38 Reasons for the FairTax

[Daniel Dyer]

The points below are adapted from the 27-page Testimony of Dan R. Mastromarco, Before the Joint Committee on Economics, on How U.S. Tax Policy Affects Business Investment and Job Creation, November 17, 2011.

(The Joint Economic Committee (JEC) is one of four standing joint committees of the U.S.Congress.)

1. Tax reform is coming. Tax replacement is needed. (The FairTax bill has 66 cosponsors in the House and 8 in the Senate.)
2. Replaces income and payroll taxes, including personal, gift, estate, capital gains, alternative minimum, Social Security, Medicare, self-employment, and corporate taxes with 23 cents tax on every dollar spent in the final retail sale of new goods and services purchased in the U.S.
3. Amends the U.S. Constitution to eliminate the income tax.
4. Exempts individuals from ever having to file a tax return.
5. Eliminates 90% of the present $431 billion cost of tax compliance, 30% of all income taxes collected.
6. Collection costs drop to about 1% of all taxes collected.
7. Eliminates 72,536 pages of tax code which have been changed more than once a day.
8. Eliminates the unfair cost of compliance on small businesses. (According to the Tax Foundation, small
   businesses spend $724 to comply with the income tax for every $100 they pay
   in tax.) Businesses that sell only to businesses will pay no tax.
9. Enables businesses and individuals to allocate resources based on their most efficient use instead of their most tax-efficient use. GAO estimated these “efficiency costs” at 2 to 5 percent of GDP, about $300 to $700 billion.

10.   Eliminates IRS civil penalties assessed in 2010 on 37 million individuals and almost 9 million businesses.

11.   Closes the $432 billion estimated “tax gap” in which one-fifth of income taxes owed are not paid.

12.   Collects taxes from an estimated 18 million American wage-earning “non-filers”. 

13.   Eliminates perhaps one-half of the lobbying effort in Washington which is devoted to gaming the tax code.

14.   Taxes will no longer penalize work and effort.

15.   Taxes will be neutral in the choice of consumption vs. saving and investment.

16.   Taxes will be neutral across industries and international borders.

17.   The U.S. corporate tax rate will no longer rank 33^rd highest in 34 OECD countries.

18.   The U.S. will no longer be 124^th in World Bank rankings of “total tax cost” (46.8%) imposed on businesses.

19.   The U.S. will finally join more than 50 nations that significantly reduced their highest marginal tax rate in the 1980s and 1990s, to great advantage.

20.   Reducing the highest marginal rate incentivizes marginal (extra) effort and investment.

21.   Removes the bias that favors leisure and consumption rather than work, savings, investment and entrepreneurship.

22.   More savings will create more investment, innovation, jobs, growth, and higher future living standards.

23.   More investment per hours worked explains 97% of hourly wage gains from 1948 to 1994.

24.   Multinational companies will repatriate their foreign earnings to the U.S. rather than keeping them abroad to avoid 35% in residual taxes to the only major country (U.S.) that taxes foreign earnings.

25.   Since U.S. multinationals hold an estimated $1.4 trillion in foreign earnings overseas, even a temporary reprieve from the repatriation tax, according to one study, would add 1.3 to 2.5 million jobs, boost government revenues, and increase GDP $178 billion to $336 billion.

26.   Federal corporate income taxes, less than $200 billion, are 1.3% of GDP, but the way we collect them discourages foreign companies from locating here and causes our multinationals to locate plants abroad where taxes are 9% lower (OECD average).

27.   The FairTax removes income and payroll taxes for producing goods in the U.S. and selling them abroad, where they are taxed again.

28.   Exports will soar.

29.   Jobs will return to the U.S.

30.   Tax-free trade zones for foreign goods in U.S. retail stores will disappear.

31.   Our tax system will no longer encourage consumption of foreign goods.

32.   Our tax system will no longer drive plants and good jobs out of the country.

33.   Business-to-business transactions are not taxed.

34.   Foreign, as well as U.S., production sold in the U.S. will pay the FairTax. (Both U.S. and foreign production sold in foreign markets will continue to pay the foreign value-added tax.)

35.   Instead of taxing income multiple times, the FairTax will tax income once when it’s consumed.

36.   Revenues from a consumption tax are more stable over the business cycle than revenues from an income tax. The FairTax would have reduced the federal deficit in recent years. (David Tuerck, Chairman, Economics and Executive Director, Beacon Hill Institute, Suffolk University, Boston)

37, "91% of households will be better off over their lifetimes as a result of the FairTax." (The Economic Effects of the FairTax: Results from the Beacon Hill Institute CGE Model, Tuerck, et al, February 2007)

38.  The very poor (actually everybody) will receive a monthly deposit (“prebate”) equal to 23% of income at the poverty level. So the effective federal tax will be zero percent for spending at the poverty level, 11.5% at twice the poverty level, etc., up to 23% at the billionaire level.

[Daniel Dyer]

Please see my video First, Why We Need the Fair Tax. More than 10,000 views.

[Daniel Dyer]

FairTax Fundamentals and Facts.

An excellent 11-page white paper on the FairTax can be found at

http://www.fairtax.org/PDF/FairTax-Fundamentals_and_facts-070122.pdf

[Daniel Dyer]

Citizens support the FairTax

Nationwide telephonic survey conducted during the week of Nov. 14-18, 2011.
480,000 calls made encompassing the 12 districts or states of the members of the Congressional Joint Select Committee on Deficit Reduction.
Key Findings
93% of all respondents believe that everyone should pay their fair share in taxes.
80% of all respondents would like control of how much in taxes they pay.
56% of respondents want Congress to pass the FairTax plan.

Respondents identified their political affiliation as
51% Republican
25% Democrat
24% Independent

[Daniel Dyer]

"30 multi-million dollar American corporations expended more money lobbying Congress than they paid in federal income taxes between 2008 and 2010, ultimately spending $400,000 every day – including weekends – during that three-year period to lobby lawmakers and influence politicians, according to a new report from the non-partisan Public Campaign." (International Business Times, IBT)

"If the FairTax were enacted, these 30 corporations would no longer need to hire high-paid lobbyist(s)." (fairtax.org)

"According to the Tax Foundation, small businesses spend $724 to comply with the income tax for every $100 they pay in tax!"  (fairtax.org)