The Fair Tax Act, Part LXI

July 5, 2007  ·  Filed under: Education

With some reservation, I have decided to omit the sections of the Fair Tax Act about reforming technical amendments (Sec. 202 under Chapter 9), simply because most of them are just repealing chunks of law and re-ordering them. They don’t mean much on their own and I would have to cross-reference with the 1986 IRC to fully explain each revision, which could take a while. If you are interested in them, please review this link and check it out for yourself. I am continuing on here with Title III - Other Matters:

TITLE III–OTHER MATTERS

SEC. 301. PHASE-OUT OF ADMINISTRATION OF REPEALED FEDERAL TAXES.

(a) Appropriations- Appropriations for any expenses of the Internal Revenue Service including processing tax returns for years prior to the repeal of the taxes repealed by title I of this Act, revenue accounting, management, transfer of payroll and wage data to the Social Security Administration for years after fiscal year 2011 shall not be authorized.

(b) Records- Federal records related to the administration of taxes repealed by title I of this Act shall be destroyed by the end of fiscal year 2011, except that any records necessary to calculate Social Security benefits shall be retained by the Social Security Administration and any records necessary to support ongoing litigation with respect to taxes owed or refunds due shall be retained until final disposition of such litigation.

(c) Conforming Amendments- Section 7802 is amended–

(1) by striking subsections (a) and (b) and by redesignating subsections (c) and (d) as subsections (a) and (b),

(2) by striking `Internal Revenue Service’ each place it appears and inserting `Department of the Treasury’, and

(3) by striking `Commissioner’ or `Commissioner of Internal Revenue’ each place they appear and inserting `Secretary’.

(d) Effective Date- The amendments made by subsection (c) shall take effect on January 1, 2011.

This section de-funds the IRS after 2011 (a 2-year transition period, covering 2009-2010) and requires that most records the IRS used be destroyed in the same timeframe. It also removes the Commissioner’s authority at that time.

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3 Responses to “The Fair Tax Act, Part LXI”

  1. Well, it’s easy to see that the writers of HR25 were salivating over the prospect of defunding the IRS and even stamping out the dreaded name itself. But it would be a mistake to assume that all of the functions of the IRS will also disappear. As we have discussed earlier, seven of the eleven Titles of the IRC will remain should HR25 become law. This section simply makes the Treasury Department responsible for those functions, and replaces the IRS Commissioners with the Treasury Secretary. When the dust settles, and the new Departments of Sales Tax Revenue are in place, it sure isn’t clear to me just what net cost savings to the federal government will result?

    I’ve seen AFFT estimates that 90% of the IRS budget will be saved, but what real savings will occur when this musical chair charade is over?

    Hank Van Gieson  ·  Jul 5, 2007 at 2:21 pm  ·  Permalink

  2. The 90% savings estimate is based upon the notion that enforcing the FairTax will generally only require enforcement on businesses, and not on individuals. Since businesses represent about 10% of the number of tax filers in America, the off-the-cuff estimate is that 90% of the enforcement manpower, computers, etc will not be needed.

    In addition, the states are assumed to be assisting in the enforcement of such laws through the tax authorities in each respective state, further lessening the need for a large Federal agency. Instead, the Federal Sales Tax Bureau (or whatever it ends up being called) should be include a small number of central policy makers and enforcing agents.

    There is also the arguable notion that businesses tend to have a higher compliance rate than individuals. But that’s a debate for another thread, perhaps.

    James Kidd  ·  Jul 5, 2007 at 8:09 pm  ·  Permalink

  3. James,

    I don’t think inflating your income for Social Security would buy very much. The 2007 limit is $97,500. At that point under the current system the deduction stops and any wages above that are not considered for benefits. I think the benefit part of that would be the same under the FairTax. Besides, if you’ve been reporting $70,000 or less for the last several quarters and now, all of a sudden you’re reporting the maximum, that looks like a BIG red flag to me,

    Duane Neighbors  ·  Jul 6, 2007 at 5:03 pm  ·  Permalink

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