Transcript December 15, 2011 - Philip Henson

The
FairTax
FairTax.org
The Fair Tax
HR 25/S 13
SM
Why Reform the Current System?
•It Distorts Economic Activity;
•Depresses Total Income and Employment;
•Hides the cost of Government;
•Its Complexity Significantly increases Compliance
Costs and Enforcement Challenges;
Why Reform the Current
System?
•Is subject to abuse by both taxpayers and the IRS;
•It is widely considered unfair and inefficient, and
•Puts US producers at a disadvantage in our
increasingly global economy
Why Reform the Current System
Total Pages of Federal Tax Rules
(Internal Revenue Code, Treasury Dept Rulings, IRS Regs & other official pronouncements)
80,000
70320
72536
70,000
60044
60,000
52310
50,000
54846
45662
40500
40,000
30,000
26300
19500
20,000
14000
16500
8200
10,000
400
504
1913
1939
0
1945
1954
Source: Commerce Clearing House
1969
1974
1984
1995
2001
2002
2003
2004
2009
2011
FAIR TAX PLAN
•Taxes all new goods and services purchased for
personal consumption once, with no exceptions, at
$0.23 out of every dollar spent – a revenue neutral rate.
•Eliminates payroll and corporate income taxes which
are embedded at each level of the US supply chain.
•Would facilitate the repeal of the 16th Amendment by
enacting the ONLY alternative revenue neutral proposal
which would survive a repeal of the 16th.
FAIR TAX PLAN
•Replaces federal income, estate, and payroll taxes.
•Provides a simple, transparent, progressive national
retail sales tax system administered through the
existing sales tax operations.
•Revenue Neutral: Generates sufficient revenue to
replace, dollar for dollar, all federal income, estate,
and payroll taxes (using static measurement).
FAIR TAX PLAN
•“Prebates” every family, ensuring no American pays
any federal tax up to the poverty level.
•ONLY tax proposal developed using modern
marketing techniques to find out what the American
people, across the political spectrum, wanted in a
tax system.
The Fair Tax
•Fair
•Simple
•Transparent
•Replaces all Current Federal Taxes
Except excises (approx. 5%)
Impact on you and your family
•Take home your entire paycheck
•Never file tax returns again
•Eliminates personal tax records
•Dramatically simplifies administrative burden and
compliance costs for businesses
•No estate planning necessary
•Significantly increases demand for US produced
goods, which means millions of new jobs created
How does it work?
All new goods and services are taxed once,
at $0.23 out of every dollar spent
But
Embedded taxes at each level of the supply
chain are eliminated
All Americans Pay Fair Share
How does it work?
There are no taxes collected on investments
(Education tuition is an investment)
There are no taxes collected on used items
What about the poor?
Prebate makes The FairTax
progressive when measured
against consumption
2011 FairTax Prebate Schedule¹
One Adult Household
Family Size
Two Adult Household
Annual
Annual Monthly Family Size
Consumption Rebate Rebate
Allowance
Annual
Annual Monthly
Consumption Rebate Rebate
Allowance
1 Person
$10,890
$2,505
$209 Couple
$21,780
$5,009
$417
and 1 Child
$14,710
$3,383
$282 and 1 Child
$25,600
$5,888
$491
and 2 Children
$18,530
$4,262
$355 and 2 Children
$29,420
$6,767
$564
and 3 Children
$22,350
$5,141
$428 and 3 Children
$33,240
$7,645
$637
and 4 Children
$26,170
$6,019
$502 and 4 Children
$37,060
$8,524
$710
and 5 Children
$29,990
$6,898
$575 and 5 Children
$40,880
$9,402
$784
and 6 Children
$33,810
$7,776
$648 and 6 Children
$44,700
$10,281
$857
and 7 Children
$37,630
$8,655
$721 and 7 Children
$48,520
$11,160
$930
¹The annual consumption allowance is based on the 2011 DHHS Poverty
Guidelines as published in the Federal Register, January 20, 2011, p. 3638.
Effective Tax Rate: 2011
25.0%
20.1%
20.0%
21.6%
22.3%
17.2%
15.0%
11.5%
10.0%
5.0%
0.0%
0.0%
-5.0%
$14,710
-10.0%
-15.0%
-20.0%
-25.0%
-30.0%
-23.0%
$29,420
$58,840
$117,680 $235,360 $470,720 $941,440
What about my Mortgage and
Charitable Deductions?
•No more deductions needed
•These deductions allow you to pay with untaxed dollars
•You must itemize to claim deductions
(Only one-third of taxpayers itemize deductions)
•FairTax allows entire payment with untaxed dollars
Balance of Trade
Trade Deficit: 1968 to 2010
(900)
(800)
(700)
Billions of dollars
(600)
(500)
(400)
(300)
(200)
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
1972
0
1970
1968
(100)
Balance of Trade
•Manufacturing operates at a substantial
disadvantage on world market due to tax system.
•IMPORTANT: This is not something that other
countries are doing to us – we are doing it to
ourselves!
•REAL reform of this counter-productive system
would mean the creation of good jobs and faster
economic growth.
•Manufacturing and agricultural sectors would be
reinvigorated.
Collateral Benefits
•Illegal underground economy added to
tax base
•US assets stranded off shore by the
current tax system ($11 trillion est.) would
be repatriated
Continued
Collateral Benefits
•Because of faster growing economy, the
federal budget deficit would be
significantly improved.
•Replaces payroll based funding of Social
Security/Medicare, improving the
solvency problem significantly.
Collection
•Collection of such taxes now in 46 states.
•Reduces tax form/filing complexity to an
irreducible minimum – state sales tax
form.
•States and retailers get ¼ of one percent
of taxes for collection.
Summary
•Better, more efficient way to collect taxes
•Provide same revenue to Federal Government
•Take home entire paycheck
•Never have to maintain tax records again
•Never prepare Income Tax return again
•Encourages savings for home ownership,
education, and retirement
•Funds Social Security, and Medicare
Summary
•Ensures all Americans pay fair share
•Makes American products more competitive
overseas and in our own domestic market
•Significantly reduces effective rates for low
and middle income Americans
Summary
Addresses this country’s most pressing tax related
economic problems more effectively than any
alternative:
•The spiral of complexity and ever higher compliance costs.
•The trade deficit and lack of competitiveness of US produced goods in the
global economy.
•The looming insolvency of SS and Medicare.
•Federal budget deficit.
•The AMT (Alternative Minimum Tax)
•Our chronically low savings rate
Links
www.fairtax.org
www.fairtaxnation.com
Test Question:
Were you paying attention?
• What are the three primary reasons that the
FairTax would increase the rate of economic
growth and create many (in the millions) good
paying jobs in America?
Answer:
1. It would cause price shifts that would make
US produced goods more competitive in all
global markets (including our own).
2. It would save $250 billion or more per year
in wasted compliance costs.
3. It would facilitate the repatriation of most of
the est. $13 trillion stranded offshore by the
current tax system.
Question #2
• Name at least 5 adverse economic trends that
the current tax system contributes to that the
FairTax would address?
ANSWER
1.
2.
3.
4.
5.
6.
7.
The federal budget deficit – to the extent that slower
economic growth (as opposed to spending) is a driver,
The trade deficit and ongoing loss of our manufacturing
sector,
The incessant spiral of greater complexity and higher
compliance costs,
Our extremely low savings rate – a source of concern to
almost all serious economists,
The AMT (Alternative Minimum Tax)
The looming insolvency of Social Security & Medicare
Health care costs rising faster than the rate of inflation
Questions?