Rep. Linder’s Argument, at Costco, for the FairTax
Below is Rep. John Linder’s argument for the FairTax, which appeared in the June 2005 issue of Costco Connection. For more background on this publication and the poll they conducted, see my earlier posts “56% of Costco Members Favor Retail Sales Tax” and “William Gale’s Argument Against the FairTax.”
I believe we ought to consider an alternative tax system. The FairTax, which I have introduced in the House as H.R. 25, and Sen. Saxby Chambliss (R-Ga.) has introduced as S. 25, would end the income tax system as we know it.
Anyone buying goods and services today is paying, on average, 22 percent higher prices due to the embedded costs of the federal income tax code that all businesses pass along to consumers in the form of higher prices. These embedded costs are hidden to consumers. And that’s not to mention the hundreds of billions of dollars a year spent complying with the tax code by businesses and individuals.
Under the FairTax, which would abolish the Internal Revenue Service (IRS); repeal federal income, corporate income, self-employment, payroll, capital gains, gift and death taxes; and replace them all with a personal consumption tax, consumers would pay 23 cents of every dollar they spend in taxes, versus our current income system, where, on average, taxpayers pay 33 cents of every dollar they earn on taxes.
The tax rate — a tax on personal consumption — is expressed as a percentage of consumer spending. For example, if you spend one dollar, 77 cents goes to the merchant and 23 cents goes to the tax man. This tax would apply to all consumer purchases of new goods and services. As the bill taxes only personal consumption, goods and services purchased for business purposes would not be taxed.
The measure also creates a rebate for taxpayers to offset the taxes on spending up to the federal poverty level, as determined by the Department of Health and Human Services. This rebate — mailed monthly in advance to every household — ensures that no American is taxed on the purchase of necessities.
The FairTax gets the government out of your life yet continues to provide the necessary receipts to keep the government running. FairTax broadens the tax dramatically, by making all 300 million American citizens and roughly 45 million foreign tourists and visitors taxpayers — essentially tripling the federal government’s tax base. And it does so at much less cost to the economy. For more information about the FairTax, visit my Web site at http://linder.house.gov.
