FairtaxSM Talking Points

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[postitnews.com]

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:

• allows you to keep 100% of your paycheck, pension, and Social Security payments.
• frees up the time wasted on filling out cumbersome I.R.S. forms.
• makes taxation of income unconstitutional by repealing the 16th Amendment.
• exempts all taxpayers from federal taxation, up to the poverty level, through a monthly rebate.
• ensures that all Americans pay their fair share of taxes.
• dramatically lowers tax rates for low-income and middle-income Americans.
• Dramatically reduces the cost of goods and services by 20% to 30%.
• allows families to save more for home ownership, education, and retirement.
• protects and ensures the funding of Social Security and Medicare.
• leaves unchanged the amount of money raised by the federal government.
• Makes American products more competitive overseas.

How? This tax system is the most researched, and we think you'll agree, the best tax reform plan -- it's called the FairTaxSM.

The Problem is the Current Income Tax Code

 

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

• Because the tax code is so complex and easy to evade, many of us pay more in taxes per year than we should! The I.R.S. estimates that over 40% of Americans no longer comply with the current tax code! This makes the rest of us pay over 30% more in taxes.
• Over half of American taxpayers seek professional help simply to prepare their returns. And according to Money Magazine, chances are 99% that you will pay someone to file an incorrect return!
• Compliance with the tax code is not only very difficult and complicated, but unreasonably expensive as well. It is estimated that it costs taxpayers $225 billion for tax filing, tax record keeping, and tax reduction advice. That's the equivalent of about $850 for every man, woman and child in America! We have taxation without comprehension!

B. The current income tax code unfairly hampers personal financial opportunity.

• When citizens are taxed on their earnings and on what they produce, hard work is discouraged.
• The current income tax code inhibits economic growth, capital formation, and, most importantly, job creation.
• The current income tax code punishes personal savings and investments; and sometimes these are unfairly subjected to double and even triple taxation.

C. The current income tax code tax is grossly unfair to all wage-earning Americans.

• Payroll taxes are taken out of our paychecks, and we all have no control or choice over when we pay or how much we pay in taxes. They are deducted from our paychecks before we can save or spend it.
• The payroll tax is the most regressive and unfair feature of our current tax system. The current payroll tax applies only to wages, and hurts the most important tool by which anyone who is not born to wealth has to get ahead.

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

• The tax code is filled with loopholes that are manipulated by high-priced lobbyists for their clients, and by other special interests.
• The complexity of the current income tax code is an open invitation to those with the means to manipulate the tax code.
• There are more lobbyists registered in Washington for taxes than for any other issue.
  Back to top

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.

• Everyone will be subject to the same consumption tax rate with no exceptions and no exclusions, and those least able to share in the cost of government will carry no federal tax burden at all.
• The FairTax increases individual purchasing power, making it easier to get ahead financially by eliminating:
  • the individual income tax, including capital gains taxes
  • the payroll income tax
  • the inheritance tax and the gift tax
  • the self-employment tax
  • the corporate income tax

The solution we propose involves two actions:

• Passage of legislation that institutes a single-rate, FairTax on all final sales of new goods and services. This tax would become the chief source of revenue for the United States government, replacing all federal income and payroll taxes, yet generating the same revenue. The legislation provides for a tax rebate equal to the consumption tax paid on essential goods and services. The rebate ensures that no American will pay tax on the purchase of necessities.
•  A constitutional amendment that would repeal the 16th Amendment and make a federal income tax unconstitutional.

We Can Win!

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:

• Allows you to keep 100% of your paycheck, pension, and Social Security payments.
• Frees up the time wasted on filling out cumbersom I.R.S. forms.
• Makes taxation of income unconstitutional by repealing the 16th Amendment.
• Exempts all taxpayers from federal taxation, up to the poverty level, through a monthly rebate.
• Ensures that all Americans pay their fair share of taxes.
  Dramatically lowers tax rates for low-income and middle-income Americans.
• Dramatically reduces the cost of goods and services by 20% to 30%.
• Allows families to save more for home ownership, education, and retirement.
• Protects and ensures the funding of Social Security and Medicare.
• Leaves unchanged the amount of money raised by the federal government.
• Makes American products more competitive overseas.

As Americans come to understand that the FairTax will close tax loopholes and make everyone pay their fair share of taxes, it will be passed into law. Fully 85% of Americans informed about the FairTax are likely to support the tax change that makes the closing of these loopholes a reality. And the FairTax offers not only this, but many other benefits:

• You never pay another hidden tax again. The FairTax is printed on every receipt for every purchase.
• All taxpayers are treated fairly. No loopholes for anyone.
  Individuals have more control and choice. People can make choices about how much to pay in taxes, by deciding when to buy and what to buy.
• Virtually all economic models project a much healthier economy under the FairTax. Real investment will grow by an estimated 76.4 percent. Exports will jump by an estimated 26.4 percent. Interest rates will drop between 20 and 30 percent.
• Small businesses never have to track tax withholdings or deductions.
• Tax evasion will dramatically decrease. No more income-reporting means the end of "hiding" income from tax authorities.
• Compliance costs will be slashed. Compliance costs will drop by over 90%, from $225 billion.

Concluding Remarks

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.

www.fairtaxvolunteer.org

Top

[ConservativeBamaFan]

bump for later read

[ancient_geezer]

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

No way can you claim that one as the tax is paid by business and cannot separated from their input costs be refunded back to them on export any more than corporate taxes today can be. As a consequence the price of exports are higher, cause the dollar to depreciate with respect to foreign currency markets as our trade balances continue in deficit due to lack of competitiveness of our goods in those markets.

Secondly with every transaction taxed, once again foreign investment will find no haven here. In fact with such transaction taxes liqidity of the markets will be such that finding anyone to take the other half of a trade in buying or selling investment will become a high risk venture with no way to predict the spread that will be incurred in such transaction. In todays markets one is able to sell or buy on the 1/8th point in large or small lots with no problem, in low liquidity markets such transaction costs will be much higher that even before counting the tax on the full value of the multiple transactions incurred by the trade.

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

LOL, where are these low intrest rates coming from, thin air. That 30% of GDP still gets grabbed by government from the very businesses that must make up the tax losses through their interest rates charged against loans. The financial community that the APT hits the very hardest.

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

Translated as government can raise the tax on whim, because their constituents don't see it happening, it all get passed in prices. No thank you, the APT is worse than the current tax system in this respect.

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.

See above, as well as the fact that government spending has never declined by raising a tax.

Multiplier effects of economic stimulus creating greater numbers and value of transactions in an upward spiral reducing rates or allowing more services.

Taxing something means less of it, infact a transaction/turnover tax assures vertical mergers toward inefficient monopolies. Just the opposite of more transaction infact the author of the APT promises the number of transactions to fall to 50% of current levels. Once again you are blowing smoke with just noise.

Incentive to move toward a "cashless" system.

You may call that a positive, more govenment control and monitoring of the individual is not a positive.

[deaconjim]

We've already been over this on another thread. Your list of negatives is much shorter than mine. I'll stick with the NST, thank you.

[ancient_geezer]

"The proposed, new collection system will be tested by computer simulation to capture all potential errors and omissions (new job for the IRS). "

Gee looks like we don't even need to wait on a new and improved IRS and taking the risk of that APT to do an economic study. We already have what is needed out of the experience of Australia and Brazil with their APT implementations.

Wonder why that Project Director's sales pitch lead us to believe there was no study and contemporary experience with this form of taxation?

Wasn't it nice of those wonderful countries to take the risk and find out what an APT really does for an economy?

Here it is, an actual study of the APT, aka Bank Account Debits Tax as it is otherwise known in its Australian (and CPMF) in its Brazilian implementations neither of which have had a good experience with it.

http://www.webmeets.com/files/papers/lacea/2002/176/BT111101.pdf

Disintermediation and Illiquidity in a Bank Account Debits Tax Model
P.H. Albuquerque
November 11, 2001

Abstract:

This paper uses a dynamic general equilibrium model to study the economic effects of bank account debits taxation. Theoretical aspects such as tax cascading, financial disintermediation, market illiquidity, impacts on divident and interest rates, tax revenue, government deficit, and effective rates on final transactions are considered. The Brazilian BAD tax,(CPMF) experience is evaluated. The imperical analysis shows that revenue productivity appears to be very sensitive to the tax rate, engendering a Laffer curve. It is also shown that may be impacts on real interest rates. Part of the BAD tax revenue can be lost due to increased intrest payments on government debt. Furthermore the deadweight losses seem to be significant if compared to revenue. Theory and evidence indicate that the BAD acronym is perhaps more than witticism.

1 Introduction.

Financial transaction taxes (FTTs) have always had supporters among influential economists, who believe they could be instrumental in the avoidence of macroeconomic instability. Keynes(1936), for example, had a clear stance in the matter. "It is usually agreed that casinos should, in the public interest, be inaccessible and expensive. And perhaps the same is true of stock exchanges... The introduction of a substantial government transfer tax on all transactins might prove teh most serviceable reform available, with a view to mitigating the predominance of speculation ofer enterprise in the United States." Stiglitz(1989) and Summers and Summers(1989) further explored and asserted Keynes's views on securities taransaction taxes (STTs).

Anothe eminent proponet of an FTT was Tobin. He proposed a small tax on foreign exchange transaction, which is now known as the Tobin tax.¹ Eichengreen, Tobin and Wyplosz(1995), for example, argue that the Tobin tax expands national monetary policy autonomy and diminishes macroeconomic volatiltiy. Frankel(1996) is another defender of the Tobin tax.

Nevertheless authors such as Umlauf(1993), Hkkio(1994), Shome and Stotsky(1995), Jones and Seguin(1997), and Habermeir and Kirilenko argued or found evidens that FTTs not only ar unable to deliver the benefits thought out by their proponents but also can lead to undesired economic distortions.

Aside from this debate, there have been many signs in many countriesfor the introduction of an FTT specifically designed for

1 see Tobin(1978)

2.

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revenue collection: the bank account debits(BAD) tax.² Enthusiastic supporters defend the abolition of existing taxation systems which should be entirely substituted, in their views, by a single tax levied on all bank account debits.³ The supporters affirm that a tiny rate would generate all the revenue needed by the government, due to the large incidence base of the tax.

Despite the efforts of utopian compaigners, which a have been advocating BAD taxation for years, only f few recent academic studies have dealt with the subject. Some fo those studies are presented as tax reform proposaals, while others analyze the performance of theis tax in countries that have adopted it during the eighties and nineties.

Colabella and Coppinger(1999) and Feighe(2000) provide rationale for BAD taxation.⁴ Feige argues that it would be the most appropriate tax for economies based on electronic transactions. In his opinion, collection costs and tax evasion would be small when compared to traditional taxes. Collecton of taxes from illegal activities would be assured. Tax avoidance through barter or alternative currencies would not happen given costliness. Distortions woudl be small due to its low rate. Feige maintains that the BAD tax would fall disproprtionately on wealthier citizens and would eliminate wasteful tax-related activities, freeing a large amount of economic resources for nobler uses.

In contrast, Tanzi(2000) and Coelho, Ebrill and Summers(2001) reach different conclusion based on the experiences of Australia and som Latin-American countries that have adopted BAD taxation.⁵ As a rule, the BAD tax experiments failed in Latin America. The following negative consequences were common: financial disntermediation, incresd sise of the hidden-

2 The BAD acronym is comonplace in Australia, where this tax has been in place since 1983.
3 A representative grass-roots proposal is found at http://www.debittax.com
4 Feige calls it "automated payment transaction tax", or "APT tax".
5 In Australia, for many reasons, the BAD tax is considered inefficient. The Australian government plans to eliminate it by 2005. see Coelho, Ebrill and Summers(2001).

3.

economy, a sharp and then a slow and constant reduction of financial transactions volume, disappointing revenues (generally smaller than1% of GDP) no matter the tax rate (which varied from 0.2 to 2.0% effective), shift of capital market transactions to New York, increased use of offshore banking, inefficient merging and vertiacal intergration, increased use of currency and bank account substitutes, and establishment of nonband clearinghouses.

According to Tanzi, if a BAD tax reduce the volume of financial transactions, then it will affect economic efficiency. Since the evidence for Latin America reveals reduction, he proposes that the BAD tax should be seen only as an emergency measure for countries facing a fiscal crisis. "If the bank taxes are used at low rates and only for priods of transition to better revenue sources, then, maybe, the deserv a less negativer reaction than most tax experts give them. However, they should not become permanent features fo tax systems."

Despite the rlevance of thaose studies, they did not analyze the impacts of BAD taxation using general equilibrium models. Thet also lack econometric analysis of available data. Both issues are addressed here. A simple but comprehensive dynamic general equilibrium model will be used to provide a theortical framework for the analysis of the BAD tax impacts on the economy. The model predictions will be tested using Brazilian data on BAD taxation, which are particularly suited to the task given that, in Brazil, the tax rated has cahnged a few times whil the incidence base definition remained constant throughtout the period.

Theoretical aspects such as tax cascading, financial disintermediation, market illiquidity, impacts on dividane and interest rates, tax revenue, government deficit, and effective rates on final transactions are considered, first theoretically and then empirically. Section 2 presents the model, while secton 3 develops the competitive equilibrium solution. Section 4 analyzes the steady state. The dynamics are considered in section 5. Section 6 presents

4.

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The empirical results for the Brazilian Bad tax (known in Brazil as CPMF). The paper ends with a summary of findings.

*** Snip ***

7 Conclusions

Australia's Prime Minister John Howard, once referring to a proposal of substituting all taxes in Australia by a BAD tax, declared: "It would completely rnder comatose a workable financial system in a very rapid period of time. And in a global world in which we now live we'd basically be saying that we're opting out oand going back to the jungle. I think, with great respect ot whoever is advocatin it ... it's a crazy idea."

The paper used a dybamic general equilibrium model to study the economic effects of bank account debits(BAD) taxes. Theoretical aspects such as tax cascading, financial disintermediation, market illiquidity, impacts on dividend and interest rates, tax revenue, government deficit, and effective rates on final transactions were considered.

BAD taxation levies on all other tax payments, on investments, on capital turnover and on bonds turnover. I cascades through production, penalizing specialization, diversification and competition. It unneciessarily benefits vertical integration. I punishes the small firm, which cannot concentrate transactino inside its boundaries.

An inspection fo the Eurler equations shows that it also majors real interest and dividend rates through two mechanisms. The first, common to other taxes, represents the effect of alower capital stock. The second effect, characteristic of this kind of tax, is associated with the increased capital and bonds turnover cost. This second effect will generally be substantial and much larger than the first effect.

The BAD tax has the peculiarity of levying on intermediation and liquidity. Since the use of bank services may be easil substituted or

24.

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voluntarily reduced, the incidence base of this tax can be unususally sensitive to the tax rate.

The net return of an asset after discounting the BAD tax payments on asset transactions increases with BAD taxation. Capital and bond owners transfer their tax payments to renters(for example, companies, loan takers, and government) through higher rates of return.

The Brazilian BAD tax(CPMF) experience was evaluated. The empirical analysis showed that reven productivity is very sensitive to the tax rate, engendering a possible Laffer curve. It was also shown that theire might be impacts on real interest rates, particularly in the case of high-turnover loans. The CPMF is perhaps one of the explanations for the high interest rates and high spreads between bonds in Brazil.

Part of the CPMF revenue may be lost due to increased interest payments on government debt. This means that the difference between primary and operational deficits possibly increases with the CPMF. Furthermore, the deadweight losses semm to be high if compared to the relatively small revenues.

Theory and evidence, as exposed above, indicate therefore that the BAD acronym my be more than just a witticism.

25.

[KoRn]

I'm sure everyone realizes this, but it can't be stressed enough. With this "Fair Tax" plan and "Social Security(robbery) reform" we are gonna face a full blown onslaught of attack rhetoric from the left.

I hope our side can mount a good enough counter message to the masses, because these issues are of the up most importance. In a way the information war bothers me less than keeping the politicians in line in the face of the fear and pressure they will feel to back off and play it safe.

Time for war folks. Know your congressman's email addys and mailing addresses. Hit'em HARD!!!!!

[tvn]

Pleaase note that the proposed combined purchaser and seller tax is less than 1%. This is an incentive to maintain all current business structures.

[kevkrom]

For each transaction. All this does is front-load all of the taxes onto the production side of the equation (severely weakening the position of U.S. companies as compared to their competitors) while falsely giving the appearance of a low rate to the consumer.

I imagine tax-and-spend liberals would love this, because who's going to get worked up over, say, a 0.1% tax rate increase (which, under a nightmare like the APT would be a massive increase)?