I think 7 years is too long. They’ll try to keep the income tax and NRST for as long as possible. Or they’ll just try to amend the Fair Tax Act to keep some form of income tax.
Another thing I have issue with is that I’ve read it was designed to fund our current-size government. I think the rate should be far lower than 23% so as to force government to shrink and operate at a smaller budget.
You’re hitting all the right notes here.
Take your last point first. The NRST rate should be lower and will be voted on each year by Congress. One of the beauties of this aspect is that each member of Congress will need to run on a ticket of committing to find ways to lower the NRST rate. Each member will be in the spot light on this issue, no more smoke and mirrors.
If a session of Congress does not lower the NRST rate, then that session will be judged a failure, unless there is some enormous set of national emergencies that justify not lowering it.
Having to vote each year on the NRST rate will force certain aspects of government to be efficient.
Next we note that lowering the NRST rate does not necessarily lower tax revenues to the federal government. If we have economic growth, tax revenues can increase even if the NRST is voted to a lower rate. The idea is to shrink federal government as a percentage of GDP.
Then there is the question of 23%, why not lower right now? 23% is chosen because it is ‘revenue-neutral’. Why must it start at a revenue-neutral rate? This is pragmatism in politics. It is for the same reason that the democrat socialists in Congress passed an imperfect takeover of healthcare, because they saw their chance and did not want to lose the opportunity thinking they could fix it later.
The same pragmatism runs through revenue-neutral. The architects of HR 25, the FairTax legislation, knew that if they got bogged down in spending reduction arguments and debates, that it would never make it out of committee. Thre are too many vested interests with tentacles reaching into Ways and Means. Taking on spending reduction arguments invites a fight with hundreds of boardrooms and their lobbyists across the USA. So revenue-neutral is a temporary first year provision. If you read the legislation you will see that after the first year at 23%, the rate will be lowered to 14% plus a calculated extra.
Ok, now about 7 years, we know that the entire IRS Tax Code is abolished the first day of enactment of the FairTax Code. I also argued that there is a danger here, that the Left in Congress would use a class envy argument to impose say a 2% tax on the very rich. That is how they work and once they get their foot in the door with an income tax it is only a matter of about ten years or so before the whole metastasis is back with a vengeance. Note that the original Income tax was a flat tax of 7% on less than 2% of the wealthiest So the Left knows how to be deceptive and there is real danger down the road in having both an NRST and an Income tax.
Now note that HR 25 sunsets if the 16th is not repealed within 7 years. So the legislators have thought about this but you are right that Congress could decide by amendment to extend that 7 year sunset provision. Leaders of the FairTax are still arguing this point. Be aware that HR 25 is a work in progress and can still change. But it is the most researched tax reform legislation ever introduced and it has mpre support in Congress that Reagan had for his 1986 reform.
So what to do?
I will digress a little to Obamacare because it is related. The abomination that is Obamacare has woken the American giant. We now have 40 states lining up against Obamacare either by filing suit against the federal government or by passing state laws or making amendments to their state constitutions to prohibit the Obamacare federal mandate.
Unfortunately, in the sense of worst case and unfortunately again the worst case is a probable case, that Obamacare will be upheld, even begrudgingly, because of the 16th Amendment. The Obama DOJ lawyers are going to be arguing in court that the federal government is not forcing anyone to buy health insurance, that it is only taxing those that do not have adequate health insurance meeting minimum standards, standards that the Left is setting. They will argue that the 16th Amendment gives them the power to collect taxes from income however defined and from any source without apportionment. This was the argument used in court by FDR lawyers to defend Social Security as a tax.
So we have got to get rid of the curse of the 16th Amendment by repealing it. And that would leave us with the brilliant FairTax system as a new and far superior tax code.
I’ve always said it would be highly symbolic to pass the FairTax in 2013, exactly 100 years after the 16th was ratified.