FairtaxSM Talking Points

These talking points are designed for a 15-minute speech. We suggest the use of specific examples on how people will be affected by the FairTax to better illustrate its value.

Imagine a tax system that:

The Problem is the Current Income Tax Code

A. The current tax code is unfair, costly, and unreasonably confusing.

D. The current tax system allows for massive loopholes encouraging politicians and lobbyists to pick winners and losers.

The Solution is the FairTax

The FairTax is fair to all Americans and simple to understand. Under the FairTax, all wage earners will keep 100% of their paychecks, prices will drop dramatically, and Social Security and Medicare funding will be more secure.

The FairTax frees up financial opportunity by restoring choice in spending, encouraging savings and investment, and dramatically reducing tax evasion. With the elimination of virtually all compliance costs, $225 billion will be restored to the economy. The FairTax offers an unprecedented opportunity for lower and middle-income wage earners to get ahead, to save to buy a house, to educate themselves and their children, and to save for a dignified retirement. And under the FairTax, all Americans, regardless of their income level, will be better off with the FairTax.

Bringing the FairTax to a vote only requires 31 members of Congress! If eleven members of the Senate Finance Committee and twenty members of the Ways and Means Committee support the FairTax, they can bring the FairTax Bill out of their respective committees and onto the floor of both the House and the Senate. At that point, it would be the leadership's decision to go to a full vote by the entire membership. It can be done, and we are well on our way there.

Polling shows that the American people understand and favor fundamental reform such as a federal consumption tax. The national groundswell of support is growing in leaps and bounds. Thousands of Americans are expressing their support for the FairTax through phone calls, e-mails, letters, and faxes. FairTax Volunteers are growing by the hundreds. The possibility of bringing about peaceful change is one of the great strengths of the American system. It is obvious that the FairTax is a reasonable solution whose time has come.

Let me repeat the tremendous benefits of the FairTax plan. The FairTax plan:

It is time for the FairTax. For nearly 100 years, we have carried the burden of an oppressive and counterproductive tax system which has punished work and achievement, savings, and investment. The current tax code has been grossly manipulated to reward elite political interests, and it hurts the average American. The current tax code has hidden the true cost of government from the very taxpayers who pay for it.

Americans are not obligated to accept a tax system that penalizes the average working American while giving special consideration to those who buy favors and perks in Washington, D.C. To be competitive in the next century, and to renew the American dream, we must change the way we fund our national government. It is time for the FairTax.

The FairTax will allow Americans to keep 100% of their paychecks, dramatically reduce prices, protect and ensure funding of Social Security and Medicare, empower low-income taxpayers, and put choice and control back into the hands of all Americans. All the crucial elements are in place: a public, eager and ready for a tax system that is fair, and a Congress seriously willing to consider genuine tax reform. It only takes thirty-one Congressmen, and we will win.

1 posted on 12/13/2004 9:18:21 AM PST by postitnews.com

To: postitnews.com

ANOTHER ALTERNATIVE:

AUTOMATED PAYMENT TRANSACTION (APT) TAX
Taxation technology for the 21st century

Dr. Edgar L. Feige, Professor Emeritus of Economics from the University of Wisconsin-Madison and the originator of the APT Tax concept, has just produced new estimates suggesting that a broad-based transaction tax as low as six tenths of one percent could replace the entire Federal and State 2005 budget revenue requirements of the United States of America.

The APT concept is elegant in its simplicity - potentially replacing the entire federal and state tax system - including income, corporate profits, excise and estate taxes - in favor of a tiny tax on all transactions. The tax would be automatically deducted from special taxpayer accounts, linked by software to all accounts at financial institutions capable of making final payments to the government seamlessly in real-time. The APT tax therefore eliminates the need for individuals and firms to file income and information tax returns. This is estimated to save citizens and the government roughly $200 billion per year in administration, enforcement, evasion and compliance costs, roughly seven times the amount currently being spent on homeland security.

The APT tax seeks to maximize the goals of both the government and the people - collecting necessary revenue with the lowest possible tax rate. The difference between the APT tax and our current income tax, as well as the proposed consumption taxes, is simplicity, progressivity, and breadth-the APT tax allows for significantly lower rates spread more equally throughout the world of economic activity. The APT is a transaction tax, and as such, taxes every single transaction that occurs in the economy including fund transfers between accounts and transactions involving the exchange of bonds, securities and foreign exchange. Because the wealthy conduct a disproportionate share of these financial transactions, the tax is highly progressive despite its flat rate. Progressivity is achieved through the skewness of tax base itself rather than through the progressive income tax rate structure of the current system. The very small tax is "sliced" off each side of every transaction as it moves electronically through banks and all other qualifying financial institutions. The tax collection is orderly and transparent, the rules are simple and universal and apolitical. The APT system eliminates the entire present tax code. No more exemptions, no more deductions, no more special interest loopholes and no more tax returns.

Feige's 2005 projections of total debits of $881 Tril., and total transactions of $832 Tril. (based on the most recent 2002 Bank for International Settlements data) update the figures he used in his original paper, published in Economic Policy in 2000. Taking the average of these two estimates ($856 Tril.), he conservatively assumes that the replacement of the current tax system with a revenue neutral APT tax will reduce total transactions by 50%. The projected potential APT tax base for 2005 would then be $428 Tril., permitting a revenue neutral flat tax of .57 percent on all transactions or .28 percent on each (buyer and seller) transactor to replace projected 2005 Federal and State tax revenues.

The tax rates required for a "revenue neutral" tax are divided into three phases which are the result of a suggested implementation plan that would gradually replace virtually all Federal and State taxes. The projected tax rates are calculated conservatively, assuming that only 50% of the potential 2005 APT tax base is available, since the volume of total transactions is expected to fall with the introduction of the APT tax. To the extent that transactions decline less than is assumed in the current calculations, an even lower tax rate would be able to raise the requisite revenues. As individuals and businesses use their new found economic freedom, transactions naturally grow over time, suggesting that future tax rates could be even lower.

Utilizing 50% of the projected APT tax base for 2005 of $856 Tril., that is, $428 Tril, the estimated tax rates required to raise the revenues projected for 2005 budgets are as follows:

Phase I (Eliminate all Federal taxes other than SS and Medicare)
Required revenue neutral target=$1.242 Tril:
Required tax rate = 0.29% per transaction or 0.15% per transactor.

Phase II (Eliminate all Federal taxes including Social Security and Medicare "payroll" taxes)
Required revenue neutral target = $2.036 Tril.
Required tax rate = 0.48 % per transaction or 0.24% per transactor.

Phase III (Eliminate all Federal taxes including Social Security and Medicare "payroll" taxes and all State personal income; corporate profits and sales taxes)
Required revenue neutral target = $2.436 Tril.
Required tax rate = 0.57% per transaction or 0.28% per transactor.

The estimates above are based on 2005 revenue and transaction projections. Implementing the three phases will require several years and careful government management, especially the third phase. However, Dr. Feige has built in a safeguard for the APT Tax by calculating the required tax rate based on only half of the transactions that are actually observed.

Examples: Assuming full implementation of Phase three:
1. $100 restaurant bill would have a tax to the customer estimated to be 28 cents and the restaurant would pay 28 cents.
2. $50,000 family income deposited and spent or moved to savings results in $100,000 of transactions paying a total tax of $280 distributed over all the individual transactions as they occurred through the year. These amounts would be doubled if businesses fully shifted their tax burden to the consumer, but nowhere near the $15,000 to $20,000 the family would pay under the current federal and state systems.

It is now important to begin the process of planning the economic, legal, technical and administrative requirements necessary for a smooth and transparent transition from the current tax system to an APT system. The proposed, new collection system will be tested by computer simulation to capture all potential errors and omissions (new job for the IRS). Then, it will take several years to rollout, especially Phase III involving central collection and distribution to the States. A national commitment to this revolutionary, fair, automatic and lowest cost tax system is needed NOW!

For more details, please visit www.apttax.com

William J Hermann, Jr. MD, Director APT Tax Project Contact: administrator@apttax.com , 713-932-3773

2 posted on 12/13/2004 10:34:11 AM PST by tvn

To: postitnews.com; Taxman; Principled; Bigun; EternalVigilance; kevkrom; n-tres-ted; Poohbah; ...

A Taxreform bump for you all.

If you would like to be added to this ping list let me know.

John Linder in the House & Saxby Chambliss Senate, offer a comprehensive bill to kill all income and SS/Medicare payroll taxes outright, and provide a IRS free replacement in the form of a retail sales tax:

H.R.25, S.1493
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: http://www.fairtax.org, http://www.salestax.org & http://www.geocities.com/cmcofer/ftax.html

3 posted on 12/13/2004 11:59:47 AM PST by ancient_geezer

APT = hidden tax burden. It taxes capital cash flows in every transaction occuring in the economy.

This is what happens when the true tax burden is hidden from just half the voters of the United States:

It does not look very promising for the future
financial well-being of our offspring, does it?

TAXES

The APT hides the other half.

A government which robs Peter to pay Paul can always depend on the support of Paul.
-George Bernard Shaw

for

In general, the art of government consists in taking as much money as possible from one party of the citizens to give to the other.
-Voltaire (1764

It's like me in the restaurant: What do I care about extravagance if you're footing the bill? --- Walter Williams

The perfect formula for every growing government.

To remove perception of the tax burdens of the individual, is to remove the goad which assures accountability of government to the electorate. Federal tax rates are high and government grows ever larger because a majority of the electorate do not perceive proportionately the burden their demand for largesse imposes on the minority of citizens.

Liberty and freedom have a price, responsibility. If that price is avoided there are no brakes on the growth of government, the ultimate result is the end of freedom through creeping socialism.

4 posted on 12/13/2004 12:09:50 PM PST by ancient_geezer

If you want to completely destroy American business, then the APT is definitely the way to go.

5 posted on 12/13/2004 12:14:33 PM PST by kevkrom (If people are free to do as they wish, they are almost certain not to do as Utopian planners wish)

Wonder if people like the APT folks will ever figure out that if you eat your seed corn, its going to be awful slim eating the next harvest.

6 posted on 12/13/2004 12:26:11 PM PST by ancient_geezer

To: ancient_geezer

What amazes me is that they try to sell the worst possible marriage of an income tax and a VAT as "reform".

7 posted on 12/13/2004 12:28:48 PM PST by kevkrom (If people are free to do as they wish, they are almost certain not to do as Utopian planners wish)

Very interesting. What's the bill #? DO you have any links to the economic studies?

8 posted on 12/13/2004 12:34:03 PM PST by phil_will1

Implementing the three phases will require several years and careful government management, especially the third phase.

It always does somehow, doesn't it?

This nation has more than enough government management, we need to get rid of abit from my view of the matter, not create reasons for more of it.

9 posted on 12/13/2004 12:45:09 PM PST by ancient_geezer

To: kevkrom; tvn

What amazes me is that they try to sell the worst possible marriage of an income tax and a VAT as "reform".

What's worse, the APT is little more than the French turnover taxes, that resulted in the adoption of the VAT to reduce the dislocations and severe burden on business activity caused by their pre-WWII APT style tax system.

Used google to investigate the history of turnover taxes and how they relate to the European VAT.

Google Search: Turnover tax & VATs

The payment transaction tax is hardly new, just a warmed over version, with high tech flourishes and the serial numbers filed off, of the old European turnover taxes. The APT just taxes the same thing more times to drop the per turnover tax rate.

A little Information about taxes on the gross value of transactions, (i.e. turnover tax) and why Europe gave them up in favor of the other problematic tax, the VAT:

Public Finance
Government Revenues and Expenditures in the United States Economy
http://garnet.acns.fsu.edu/~holcombe/

CHAPTER 12
Taxes on Economic Transactions
http://garnet.acns.fsu.edu/~holcombe/chap12.PDF

Page 235-236

Turnover Taxes:

A turnover tax is like a sales tax in that it is a tax paid as a fixed percentage of the value of a transaction, but a turnover tax taxes all transactions, not just retail sales. For example, if a leather tanner sells leather to a shoe manufacturer who then sells the finished shoe to a shoe store for retail sale, a sales tax will place a tax only on the retail transaction, whereas a turnover tax wilt tax every transaction. With a turnover tax, the tax is placed on the leather sold to the shoe manufacturer, on the shoe when it is sold to the retailer, and then on the retail transaction when the final user buys the shoe. The turnover tax is inefficient because it places a tax on the value of each transaction, thus discouraging transactions. The turnover tax taxes each good multiple times. In the shoe example, the retail price of the shoe includes the turnover tax paid by the leather tanner, the shoe manufacturer, and the retailer. Firms can avoid the multiple tax by merging and producing inputs themselves rather than buying them on the market. For example, the shoe manufacturer can buy the leather tannery and the shoe store, so that one firm tans the leather, makes the shoes, and sells them to the retail customer. This means that the turnover tax is paid only once rather than multiple times. A turnover tax encourages vertical integration of firms. When firms that buy and sell to one another merge, they eliminate some market transactions that would be subject to the turnover tax.

The turnover tax, while not common today, was used in Europe before the establishment of the Common Market, which was the precursor to today’s European Community. The replacement of turnover taxes by other types of taxes is a good example of how economic theory can be applied to improve the efficiency of the economy. The turnover tax is an inefficient method for raising revenue because it discourages potentially profitable exchanges and encourages potentially inefficient mergers. Turnover taxes, and other types of taxes, have been replaced in the European Community by the value added tax.

abit more:

http://www.britannica.com/eb/print?tocId=9108616&fullArticle=true

Multistage sales taxes, which are imposed at more than one level of production and distribution, without relief for taxes paid at previous stages, are sometimes called turnover taxes. For reasons of administration and simplicity such taxes are based on gross receipts; consequently, the taxable value at each stage includes amounts taxed at the previous stage (as well as the taxes already paid at previous stages). In order to avoid such pyramiding of taxes, an increasing number of governments employ a value-added tax. This is a modified sales tax based on the net value added at each stage rather than on gross receipts. Roughly speaking, an enterprise's net value added within a given period is equal to output minus input, calculated as its total sales minus expenditure on goods and services purchased from other enterprises. Tax liability is not, however, calculated by applying the tax rate to the value added figured in this way. Instead, receipts are used to show the amount of tax at each step; each seller adds the tax to the price and acknowledges this on his bill. Each enterprise's net tax liability is then calculated as the sum of all taxes it collects on goods it sells minus the sum of all the taxes it has paid on goods it has brought. This is sometimes known as the “invoice” or “credit” method of implementing a value-added tax.

A little history on the turnover tax:

John Quiggin - News Articles - GST9806
Australian Financial Review
4 June 1998

The VAT was introduced in France in 1954, to replace a system which relied a highly distortionary turnover tax on sales to supplement a rather ineffectual income tax system. The problem with a turnover tax is the 'cascade' effect arising from the fact that goods are taxed every time they change hands. The effective rate of tax on a good therefore depends on the length of the marketing chain from producer to final consumer. At even modest rates, cascade taxes are highly distorting. The VAT solves this problem elegantly, by allowing firms to credit the tax already paid on their inputs against the tax imposed on their sales. The net tax payable is therefore a fixed proportion of value-added.

Like the metric system, the VAT was adopted by other European countries, and the use of a VAT was made a condition of membership of the European Union. Once again, the English-speaking countries had less need to make the change, and were slower to do so. Their income tax systems were more effective, and their wholesale and retail sales taxes were less distorting than cascade taxes.

More on the ubiquitous transaction tax (i.e. turnover tax; aka general sales tax)

http://old.ucipr.kiev.ua/english/ers/35/3507.html

Problems of and Prospects for Alternative Sales Tax in the Ukrainian Taxation System

By Valentyn Tregobchuk, doctor of economics, professor, head of the department for resource potential at the Economy Institute of the National Academy of Ukraine;

*** SNIP ***

From the theoretical viewpoint, the sales tax and the VAT are analogous, since they both are indirect taxes on consumption and represent different forms of the same tax collected at each stage of commodity production and turnover. The only difference between those taxes is tax article, to which tax rate is applied. In other words, the sales tax is levied on gross turnover and the VAT on net one. Though, in the practice of application of sales tax the above difference engenders numerous negative consequences the economic theory has not dealt with since early 20^th century, when their major drawbacks related to the nature of tax article became evident.

As the sales tax is levied on the whole sales value, inclusive of raw materials cost, should this tax be applied in the event of several production and turnover stages, it will generate a cumulative effect or that of sequential growth of tax burden. Proceeding from the above, tax burden depends on the “distance” from the manufacturer to the consumer. The higher is value, including wages and profit, added by a company operating at the initial production stage, the stronger is the cumulative effect. Hence, in this respect, the nature of tax burden is uneven and sporadic, for it depends not on the company’s performance but on its role in production chain and the number of technological cycles. Such an approach to taxation stimulates considerable increase of tax burden, first and foremost, that on consumer goods and food enterprises, processing branches of the agro-industrial complex, wood-processing, pulp and paper industries, machine building etc. It turns out that within the same branch, enterprises manufacturing products using high-grade and more expensive raw materials experience much more difficulties.

Such a situation engenders incentives to vertical integration, i.e. consolidation of technologically related enterprises, determining higher level of economy’s monopolization. Monopolies that emerged to optimize tax payments are not interested in cooperation with any intermediate parties, small and medium enterprises offer no incentives to competition. So, small and medium business declines, as companies cannot stand price competition with monopolies.

After the World War II, in the majority of states, the sales tax was not imposed due to the above reasons. However, further growth of fiscal needs urged a number of countries to seek for alternative types of indirect taxation. In 1954, France substituted the sales tax for the VAT and pioneered in change of consumer tax structure.

10 posted on 12/13/2004 1:01:03 PM PST by ancient_geezer

To: ancient_geezer

Fair Tax Constitutional Freedom BTTT

11 posted on 12/13/2004 1:20:07 PM PST by ApesForEvolution (You will NEVER convince me that Muhammadanism isn't a death cult that must end. Save your time...)

"careful government management"

thanks for the laugh..cracks me up each and every time that I read it!

12 posted on 12/14/2004 10:48:57 AM PST by socialismisinsidious ("A government that is big enough to give you all you want is big enough to take it all away.")

To: ancient_geezer

Please note that under the APT Plan the responsibility for regulating government spending remains as before with the voters.

13 posted on 12/14/2004 11:47:20 AM PST by tvn

"Please note that under the APT Plan the responsibility for regulating government spending remains as before with the voters."

Do you prefer to keep the voter ignorant of the scope of government spending? Wouldn't the voter become more anti business and anti capitalism if all they see is the tax passed along in higher costs? Wouldn't they blame the private industry more with the government cost hidden in prices? Think about how oil companies take the blame for higher gas prices, yet what percentage of that per gallon price is tax?

By taxing transactions you are adding a burden to the cost of doing business in the US. Why would you support a system that gives a competitive edge to foriegn businesses? How is this good for the american citizen?

14 posted on 12/14/2004 1:00:45 PM PST by CSM

Please note that under the APT Plan the responsibility for regulating government spending remains as before with the voters.

Only with all of the voters blind to the costs of government, instead of just half of them totally ignorant of the real burden that largess charges against the entire society.

The Honorable James DeMint (R-SC)
United States House of Representatives
APRIL 5, 2001

"There has been a shift in the relationship between individuals and government, he argues, such that fewer and fewer are paying taxes at the same time that more and more are receiving increasingly generous benefits. If it becomes the case that most voters do not bear a financial burden for this largess, then there will be little to restrain--and significant political incentives to encourage--the continued growth of government.

Today, the bottom 60% of the electorate perceive little to no "Individual Income Tax" burden,(in many cases even a handout)

From, Effective Federal Tax Rates 1979-2001

Effective Individual Federal Income Tax Rate (Percent of gross family income)

Income Category 1979 1981 1983 1985 1987 1989 1991 1993 1995
1997
1999
2001

Lowest Quintile 0.0 0.5 0.4 0.5 -0.6 -1.6 -1.6 -2.3 -4.4 -5.2 -5.2 -5.6

Second Quintile 4.1 4.8 3.8 4.0 3.2 2.9 2.9 2.3 2.0 1.8 1.7 0.3

Middle Quintile 7.5 8.3 6.7 6.6 5.8 6.0 5.8 5.4 5.3 5.6 5.0 3.8

encouraging 70% of the voting public to clamor for more from government looking for the top 30% of income earners/producers to foot the bill. That perception will do nothing but grow exponentially stronger by eliminating even more voters from substantive and conscious participation in the tax system under that faux 0.3% APT.

So many Americans paying little or no federal taxes makes for a natural spending constituency. It's like me in the restaurant: What do I care about extravagance if you're footing the bill?
--Walter Williams

To remove perception of the tax burdens of the individual, is to remove the goad which assures accountability of government to the electorate.

The siren call for representation without taxation is the formula that got us where we are at today. The ability to hide or disguise taxation from the view of large sectors of the electorate allows the Congress to get away with the creation of the evergrowing monster that it fosters.

Liberty and freedom have a price, responsibility. If that price is avoided or not perceived there are no brakes on the growth of government, the ultimate result is the end of freedom through creeping socialism.

15 posted on 12/14/2004 1:36:41 PM PST by ancient_geezer

tvn, AG is using an old trick here. If you want to skew the distribution of federal tax burdens, only talk about income taxes, even though the majority of Americans pay more in payroll taxes and a large portion of them pay more in excise taxes than they do income taxes. He is only showing income taxes because it best suits his argument (it's the most progressive). When you total up the entire federal tax burden, the Total Effective Federal Tax Rate for the lowest quintile is 5.4%. That's a lot different than -5.6%.

16 posted on 12/14/2004 6:30:00 PM PST by Your Nightmare

Stupid idea. I thought we trashed this one already.

17 posted on 12/14/2004 6:31:18 PM PST by deaconjim (Freep the world!)

The APT plan produces far more positive than negative results :

POSITIVES

Strong dollar due to economic stimulus attracting foreign investment where no income or excise taxes exist.

Very low interest rates due to extra savings by individuals and attraction of foreign investment capital allowing lower cost capital and infrastructure expansion.

Budget elasticity for government including the ability to respond to special demands such as war or national emergencies.

Eliminate budget deficits with minor adjustments in an already extremely low tax rate. Eliminate accumulated national debt through same mechanism if desired - further strengthening the currency.

Multiplier effects of economic stimulus creating greater numbers and value of transactions in an upward spiral reducing rates or allowing more services.
Incentive to move toward a "cashless" system.

NEGATIVES

Public insensitivity to expansion of government budgets and commensurate regulation.

Very low interest rates for people relying on secure, fixed sources of income.

Loss of tax incentive for charitable contribution. People will have more wealth to give but must do so without economic advantage.

18 posted on 12/15/2004 12:29:53 PM PST by tvn

To: ancient_geezer

19 posted on 12/15/2004 12:32:01 PM PST by tvn

APT NEGATIVES (continued):

Business in the US, especially manufacturing which requires many small transactions in the overall process, will dry up overnight.

All stock market exchange activity will immediately move off-shore, draining that sector of the U.S. economy permanently.

20 posted on 12/15/2004 12:35:20 PM PST by kevkrom (If people are free to do as they wish, they are almost certain not to do as Utopian planners wish)

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