Fair Tax Aims for 100 Congressional Sponsors

Supporters of the "Fair Tax" legislative package are working to have at least 100 Congressmen and Senators signed on as sponsors of Fair Tax bills during the current 109th Congress. With The President's Tax Reform Panel reporting at the end of September, the Tax Reform debate will kick into high gear. Indications are that a National Sales Tax(Consumption Tax) will be one of the final recommendations. The Fair Tax Legislative package is already ahead of the Washington Game with 38 Co-0Sponsors and shooting for 100.

According to the FairTax Grassroots Director, Genie Hayes, “The best way to get cosponsors is through the grassroots efforts within Each Congressional District. Congressmen respond to their constituents when they call and ask for tax simplification, reform and relief from an archaic and burdensome tax code”

The Fair Tax is a complete Legislative package that replaces federal personal, gift, estate, capital gains, alternative minimum, earned income, Social Security/Medicare, self-employment, and corporate taxes with a national sales tax. It would include a rebate system to make the Fair Tax a progressive tax system where the net effective rate for low- and middle-income persons is less than the effective tax rate for the wealthy.

Georgia Lawmakers Take Lead

The Fair Tax bills—House Bill 25 and Senate Bill S25—are sponsored by Rep. John Linder (R-GA) and Senator Saxby Chambliss (R-GA).

HR 25 was originally introduced in the 106th Congress by Linder and Rep. Collin Peterson (D-MN). In the 108th Congress, there were 56 co-sponsors in the House and Senate.

In an indication of leadership support for the Fair Tax, Linder has been moved from the Rules Committee to the powerful, tax-writing Ways and Means Committee. House Speaker Dennis Hastert (R-IL) expressed support for a national sales tax- last sumer in his book, Speaker: Lessons from Forty Years in Coaching and Politics.

House Majority Leader Tom DeLay (R-TX) is a co-sponsor of HR-25

On March 3, Federal Reserve Chairman Alan Greenspan told a presidential tax reform panel that a consumption tax “could certainly meet the fundamental criteria of being simple, fair and pro-growth.”


Grassroots Supporters Arise

The legislation is based on work sponsored by a grassroots organization called Americans for Fair Taxation (www.fairtax.org), which spent more than $22 million in marketing and academic research and in the last five years has grown to more than 560,000 supporters. The organization has 280 congressional district directors across the country working hard to organize local support for the legislation.

"Just like taking down the Berlin Wall, we will end the worst, most invasive tax ever devised and replace it with a simple, transparent, progressive, national retail sales tax," said FairTax.org's Executive Director, Tom Wright

Hidden Tax Costs Eliminated

Calculations conducted by several nationally known economists, including Harvard University's Dale Jorgensen, conclude the Fair Tax package would eliminate tax costs that currently are hidden in retail prices, taxes that which add up to some 22 to 25 percent of the cost of retail goods. The analysis is covered in more detail in the research section of the Fair Tax web site. Dr. Jorgensen has testified before the House Ways and Means Committee and written numerous articles and papers on the subject (“The Economic Impact of Fundamental Tax Reform, Dale W. Jorgenson, Testimony before the House Ways and Means Committee, June 6, 1995. “Looking Back to Move Forward: What Tax Policy Cost Americans and the Economy.)

After the pre-tax price drop of 22 to 25 percent, the Fair Tax plan adds on a retail sales tax of 30 percent. According to Wright, a consumer would end up paying only a little more than they pay now for products and services, but would have a significantly larger take-home paycheck, free from federal income and payroll tax deductions.

Wright said this is a key fact that is often missed by many people, who make the mistake of thinking the tax would be solely an add-on to current prices.

Wright said. "The Fair Tax is a revenue-neutral proposal that grows the American economy an estimated 10.5 percent in the first year while creating jobs for American manufacturing workers."

Exports Wouldn’t Be Taxed

A key factor in the pro-growth component of the Fair Tax package, according to supporters, is that there would be no taxation of American exports. With the elimination of business taxes and compliance costs on American manufacturing, American-made products will be 22 to 25 percent lower in price thereby making the goods more affordable in overseas markets. The Fair Tax package will increase exports; decrease the trade deficit and help fight against outsourcing by making American Shores a Tax-Free Zone for American Business.

Another key component of the Fair Tax package is a rebate to resident Americans with a legal Social Security number. This would wipe out any tax up to the poverty level as determined by the Department of Health and Human Services. The rebate goes to every family regardless of income level. No one will pay taxes on the necessities like food and medicine up to the Poverty line of spending.

Based on 2005 Health and Human Services poverty levels and updated rebate numbers from the Fairtax.org web site; A family of four would receive $492 per month, rebating all federal sales tax on spending up to $25,660. A couple would receive $367 per month and an individual $183 per month. Everyone would receive checks at the beginning of the month to cover the tax on basic necessities. A system of checks very similar to Social Security checks.

Unlike the flat income tax or a French-style value-added tax (VAT), the Fair Tax would entirely replace both income and payroll taxes with a broader-based tax that is revenue-neutral for the national budget, Social Security, and Medicare, and allows working families to take home 100 percent of their paychecks free of federal income and payroll taxes.

New York Congressman Charlie Rangel (D-NY) spoke out against Chairman Greenspan’s comments for supporting a national sales tax stating, “When you have a tax, where you pay the same tax whether you're wealthy or you're poor, …that's not fair."

Other critics of a National Sales Tax include William Gale (Senior fellow at the Brookings Institute), Bruce Bartlett (Senior fellow with National Center for Policy Analysis) and those that support competing proposals such as the French VAT or flat (income) tax. Karen Walby, Ph.D. – Fair Tax chief economist and Director of Research says “Comparisons to these proposals and rebuttals of the criticism are well covered at the rebuttal section of our web site.” ( www.fairtax.org) She points out that Mr. Bartlett and others typically ignore specific features of the Fair Tax that make the legislation much more comprehensive than just a national sales tax plan.

During Newshour on PBS ( March 3, 2005), William Gale acknowledged that a consumption tax could be modified to work, “… consumption taxes end up being more regressive than income taxes, although Len and I or anyone else could design a consumption tax on paper that wasn't like that.”

Dr. Walby argues that the Fair Tax – HR/25 goes far beyond the theoretical discussion of a generic consumption tax and provides a well-researched plan that is not regressive. Dr. Walby points out that Congressman Rangel and other Democrats have expressed their concerns over the regressive nature of the current flat rate payroll tax on the poor and she points out that the Fair Tax answers those concerns by eliminating the payroll tax entirely



Other Groups Lend Support

Additional support for the Fair Tax proposal has come from the National Taxpayers Union (NTU), with 350,000 members. The American Farm Bureau Federation (and its six million members) has adopted a policy statement on Tax reform that describes the Fair Tax components without naming the Fair Tax specifically. Their policy statement also excludes any form of flat income tax or value-added tax (VAT). Other organizations that directly sponsor the Fair Tax proposal include 60 Plus, the National Small Business Association, and Associated General Contractors.

In letters to both Rep. Linder and Sen. Chambliss, the NTU endorsed the current bill, urging all members of Congress to join as co-sponsors, saying, "the bill will be heavily weighted in our annual rating of Congress."