Posted on 07/28/2005 5:35:48 PM PDT by pigdog
House Committee on Ways and Means
Statement of The Honorable John Linder, a Representative in Congress from the State of Georgia
Testimony Before the Subcommittee on Select Revenue Measures of the House Committee on Ways and Means
July 28, 2005
Mr. Chairman, Ranking Democratic Member McNulty, and Members of the Subcommittee, I appreciate having the opportunity to testify today.
IRS bashing has become a sport in this country. Whenever I mention the possibility of abolishing the IRS at a town hall meeting, I’m greeted with thunderous applause. And while I know that we can all recite the horror stories of overzealous IRS agents or unhelpful and unknowledgeable IRS staff, I think that it important that we as Members of Congress accept our role in making the IRS frightening and the tax code loathsome.
There are numbers that we can all quote by heart—more than 14,000 changes since 1986, 10 million words of code and regulation, 6.6 billion hours each year to comply, 60% of Americans forced to use professional tax preparers—and these are not the fault of the IRS bureaucracy. Rather, responsibility for these numbers—numbers that would be laughable if not so painful—lies squarely with you and me. I congratulate the Chairman for holding this hearing as an important step in accepting responsibility for our errant past and charting a new course for the future.
I think that there is a real debate in Congress about what taking responsibility for this tax morass means. There are those who believe that the responsible thing is to leave in place our current system—a system literally tried and tested over 90-plus years of frustration, arbitration, litigation and incarceration—and to limit it to impacting as few people as possible. This is very easy and very doable path, and while the monster that is the income tax code will remain in place, we could limit it to feeding on as few citizens as possible. Simply raising the floor of the AMT and eliminating tax returns for most Americans would address constituent ire. Going one step further and eliminating all personal income taxes in favor of higher taxes on big business and capital might be even more popular. Again, these are relatively easy changes.
Mr. Chairman, the point that I would like to make today is that “easy” is not necessarily “better.” I would argue that if we take this historic opportunity to reform our system of taxation and we do something “easy” then we are not accepting the mantle of responsibility for our past failings and in fact we are simply passing the buck and failing once again.
I certainly believe that one of our goals should be to make paying taxes easy, but it is but one of our goals. We must lift the foot of our tax system off of the neck of our economy and free the American worker and the American consumer.
To be competitive in international markets, we must have a border-adjustable tax system. How long has the Ways and Means Committee worked to provide some measure of relief from this burden for American companies doing business abroad? DISC…FSC…ETI… the list of acronyms that have tried and failed to address this issue is long. For more than 30 years we have tried these band-aid solutions to a problem that we know is real. The FairTax—for the first time—will heal this economic wound fully and permanently.
The FairTax is the only Congressional proposal that abolishes corporate taxes. For too long, the costs and complexities of the tax code have been levied on business, which simply hides the burden in higher prices for American consumers. Not only do these hidden taxes burden American goods as we try to compete in international markets but they also hide the true cost of government from American consumers here at home.
The FairTax also removes the highly regressive and hidden payroll tax from both workers’ paychecks and the price of goods. Not only is the payroll tax doomed to failure as a funding mechanism for Social Security and Medicare, but it stands as the largest tax that Americans pay. How can we claim to tackle the burdens and complexities of the American tax code if we fail to address the largest tax that Americans pay? The answer is that we cannot, and yet the FairTax is the only major piece of legislation that takes on this challenge.
Just last week, the President’s Advisory Panel on Tax Reform, with the help of the Treasury Department, concluded that the FairTax is the only reform proposal that completely untaxes the poor. I want to say that again: The FairTax is the only reform proposal that completely untaxes the poor. Today, we use exemptions and deductions, we use cash payments in the form of the fraud-riddled earned income tax credit, and we still fail to provide the opportunity society that we’ve promised to low-income Americans. For the first time, the FairTax fulfills this promise. Even more, it ends the punishment of American workers as they struggle to climb the ladder of success.
The CBO reported in March—as it does every March—about where the burden of Federal taxation falls. The CBO found, as it has every year since it began tracking these numbers in 1979, that while the effective income tax rate on the poor is actually negative the effective payroll tax on those same Americans is incredibly high. In fact, we have so manipulated the income tax code in this country that it is only those Americans with the highest quintile of incomes—those at $175,000 and higher—who pay more in income taxes than payroll taxes. For the other four quintiles—80% of all Americans—the payroll tax burden is higher and larger than the income tax burden. It is simply folly to discuss tax reform without discussing this burden, and yet the FairTax is the only major reform proposal that does.
The reports above make it clear that a personal consumption tax of 23% is more favorable to working Americans than the current 10% or 15% income tax that is filled with credits and exemptions designed by Washington to make their lives better. The demagogues are always available to exacerbate the confusion. I expect that we might even here some of that today. While the motive of some might be to confuse, others simply are confused, and who can blame them? The current system with its cascading taxes hidden at every level of income and consumption denies Americans that opportunity to understand exactly what their tax burden is. The FairTax by design ends the deception.
An interesting part of my experience promoting this bill has been responding to myriad calculations of what the rate of the FairTax would need to be. All sorts of outlandish numbers have been calculated including one of nearly 60% by the Joint Tax Committee some number of years ago. I confess that these erroneous guesstimates used to be very frustrating to me, but now I simply use them to make my point. You see, I don’t care what the rate has to be for revenue neutrality. The math is what it is. I value the transparency and the efficiency of removing all of the hidden taxes and having the complete tax figure available for all Americans to see. With a near zero percent savings rate in this country, consumption and income by definition are the same thing…so if a detractor calculates that a revenue neutral FairTax rate would actually be 60%, by definition the current tax rate on all of America—when you pull all the hidden taxes together into one place—must also be 60%. If I spend everything that I earn, and the tax man needs 60 cents out of every dollar that I spend, in the alternative he would also need 60 cents out of every dollar that I earn. I ask that you take this point to heart as this Committee continues this process.
Transparency, border-adjustability, simplicity, and progressivity are all found in the FairTax. With a 600,000 member (and growing) grassroots organization on the ground in every state in America, the FairTax has amassed more cosponsors—both this Congress and last—than any other piece of fundamental tax reform legislation. It has been the subject of Committee hearings and has been poked and prodded by economists from the left and the right. I appreciate the opportunity to testify about the FairTax again today, and I look forward to working with the Subcommittee to make this bill a reality.
Thank you, Mr. Chairman.
How long will it take before the uneducated naysayers invade this thread with their gloom and doom scenarios?
Thanks for the link ... a wealth of good information there.
Judging from past experience it shouldn't be too long - it's sort of like a sore tooth to them ...
Thanks, pigdog. You're right, it is very well done. I hope we can make the critics eat their assertions that the tax rate must be much higher. I saw Steve Forbes yesterday pumping the flat tax, and his criticism of the "sales tax" is that it requires an amendment of the Constitution.
http://www.amazon.com/exec/obidos/tg/new-for-you/top-sellers/-/books/53/ref=pd_ts_b_nav/102-2016428-7344963?ts-parent-id=1000
An excellant presentation indeed! I hope they were listening!
That's no criticism at all as we know since the FairTax doesn't REQUIRE such - we all just want it though to try to keep the income tax from ever coming back.
Sort of a belt and suspenders thing, don'cha know!
That's great - should help to get more supporters.
If you would like to be added to this ping list let me know.
John Linder in the House(HR25) & Saxby Chambliss Senate(S25) offer a comprehensive bill to kill all income and SS/Medicare payroll taxes outright and replace them with with a national retail sales tax administered by the states.
H.R.25,S.25
A bill to promote freedom, fairness, and economic opportunity by repealing the income tax and other taxes, abolishing the Internal Revenue Service, and enacting a national retail sales tax to be administered primarily by the States.Refer for additional information:
Boortz will be at a local bookstore in a couple of weeks signing his new book. I plan to stop by. It should stir up quite a movement.
Thanks for the article pigdog -
Fair tax bump.
"Neal Boortz's Fair Tax book is currently #1 on Amazon's non-fiction bestseller list and #2 overall."
I think that Steve Forbes' flat tax book was about #493 last time I heard. Forbes seems to be falling in behind the Burgess bill, which adds a flat tax option to the current system and isn't even revenue neutral.
I wonder where the Nightmare book is?
"An excellent presentation."
No doubt about it. Linder is easily one of the most articulate and thoughtful members of congress. I found the following perspective very enlightening.
"I value the transparency and the efficiency of removing all of the hidden taxes and having the complete tax figure available for all Americans to see. With a near zero percent savings rate in this country, consumption and income by definition are the same thing…so if a detractor calculates that a revenue neutral FairTax rate would actually be 60%, by definition the current tax rate on all of America—when you pull all the hidden taxes together into one place—must also be 60%."
That is something that even the SQLs would agree with.
Then again, maybe not. LOL
"Transparency, border-adjustability, simplicity, and progressivity are all found in the FairTax."
Worth repeating.
Well said, Congrssman!
You are right about that. Did you see his brief comments on the floor in support of CAFTA. Very thoughtful and well stated, indeed.
"Well said, Congressman!"
Indeed.
"The FairTax BY DESIGN ends the deception."
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