The FairTax is alive in the 111th Congress
A message from John Linder
Friends,
I am extremely happy to tell you that HR 25, the FairTax, has been reintroduced and is alive and well in the 111th Congress. Not only that, the FairTax has been dropped with more original co-sponsors than it has ever had. This is an incredible accomplishment, and it has everything to do with you and the immense passion and work you have put into it.
As a citizen co-sponsor of the FairTax you have played an active role in illustrating to other Members of Congress that the FairTax is important to you and is the right step for America to once again regain her prominence. Thank you for that.
Our citizen co-sponsor effort has become a powerful tool, as I hoped it would. This means we need to work together to enhance and strengthen it. Our goal in Congress is to reach 100 co-sponsors on the bill, and our goal for the citizen co-sponsors is to reach 100,000. I truly believe that if our citizen co-sponsors can achieve that goal, then that will be the catalyst for HR 25 crossing that 100 co-sponsor threshold. So now is the time, if you haven’t gotten a friend to join the fight, do it today by sending them to www.johnlinder.com. If you already have, thank you; now go try and find ten more.
The success of the FairTax to date has been tremendous, and it is all a result of your hard work. It is incumbent upon all of us that we step up our efforts to ensure that the FairTax has not yet reached its peak, but is still climbing.
Thank you again for all you do,
John
Once the text is uploaded, we should do a compare to see if there are any changes.
So his goal is to get 100 co-sponsors – not to get the bill passed into law? It also seems to me that his criteria for measuring the success of a congressional bill may be a little lax. The thing’s never even been considered by committee – let alone voted out!
Why would there be more co-sponsors of the FairTax (among Republicans) when the Democrats are in charge of government than when the Repulicans were in charge?
Because if they had proposed the FairTax while they were in power, it would have come under actual scruiteny and the Republicans would have had to defend it to the American public. (“Yes, we know your taxes will go up, particularly on you retirees, but we think it’s best for the country.”)
Now that they’re out of power, the Republicans can simply criticize every Democratic tax plan and say “Hey, don’t blame me. I’m for the FairTax.” Since the FairTax won’t be subjected to any scrutiney (since it won’t be on the radar screen of any serious economist), they can make whatever outrageous claims they want without fear of being refuted.
I know, call me a cynic.
Speaking outrageous claims, a certain talk-show host is repeating the claim that the FairTax will bring $14 trilion back in the economy. I know we discussed that sometime ago. Does anybody know where that claim comes from? Morph, I didn’t see anything on that in your Wikipedia article.
I found the following quote on the U.S. Chamber of Commerce site:
In 2006, the latest available data, U.S.-owned assets abroad were $13.8 trillion, and foreign-owned assets in the United States were $16.3 trillion. Therefore, the United States was a net borrower from the rest of the world to the tune of $2.5 trillion.
Why do I have a sneaking suspicion that this is what they are talking about when they say that US companies and individuals keep $14 trillion abroad in order to avoid US taxes (while conveniently ignoing the foreign holdings in the US). I could be wrong, but I somehow doubt it.
Full text is available here: http://thomas.loc.gov/cgi-bin/bdquery/z?d111:h25:
Morphh,
The only change I can find after a very cursory look is the addition of Title 4, which sunsets the Fairtax six years after implementation if the 16th Amendment has not been repealed by then.
Frankly, I think that is a gigantic mistake, perhaps based on a failure to properly consider the States potential resistance to a national sales tax. I have emailed the National Governors Association staff and Mr Huckabee, former Governor and Chair of the NGA in an attempt to find out just how important it is that the NGA tax policy paper for 2008 absolutely opposes a national consumption tax of any kind. Doubtful I’ll get a reply, but I think it’s an important question.
I guess that Linder thinks that after six years of the Fairtax, no one would favor reinstatement of the income tax and this is supposed to put pressure on the States to repeal the 16th? Seems to be a very risky strategy, imho.
I’d still like someone to educate me about reasons why having multiple tax collection systems causes so much angst? Putting all the federal governments “eggs” in one basket seems foolish in the extreme. Particularly under today’s economic downturn. Florida, and probably Texas are going through brutal budget exercises in order to make up the deficit caused by declining sales tax revenue. Stay tuned!
This is new:
Hayden, the Wikipedia article states this about the funds “John Linder states an estimated $11 trillion is held in foreign accounts (largely for tax purposes), which he states would be repatriated back to U.S. banks if the FairTax were enacted, becoming available to U.S. capital markets, bringing down interest rates, and otherwise promoting economic growth in the United States.[10] Attorney Allen Buckley states that a tremendous amount of wealth was already repatriated under law changes in 2004 and 2005.[64]“
So the provision looks like 8 years before the FairTax is pulled if the 16th Amendment is not repealed.
Re 6
Hank,
Article IV is a suggestion I actually made. I have written in the past that I would not support the Fair Tax if I thought we would end up with both a sales tax and income taxes because of the economic disaster such a tax scheme would create. I would rather take the chance of putting our tax eggs in one basket that is transparent.
A congressmen and several congressional candidates have told me they share this fear and have backed away from supporting the Fair Tax for this very reason.
~Jim
Jim,
I’ve always respected your opinions, but on this issue, I still don’t get it. You wrote: “I would not support the Fairtax if I thought we would end up with both a sales tax and income taxes because of the economic disaster such a tax scheme would create.” Will you please spell out in detail just what kind of economic disaster you are talking about? Most of the States have multiple revenue collection schemes and don’t seem to be experiencing disasters on a regular basis. In fact, there are now discussions about Florida adopting an income tax to go along with the sales tax. Gives added flexibility during periods of consumption downturn like we are experiencing now.
And by the way, Jim, I continue to point out that there is nothing transparent about the Fairtax proposal to hide 15% of the revenue needed to fund the federal government in higher State and Local taxes. For the federal government to tax State and Local consumption is inappropriate to begin with, but if it gets by the Supreme Court, at least 15% of the needed revenue will come from State and Local government consumption. And I’m sure you understand what that means? Higher taxes of all kinds. Nothing transparent about that whole proposition, imho! What is your definition of transparent?
Regards
Hayden/Morphh,
Regarding the $14 trillion offshore, I’m getting more and more confused. When this claim first surfaced, I googled Offshore Wealth, and came up with the Tax Justice Network, an international firm that tracks offshore holdings that appear to have a tax avoidance motivation. Their 2005 report made it clear that the total offshore holdings by high net worth individuals was around $13.5 trillion. But that wealth was owned by individuals from all over the world. Only $1.6 trillion was owned by North Americans, and the best estimate for US owned wealth parked offshore was around $700 billion.
Next, Morphh pointed out a reference in the Boortz/Linder books that seemed to indicate that the source was the year 2000 Wealth Report. Done by an investment firm, the report stated that there are 3 million Americans with a net worth over 1 million, with the average being $4 million. That looks like $12 trillion , but the report stated that only one third or $4 trillion was invested offshore.
Now, Hayden raises a Chamber of Commerce report that seems to say there is $14 trillion in US investments overseas-and $17 trillion in foreign investments in the US.
I can’t begin to know what Linder and Boortz are using for justification for their recent statements, but the Wealth Report doesn’t support their case, the Chamber report seems to focus on investments for reasons other than tax avoidance, and I’m left with the Tax Justice Network report which at least deals specifically with wealth held offshore for tax avoidance reasons. Of the three, I think the TJN makes the most sense, but others may disagree.
There is good news and bad news for the Fairtax in the 111th Congress. The good news is that after ten years of having just Linder and Brady from Texas as members of the W&M Committee and cosponsors of HR25, there are now three with the addition of Ginny Brown-Waite from Florida. Even better, Charles Boustany-Lousiana, newly assigned to the W&M committee, may also become a cosponsor. Only Linder continues to be a member of the Revenue subcommittee where HR25 must begin the legislative journey.
The bad news is that the Democrats victories last November changed the Committee membership from 24 D’s and 17 R’s to 26 D’s and 15 R’s. More significantly, the Revenue subcommittee now has 9 D’s and only 4 R’s, changed from 8/5 in the 110th.
Frankly, I don’t think it matters one bit if Linder gets 100 or 150 Republican cosponsors. HR25 can not be considered unless the Revenue Committee decides to do so, and the outlook there is bleak. Bucking Charlie Rangel and Speaker Pelosi could be hazardous to one’s legislative career? I think it’s going to be a long, frustrating eight years unless the new Administration/Congress fails miserably, and I certainly hope that doesn’t happen!
Re 11:
Hank,
I will be glad to spell out the economic disaster that I am talking about. It’s spelled “New Jersey.” Here in the Garden State we have it all: the shore, diverse cultural opportunities, sports teams, wealthy suburbs with good public schools (still), higher education opportunities, personal income taxes, corporation business taxes, transfer inheritance taxes, sales taxes and the highest property taxes in the nation. People who want to stay are leaving for places like North Carolina, which just supplanted New Jersey as the ninth most populous state. I would venture that most of the growth of North Carolina consists of New Jersey ex-pats. The tax policies of this state are repelling business.
If you want the low-down on New Jersey and taxes, I commend the Jim Gearhart show to your listening, 6am to 10am weekdays, http://www.nj1015.com.
William McGurn, once the chief editorial writer with The Wall Street Journal, suggests that President-elect Barack Obama’s New Year’s resolution should be, “I will not allow America to become New Jersey,” and he does refer to our state as the “People’s Republic of New Jersey.”
When government is given another source of revenue, be it an income tax in Florida’s case, or a VAT in the case of the federal government, government adapts quickly to the new level of income without making necessary structural change. Revenues, however, generally settle to a constant percentage of GDP. See Hauser’s law.
As hard as Florida may be feeling pain now, it shold avoid givin in to the temptation of seeking an additional source of revenue and risking becoming New Jersey.
~Jim
Does anyone understand the point or purpose of the “Citizen Co-sponsor” thing? Is this like a First Amendment petition to the Government for redress of grievances?
Morphh,
Here is a post by a sceptic on another site:
“I’m not suggesting it’s not valid.
The web site clearly states it’s run by “Linder for Congress.”
What I’m saying is that things tend to get passed around on the Internet without evaluation.
Linder’s petition page has been up for at least a year. There was a discussion about it that AFFT shared with its list about a year ago.
I mean, seriously, what will signing this petition do for the FairTax that’s different than the petitions that AFFT has initiated?
And if the same circle of people are signing both, how does that help the cause?
As one of the AFFT leadership rightly pointed out, an Internet petition is a mechanism to collect e-mail addresses and other information that will be used for a purpose beyond signing the petition.
So, should we all jump on this? It’s really old news.
I’d much rather have Mr. Linder and the co-sponsors get up there in front of the House of Representatives and argue that the FairTax is the solution to the economic situation.
But he does have to run for office again in a little over a year, so you can’t fault him for building up his supporters list.”
In other words, because of the email address used, the petition would seem to be a way to generate names of supporters who might also be asked to send money?
Jim,
Nice try, but I still don’t think you have described the economic disaster that would be created by having both an income and sales tax. A quick google check confirms that NJ does have the highest tax burden in the country, but NJ also has the highest median income ($55,000), and the 2nd highest per capita income ($41,000). Nine of your counties appear on the list of the 100 wealthiest counties in America. Might there be a connection between wealth and taxes?
As for the taxes, compared to NC, your income tax has brackets from 1.5% to 9%, while NC has 4 brackets from 6% to 8.25%? Your sales tax is 7% compared to 6.75% in NC, but NJ has designated most of the State as Urban Enterprise Zones with sales taxes of only 3.5%? While I couldn’t find any specific data for real estate taxes, I can tell you that NC taxes the full appraised value, while NJ may not?
You may think that people are leaving NJ in droves, but the fact is that NJ”s net population grew by almost 100,000 in 2006, the only data I could find.
All of which fails to make the case that NJ is an economic disaster, imho.
Jim, it seems to me that the real reason you need to totally replace the income tax with a sales tax is simply that you aren’t ready to talk compromise. If HR25 were to pass as written, of course the income tax would have to go away. You certainly wouldn’t want (or need) to have both. But, you may have closed the door on compromise by adding your poison pill in this years version of HR25. As you know, I would prefer to just replace the income tax, leave the payroll contribution in place, don’t have the federal government inappropriately tax State and Local governments, include a targeted cash grant entitlement (prebate), at only 10% of the current prebate cost, and phase the slimmed down version of HR25 in over five years. The sales tax rate would be 12%, which might be a whole lot more saleable than the current version. What would be such a disaster about replacing the income tax with a 12% sales tax, and retaining the current payroll contribution?
Best regards,
Hank,
You hit the nail when you mentioned New Jersey property taxes. My house in Summit is below the median house value, and I pay close to $12,000/year. Over half the houses in Summit pay more. I’ll bet North Carolinians are nowhere near that. I also don’t know what the corporate income tax is in NC. I’d bet further, though, that the rate of population growth there outstrips New Jersey.
New Jersey’s income comes disproportionately from Wall Street, whose workers live here. People I know are retiring out of state.
My real reason, though, for digging in my heals about a new form of taxation is my distrust of Congress. My former Congressman shares this view. Congressmen are rewarded at the polls in direct proportion to how much pork they bring back to the district and not on how much they save the federal government.
Government does not make structural changes in response to new sources of revenue. Government merely finds new ways to spend it. Conversely, when government draws more from the host economy, the host economy becomes sick. It may not be readily evident, but it is a gradual process.
~Jim
Folks I have just come accross this blog, and wanted to add my thoughts. I have been moderating a discussion on how to fix the economy and this topic has come up much. I am copying my post below that was an assessment on the plan. I will also provide you with the link if you care to read more and the replies associated. Please feel free to let me know your thoughts.
Here is the thread discussion:
http://www.facebook.com/topic.php?topic=8240&post=100244&uid=15704546335#topic_top
Here is the post:
http://www.factcheck.org/taxes/unspinning_the_fairtax.html
The American’s for Fair Tax have been the leaders for this going through. I make my own assumtions on the details from what I have read in multiple locations not just the above link and I encourage those reading to do so on their own and make their own ideas. As a side note I don’t think it is great that we are a consumer society entirely and this would really lock it in… What happens if we save??? but lets assume we continue which is likely anyway.
Here goes.
I feel the idea has merrit as a change from our current setup it eliminates everything and puts it all on what we spend and buy. No Income tax, no Payroll tax no social security nothing. So ensentially what you get as a gross ammount on your paycheck right now you would get that rather than the net amount you get now. So everyone gets a raise right away by a considerable amount I say maybe $ 300 on every $1000 essentially. That helps. If you once got $700 a week in usable income then now you get $1000 roughly.
Now you have more to spend, which is good cause you will need it to cover the increased cost of goods you buy. AFT talks of a 23% inclusive rate which means it is in what you buy. Exclusive of that it equals the equivilent of about 30% AFT disputes this, but I don’t agree with their assesment and think that they have taken reports that favor their views rather than being impartial, but that does not change the merrit of the idea.
Calculations of around 34% were out there and I do think that is about the level it would have to be to make sense. There are a few problems that need to be addressed.
I think the following items need to be exempt from any type of tax in this system or the burder is greater.
Home Purchases
Rent
Interest Rates on Vredit Cards, Mortgages, and Car Loans
doctors bills
Utilities
Gas
Legal Fees
and most importantly food and clothing
Here is why.. These are the loopholes of this program and they can hurt big. These very much change the cost on crucial day to day items that effect people’s monly responsibility. Houses 30% higher to buy plus 30% on the interest, not good. The food and clothing is about the poor or rather poverty level. The system provides for a credit or PreBate to people under poverty level. problem is it gives it to everyone up to that level so even the richest get it. These Items are essentials and should not be included. Obviously deductions like interest on taxes now would have to go away since this eliminates your payment of the tax on it in the cycle.
Now here is my big issue the system as it stands form AFT would really make a higher burden on those above poverty and under $200 K and would lessen the burden on those over $200 K which I am not in favor of under that setup. What I would be ok with is a 34% inclusive rate with the stipulations I said above up to the $30 K level for the PreBate since you can barely live on that either. Again no food or clothing end tax as an essential. Now it is set up for NO TAXES VIA END OF YEAR FILING FOR THE LOW INCOME I JUST CHANGED IT TO $30K FROM $15K. All other end use goods TV and Electronics say have the new end use or Fair Tax on it and I think End Use is a better name since it benefits the richer more. Now I think that to offset the inequity that would exist for the middle class, they would be better able to pay the increased costs with the increase in income to gross levels and incomes would most likely rise quicker to help them deal with it. Here is my twist.
Up to $200K per year gets a tax refund that brings their effective rate down to 24% inclusive. This gives the capital to the Gov for cash flow, but gives it back to those below 200 K at the end of the year. I think this works great cause it makes it a Fair Tax, and gives the added benefit of helping us all to save more most likely because of the money refund. If not saved then it is spent and continues in the cycle to help everyone.
I think in this manner it could work well although I will admit that the percentages may change based on a full release of the President’s Council methods and a hard independant look with all the facts from any agency they see appropriate with no private involvement.
I am only worried about the distribution of funds out of the collective tax pool. How do we figure out what goes back to Social Security versus to Education that part is a little fuzzy and I do not want another slush fund like Social Security has been used for. This is obciously not a complete fix to our situation, but I believe that under these specifications and together with some of our other ideas here that we could fix this country and make great headway back towards being the country we formed.
____
Please let me know any thoughts on this as I welcome new info and input. Most have agreed with post although some have not. People do tend to agree no tax on food or meds, but the biggest thing is that people have really started to like the idea and think it is the kind of foward thinking tax change that we need.
Regards
Tim
I am very happy to see that the Fair Tax is alive in the 111th Congress. I admire the work that went into this by the leaders involved. Kudos.
However, my guess is that they will not do a Fair Tax unless (or more accurately, until) they are forced to.
When we reach the point of economic collapse due to the wage distortions of the Income tax in a global environment, then I think we will see the tax adopted. They will do it when they have to.
But the government credit card isn’t maxed yet, so I think the Income Tax party will continue for a while longer..
Hello,
I have begun to examine the FairTax proposal. I am going through the major claims and trying to evaluate them. I have begun with those claims that are on the covers of the B&L books and will continue with others found within. I would appreciate comments from those who support the proposal and from those who are skeptical.
Look forward to hearing from you!
Ken Spitze
http://www.politicalandeconomicnumbers.blogspot.com
We can force the fair tax on our country now. all we have to do is just stop filing taxes. if you are self employed stop paying anything in. Lets force it to happen now! I dont like the way the fair tax is designed right now. I think we should do away with the Irs , realestate Tax, Personal property tax, and any tax on food , medicine, medical supplys, doctor visits, and we should not tax any services except the luxuary ones. I hate realestate Taxes its like paying rent , you never really own your property in this country. I don’t care if the flat tax has to be 35% on cunsumer goods. maybe it will encourage people to recycle more and spend less. Untill we can get this done, screw the economy. Lets just do away with wallstreet its a stupid game anyway. We do not need public trade in companys. We need to complete change out our system not try to fix it up . If you have sorry designed parts you can never fix it. We need to get all new Bolts and nuts for our system , and theonly way this is going to happen is by force. Lets all stop filing. Let the IRS go bankrupt.
Then they will want to enact a flat tax. We can do it by force! Thank you for reading my rant> Derek Smith Benton, Arkansas
Tim @ 19…
I’m not sure how much of the FairTax bill you may have read, or how much of the Boortx & Linder books you may have read, but what you are proposing is not a matter of modifying the existing FairTax proposal it’s more of a completely different beast.
First of all, you have completely retained the IRS rather than comparatively eliminating this department. You propose providing income statements to the government which is one of the minor but wonderful benefits of the FairTax. The government doesn’t need to know anything about the amount of money that we are making.
Next you have thrown in a whole laundry list of exemptions that once again puts Congress back in the business of picking and choosing winners and losers. I’m sure that lobbyists everywhere are praising your plan as the most reasonable alternative. Exemptions like what you propose one of (if not the) the biggest reasons for the insane complexity of our current tax system. Congress will have a grand time manipulating exemption list, and the lobbyists will be the ones dancing all the way to the bank.
One final note… I believe that the FairTax deals very specifically with Social Security funding as a percentage of the revenue raised. I could be wrong as it’s been a while since I looked at the proposal.
The 16th amendment does not need to be repealled. This amendment does not make the income tax constitutional as the IRS would have you think. This is a total waste of time and makes me think that some of the current supporters are dirverting our attention to the real reasons they want the 16th amendment repealled. The income tax can be destroyed by merely advertising the flaws in the IRC that allow it to remain constitutional in the first place.
I would like to point out to all of those people who think this will help the middle class and poorer people of our country. It won’t. If it is passed, and people are taxed on NEW purchases, you can bet that the retail price on used goods will skyrocket. Greedy people will realize they can get more money for their items because people won’t have to pay tax on them. People who have already been buying used goods to survive because they cannot afford to buy new goods, will suffer even more because they will no longer be able to afford to purchase used goods either. I thought this was a good idea until I really stopped to think of the ramifications of this plan. THINK PEOPLE, this will not accomplish what you want it to. Greed is too common in our great country. Let’s work on the tax plan we have.
Mary, why don’t they raise the price today – those greedy bastards? Price maximization is not profit maximization. It doesn’t do them any good to price out a product people won’t be able to afford. This is common economics. Also, don’t forget about the prebate, which is indexed to inflation that covers the cost of taxation up to the poverty level.
Mary,
It’s the current income tax system that is far more unfair to the middle and the poor wage earners than the Fair Tax. The individual income tax rate on wages and salaries is much higher than the rates from all other sources of income. As individuals become wealthier the percentage of income from wages and salaries drops as does their overall tax rate. Those that are the wealthiest 1% control over 40% of all American assets and contribute only 19% of their overal income to federal revenues which is lower than even the lowest rates paid by the working poor. The lowest end of the income scale are paying the hidden embedded cost of income and payroll taxes in everything they purchase. The current system keeps the poor and even the middle down because of the higher rates placed on income from wages and salaries inhibits upware mobility. The Fair Tax does a better job at equalizing this inequity because the working poor are completely untaxed up to the poverty level. The Fair Tax will legalize a whole class of the currently under the table worker that could not even survive it their wages were to become taxed.
This will bring back freedom, the economy, and America in general. And that’s all I have to say.