an alternative system that can still be manipulated by the Ruling Elite. We must let Congress and the President know that the best way to replace the income tax and the IRS is with the FAIRtax.
Make no mistake about it. The FAIRtax is a grave threat to the Ruling Elites. It will strip them of their power and their ability to control us though the tax system. Their opposition to the FAIRtax will be fierce and unrelenting. And don’t think for an instant that they won’t use half-truths, deception and downright lies in their desperate attempt to hang on to their power.
However, with the support of this President, we can finally eliminate the income tax and the IRS!!!
Of course, the best course of action is to not only repeal the income tax and abolish the IRS but to repeal the 16th Amendment as well so no future administration can ever shackle the American people with an income tax again.
We must come together and ensure that real tax reform, the FAIRtax, is not subverted by the Elites in D.C.
This will take the diligent efforts of all of us. We need your financial assistance, and we need your grass roots assistance.
If you have contacts that will allow us to get more information to President Trump about the FAIRtax please let us know.
Please email us at info@fairtax.org and we will give you some options on how you can best help us.
At a minimum, please call your Congressional representative and ask if he or she supports the FAIRtax. If so, thank him/her for their support and suggest they become a cosponsor of HR-25 if they’re not one already. If not, ask why not. If your representative claims to be unfamiliar with the FAIRtax, offer to have someone come to their office and explain it to them.
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.