Transcript Spending by a family of four

The need for fundamental reform
has never been greater:
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75 percent of Americans are more interested in
tax reform – making the system fairer and
simpler – than in tax cuts.
59 percent of Americans are dissatisfied with
the current system
64 percent believe that the system requires
major changes or a complete overhaul.
Poll conducted by Wirthlin Worldwide, March 2000.
Why reform the current
system?
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It distorts economic activity;
Depresses total income and employment;
Hides the cost of government;
Is complex, and expensive to comply with
and enforce;
Is subject to abuse by both taxpayers and the
IRS; and
Is considered unfair.
Four Attributes of a Good System:
 Fairness
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Visibility
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Neutrality
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Simplicity
(The FairTax meets all four requirements!)
Americans support the FairTax:
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Polls show that while only 30 percent of individuals
initially supported a national retail sales tax (NRST),
once given the details, 70 percent of these same
individuals favored a NRST.
Market research confirms these results. Only two
weeks of educational advertising in three test
markets produced large swings in favor of the
FairTax. Support increased by 11 percent and
opposition dropped 13 percent -- a 24 percentage
point swing.
Results from Wirthlin Worldwide (March 2000) and Market
Strategies (September 1996).
The FairTax untaxes the poor:
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Eliminates payroll taxes, which are more
burdensome than federal income taxes for 75
percent of Americans.
Rebates taxes on spending up to the poverty
level so that no one pays taxes on essentials.
A single mother with two children can spend
$16,090 without paying any taxes. If she
spends twice that ($32,160), her effective tax
rate is only 11.5 percent compared to 15.3
percent today.
FAIR TAX REBATE TABLE
FAIR TAX PROGRESSIVE GRAPH
The FairTax is progressive.
30
$1,998,400
$99,920 $199,840
20
$49,960
10
Effective Tax
Rate
$24,980
0
-10
-20
$12,490
-30
Spending by a family of four
Based on rebate at 2004 Poverty Levels
FairTax dramatically increases
purchasing power:
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Gross Domestic Product would increase by 10.5
percent in the first year, equivalent to about
$4,000-$6,000 in average family income.
Would result in an immediate increase of 2.4
percent in family wealth.
Raises the real wage rate by 8 percent.
Prices would fall by 20 to 30 percent, keeping
the the final price of a product largely
constant, but an individual would keep their
entire pay check.
Creates new factories…
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Eighty percent of corporate heads in Europe
and Japan said that they would build their
next factory in the U.S. when asked how their
operations would change if the U.S. replaced
the current tax code with a border-adjustable
National Retail Sales Tax. (Survey by Princeton
Economics)
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Twenty percent said they would relocate their
international headquarters to the United
States.
… while creating jobs in and
beyond those factories:
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Industry outputs and production would rise by
20 percent in the short-term and by 30
percent in the long-term.
Initially, the labor supply would increase by
more than 25 percent. This will decline in the
long-term, but remain constant at 10 percent
higher than current supply.
Gives the U.S. an export
advantage:
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U.S. exporters’production costs will drop by 20%
on average providing an immediate boost to their
competitiveness overseas.
Exports would jump 26.4 percent in the first year.
Ultimately, exports would remain more than 13
percent higher than the level under the current
system.
Imports and exports will be put on a level playing
field. Exported goods will not be subject to the
FairTax, but imported goods will be subject in the
same manner as domestic production.
Revolutionizes interest rates:
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As savings and investment dramatically
increases, the pool of funds available for
borrowing increases, decreasing the relative
cost of borrowing those funds.
The FairTax eliminates the tax costs that the
lender must pay on their earnings, dropping
interest rates toward today’s tax-exempt rate.
Rates will decrease by 25-35 percent under the
FairTax.
Increases investment:
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Because the FairTax eliminates punitive
taxation of savings and investment would
increase by 76 percent in the first year.
For the following ten years, investment would
remain 20 to 60 percent higher.
In the long-term, investment would remain
constant at approximately 15 percent higher
than under the current tax code.
Boosts the stock market:
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Replacing the present tax system with the
FairTax will cause the stock market to
appreciate. Lower interest rates mean that the
present value of expected future income will
increase. Thus, lower interest rates cause stock
prices to rise.
The FairTax reduces the top marginal tax rate to
23 percent compared to 57 percent today;
increasing the expected future return on
corporate stock and the value of corporate
stock.
Reduces compliance costs…
The FairTax eliminates:
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The $724 small businesses spend on
compliance for every $100 they pay in taxes;
Compliance costs that consume between 2 to
3.5 percent of GDP; and
The $250 billion that Americans spend
annually to comply with the federal tax code,
which equates to $850 for each man, woman
and child in the U.S.
… resulting in a $250 billion
tax cut:
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The FairTax removes the hidden and
embedded costs of our current tax structure
from the economy.
The FairTax decreases compliance costs by 90
percent, resulting in savings for Americans,
lower costs for consumer goods and less
economic inefficiency.
This equates to a $250 billion tax cut, without
having to reduce spending or tax revenues.
Why the FairTax?
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It is actively supported by over a half million
Americans.
It makes every American a voluntary
taxpayer.
It is fair, visible, simple and revenue neutral.
No other bill eliminates all corporate and
personal federal income taxes, as well as the
regressive payroll tax.
Why now?
America is ready
 It will stimulate the economy
 It’s bipartisan
 It’s what our founding fathers
intended
 It will fix Social Security as well
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WHAT CAN WE DO?
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Call your legislator’s office and ask that
they support FairTax HR 25
Sign the FairTax Petition
Support FairTax activities in your area
Support FairTax with $$ contributions
Visit www.fairtax.org for more information
Prepared by volunteers of Americans for FairTaxation