New Section of HR 25

Thomas Library of Congress ^ | 1/6/2009 | Rep. John Linder

[phil_will1]

SEC. 401. ELIMINATION OF SALES TAX IF SIXTEENTH AMENDMENT NOT REPEALED.

If the Sixteenth Amendment to the Constitution of the United States is not repealed before the end of the 7-year period beginning on the date of the enactment of this Act, then all provisions of, and amendments made by, this Act shall not apply to any use or consumption in any year beginning after December 31 of the calendar year in which or with which such period ends, except that the Sales Tax Bureau of the Department of the Treasury shall not be terminated until 6 months after such December 31.

[phil_will1]

This provision has been discussed for some time and Congressman Linder just decided to modify the bill prior to its introduction into this session. This addresses the concern that we will end up with both an income and a nrst (national retail sales tax).

[phil_will1]

FairTax ping

[upchuck]

BUMP!

[guitarplayer1953]

I would love to see a national sales tax rather than payroll tax. That way all the under the table money will eventually get taxed as it is spent.

[HighlyOpinionated]

Is that Georgia’s Congressman John Linder? Good for him. He’s a nice person, I met him once in my past life (when I was employed).

[Myrddin]

I would love to see a national sales tax rather than payroll tax.

If your labor is a service, it gets taxed. A hair cut or cutting the lawn is a taxable service. All the consumer perceives is how much money must be forked out to acquire item X. If labor+"fair tax" is too much, the price will have to be reduced until it becomes "affordable". If the labor compensation is too low, nobody will bother. The tax rate will make the availability of labor and the cost of doing business a fairly volatile issue. When the tax is applied to labor (service), it is a flat income tax. I predict that every kind of labor will end up categorized as a "service". At that point, it would have been easier to simply go with a flat, non-progressive income tax. Further, things that weren't previously taxed (rental of a house or apartment) will add to the tax burden.

I would much rather see HR 25 state that NO sales tax can be collected until repeal of the 16h amendment is ratified. The government should not expend any money until the repeal process gets to 95%. My guess is that the repeal will never happen. The socialists feeding at the trough can't allow it.

[Man50D]

Fair Tax ping!

[swatbuznik]

Please remove me from the FairTax list. Thanks.

[wastedyears]

I thought one of the provisions of H.R. 25 is that if it passes, it nullifies the 16th Amendment, and abolishes the IRS.

It seems to me that by amending the bill, if the Fair Tax passes then we’ll effectively have two tax systems in place.

Please correct me if I’m wrong, and clear this up for me.

[Man50D]

All the consumer perceives is how much money must be forked out to acquire item X.

The Fair Tax will itemize the tax rate as a separate entry on the receipt so people will know exactly how much they are taxed.That transparency is a big improvement over the federal income tax since the price of all goods and services include the cost of corporate income taxes and the associate compliance . These embedded taxes are never seen by the consumer. The Fair Tax will end that deception.

If labor+"fair tax" is too much, the price will have to be reduced until it becomes "affordable". If the labor compensation is too low, nobody will bother. The tax rate will make the availability of labor and the cost of doing business a fairly volatile issue.

If the tax rate becomes too high with a consumption tax people will respond with less purchases. Less purchases will result in Congress collecting less tax. This forces Congress to keep the tax rate within reasonable if it wants to maximize the tax collection. People will have more freedom to determine how much and how often they are taxed and thereby return power to the people and away from Congress as our founding fathers intended when they wrote the Constitution. This tax concept was recognized by one founding father and first Secretary Of The Treasury, Alexander Hamilton in Federalist Paper #21, To quote:

It is a signal advantage of taxes on articles of consumption, that they contain in their own nature a security against excess. They prescribe their own limit; which cannot be exceeded without defeating the end proposed, that is, an extension of the revenue. When applied to this object, the saying is as just as it is witty, that, "in political arithmetic, two and two do not always make four." If duties are too high, they lessen the consumption; the collection is eluded; and the product to the treasury is not so great as when they are confined within proper and moderate bounds. This forms a complete barrier against any material oppression of the citizens by taxes of this class, and is itself a natural limitation of the power of imposing them.

When the tax is applied to labor (service), it is a flat income tax.

The individual will earn his or her wages free and clear of any tax with The Fair Tax as they will not have to report it as income. That will in turn eliminate the embedded taxes imposed at each stage of production. That reason alone makes the Fair Tax profoundly different from any income tax.

That's not a prediction. You're merely stating the obvious as all labor by definition is a service.

At that point, it would have been easier to simply go with a flat, non-progressive income tax.

A flat tax on income still mean people will not have the freedom to choose when and how often they are taxed. It will also maintain the increasingly oppressive IRS.

Further, things that weren't previously taxed (rental of a house or apartment) will add to the tax burden.

On the contrary. All items with the income tax are taxed multiple times. All the materials used to construct houses or apartments come from many businesses who pay taxes and past that cost on to their customers(lanlord/developer) in the price. They in turn pass those taxes plus their own tax onto the tenant and home buyer. Ultimately a person pays multiple taxes with every payment without knowing as is evident by your statements. The Fair Tax will only tax each one once at the time of payment.

I would much rather see HR 25 state that NO sales tax can be collected until repeal of the 16h amendment is ratified.

The purpose of concurrent passage of The Fair Tax Act and repeal of the 16th amendment is to put pressure on Congress. Your scenario would give Congress critters less reason to commit to passage of The Fair Tax and more reason to delay.

My guess is that the repeal will never happen. The socialists feeding at the trough can't allow it.

They will have less say as an increasing number of their constituents demand they support The Fair Tax and repeal the 16th Amendment concurrently as is occurring with more people supporting the Fair Tax as time passes.

[Man50D]

I thought one of the provisions of H.R. 25 is that if it passes, it nullifies the 16th Amendment, and abolishes the IRS.

You're partially correct. The Fair Tax Act will abolish the IRS but it can't repeal the 16th Amendment as that requires a different process. There is a separate piece of legislation(House Joint Resolution 16) for repeal. Passage of The Fair Tax requires only a majority vote in Congress. Repealing an amendment requires ratification of three fourths by each state legislature.

[wastedyears]

So I would imagine that the 16th should be taken care of before the Fair Tax would be enacted.

[Hostage]

The idea is to abolish the IRS and scrap the present income tax code when enacting the HR 25 FairTax.

Leaving the 16th Amendment in place is dangerous as the income tax can be resuscitated at a later date.

What this modification of the bill HR 25 does is to say you can’t have both, you get one or the other but not both. If the nation does not repeal the 16th then this modification provides a ‘sunset’ provision to the HR 25 FairTax Act.

What the good Congressman is banking on is that people and business will be so satisfied with the simplicity and transparency of the FairTax code, that they will never allow it to ‘sunset’ and will therefore pressure Congress and the States to get rid of the 16th.

That’s the idea.

There are problems with this tactic though. I will point those out in the next post.

[Hostage]

First I have read through HR 25 and have had several discussions with the behind-the-scenes architects of the legislation.

It is truly an inspired piece of legislation and has brilliant provisions that correct deep historical flaws in the evolution of American taxation, both pre- and post- Income tax or 1913.

And I sympathize with Congressman Linder in how difficult it is to cut the Gordian knot that the 16th Amendment uses to restrain the spirit of American entreprise.

The problem I see with this modification is that it is part of a piece of legislation that can be passed with a simple majority of Congress, and therefore any of its provisions can be amended with a simple majority of Congress. For example, this ‘sunset’ provision triggered by a failure to repeal the 16th can itself be amended out of existence by a simple majority in Congress (the provisions of HR 25 should be amendable only with a supermajority of Congress as a minimum). Another example is that the provision calling for abolition of the IRS and the present monstrosity of a tax code can likewise be amended to allow the income tax to creep back in to the code. For example, if society at some later date decides that the upper 2% of the wealthy in this country should be taxed on their income and dividends, then we will see a repeat of the events of 1913 unfolding to the present. Because in 1913 that is exactly what happened, the upper 2% of Americans were subject to the 14 page tax code of 1913 and before long the 16th Amendment gave a business license to Congress to tax and exclude whatever and whoever they fancied until the bulk of income taxes were thrust upon the middle and upper middle classes.

The last I heard (late 2007) on this enigma of the 16th was that Congressman Linder and other members were meeting with the American Legislative Exchange Council (ALEC, a bipartisan organization of state legislators) to ‘memorialize’ Congress to call for a limited Constitutional Convention, limited for the sole and exclusive purpose to repeal the 16th. Congressman Linder had correctly observed that Congress itself would likely not initiate serious effort to repeal the 16th so the other provision in the Constitution was to have the States draft the convention and force Congress to act.

The problem I suspect is that once a Constitutional Convention is called no matter how limited it can always be redrafted to expand its scope with the vote of enough states.

I would hope that someone would call Congressman Linder’s office and ask what the status is of meetings and progress with the ALEC.

I still think enacting HR 25 without repealing the 16th is dangerous to the possibility of having both tax systems simultaneously applied. Boortz mentioned that HR 25 could be ‘passed’ but not enacted until the 16th is repealed. This falls short as well.

Another possibility which seems to have been set aside for now is to provide that states be allowed to vote for either a federal income tax or a federal sales tax, but not both. In this case, if at a later date the Federal Government attempted to force an income tax onto people of a state that had voted for a federal sales tax, then there would be a certain large backlash. Furthermore, if the FairTax was successful in states, then other states could vote for it and at some point a critical mass would be in place to repeal the 16th.

Any legal opinions and economic comments to the foregoing are welcome.

[Principled]

Thanks man...

when this provision wasn’t in there, it was a problem.

now that it is, it will be a problem. just wait.

The nrst is our future - even a way out of the economic mess via providing billions in capital...

[phil_will1]

Hostage, the Constitutional convention route has been picked up by Ga Insurance Commissioner John Oxendine. He has strong relationships with his counterparts in other states and will be promoting this approach and encouraging FairTax supporters to lobby their state legislators to vote at the state level for sending “memorials” to the U. S. Congress from the various states.

Your concern about the scope of any Constitutional Convention being expanded by other groups is common and legitimate. Although Constitutional scholars are not unanimous on this point, he is of the opinion that Constitutional conventions can be called for specified purposes and limited to those purposes with one caveat. The “Memorials” from the 38+ states causing the convention to be convened must be identical in every word and must contain wording such as “for the specific purpose of enacting the FairTax legislation and repealing the 16th amendment AND FOR NO OTHER”, or words to that effect.

Mr. Oxendine has stated that if at any time he finds credible evidence that his interpretation (and that of the Constitutional scholars he is relying on)is found to be incorrect, he will immediately abandon this effort. Congressman Linder and AFFT/Houston have endorsed Commissioner Oxendine’s efforts.

[phil_will1]

“I thought one of the provisions of H.R. 25 is that if it passes, it nullifies the 16th Amendment, and abolishes the IRS.”

Incorrect. A piece of federal legislation cannot repeal a Constitutional amendment; as man50d has pointed out, they are separate procedures. The bill repeals the Internal Revenue Code (or at least those sections which deal with income taxes) and eliminates the IRS.

[phil_will1]

“Repealing an amendment requires ratification of three fourths by each state legislature.”

Almost. Enacting or repealing a Constitutional amendment requires ratification by 3/4 of the states (38 right now) by a simple majority in both houses. It also requires ratification by both houses of the US Congress, and I think that is by 2/3. Interestingly enough, the President does not sign.

[Starfleet Command]

Zero chance of passage in the CCCP (Commie Controlled Corrupt Parliament), zero chance of avoiding The Kenyan's veto.

We can implement this, however, after the existing system completely collapses. I give that 3 years, max.

[calex59]

At that point, it would have been easier to simply go with a flat, non-progressive income tax. Further, things that weren't previously taxed (rental of a house or apartment) will add to the tax burden.

You do realize that the income tax started as a flat tax and then progressed into a Progressive tax? We don't need an income tax, the country got along just fine for over 100 years without one. A sales tax will not add anymore to the cost of an item than income taxes do. Are you so naive you think employers don't add the cost of income taxes to their product now? What is the difference between paying 30 percent income tax or paying 30 percent sales tax? None, except that you have the choice to NOT buy something whereas income taxes are inevitable. Another difference is everyone has to pay taxes with a sales tax, an income tax can be avoided by paying under the table, as happens now with illegals and many other people.

Let's get the government out of our wallets and out of our bank accounts. Also,let's repeal the stupid laws that say we can't carry our own money around with us without being arrested for being a drug dealer and having our money confiscated. Talk about unconstitutional, what a crock. Down with the income tax, down with government being able to snoop on my bank account, down with confiscation of private property under the guise of fighting crime. Up with individual freedom.