The FairTax Book: on Tax Reform
Jimmy Carter:
1970s: Tried to extend withholding to interest and dividends
The reality of April 15 as we know it under the withholding scheme, instead of being a day when Americans are focused on what the government is costing them, most of us are instead focused on how much we're getting back from that government.Since
1943, there have been plenty of efforts to expand the withholding scheme. In the 1970s, Pres. Carter attempted to have withholding extended to interest and dividends. This time Americans seemed to understand that having taxes withheld on their interest
and dividend earnings before those taxes were actually due would cost them additional earnings. The effort failed, but it was revived a few years later in 1982. With the enthusiastic support of Pres. Reagan, politicians cited the budget deficit as a
reason to expand withholding to include dividends and interest earnings. Congress authorized the additional withholding measure in 1982 but it was repealed a month after it went into effect.
Source: The FairTax Book, by N.Boortz & Rep.J.Linder, p. 29-30
May 31, 2006
John Linder:
Tax withholding camouflages the actual tax burden
The popular story is that withholding was born of necessity during WWII because a reliable cash flow was needed to fund the war effort. Not so. The 1913 law establishing the income tax allowed the federal government to withhold taxes just as it is done
today. Then something happened that stopped the withholding juggernaut: The citizens of 1913 said, "Noting doing." They complained to their representatives, and in 1917 a law was passed barring withholding. Taxpayers went back to paying their taxes in on
lump sum, and politicians went back to their drawing boards.But the politicians weren't ready to throw in the towel. They saw that withholding was the one way they could camouflage the actual tax burden pressed on the American people and further their
political dream of spreading the scope and power of the federal government.
So when WWII came along, it provided the political class with the handy excuse they're been seeking to put income tax withholding back on the table.
Source: The FairTax Book, by N.Boortz & Rep.J.Linder, p. 23
May 31, 2006
John Linder:
More complicated tax code means higher compliance costs
The cost for our current tax system isn't just reflected in the amount withheld from your paycheck. It goes much further than that. Starting in 1954, the income tax was placed at the center of our tax system. Since 1954, the number of words in our tax
code has increased by nearly 500%. And that's just the increase in the CODE. It's the actual IRS regulations that tell you how to calculate, report, and pay your taxes. The number of words in the IRS REGULATIONS has increased by 939%.
Source: The FairTax Book, by N.Boortz & Rep.J.Linder, p. 46-47
May 31, 2006
John Linder:
FairTax repeals AMT; estate tax; gift tax; & capital gains
The prices of consumer foods have already been driven up by a 22% embedded tax--a tax that drives jobs offshore and strains the budgets of low- and middle-class families. When passed and signed into law the FairTax will repeal: -
The individual income tax
- The alternative minimum tax (AMT)
- Corporate and business income taxes
- Capital gains taxes
- Social Security taxes
- Medicare taxes
- The Self-employment tax
- Estate taxes
- Gift taxes
All of those lovely taxes will be replaced with a single-rate personal consumption tax--a simple sales tax--on new goods and services. In place of the many taxes we pay today, consumers will pay an embedded personal consumption tax in the amount of
23% on all goods and services sold at the retail level.
Source: The FairTax Book, by N.Boortz & Rep.J.Linder, p. 73-76
May 31, 2006
John Linder:
Politicians should not decide who "needs" tax cuts
It is widely agreed that the underground economy is huge, and that most of the growth has occurred in the past thirty years.
This growth stems largely from a growing sense of anger and alienation over a government that seems to insist that what we produce is theirs, and that we should be allowed to keep no more than our politicians decide we deserve.
Perhaps you remember some elected officials who were opposed to President Bush's tax cuts--politicians who were upset because, they claimed, the people who were going to benefit the most from the cuts didn't actually "nee" the money.
We don't know about you, but many Americans are a bit troubled by the prospect of politicians determining just how much of our hard-earned money we actually "need." Isn't that for us to decide?
Source: The FairTax Book, by N.Boortz & Rep.J.Linder, p. 95-96
May 31, 2006
John Linder:
FairTax is absolutely not a VAT
Isn't the FairTax really just a VAT tax like they have in Europe?No! Absolutely not!
"VAT" stands for value-added tax. The VAT is essentially a sales tax that is added at every step in the production of retail goods. The VAT is popular with
politicians, for the very reason that the people should shun it: It's capable of producing huge amounts of revenue while remaining virtually hidden from consumers.
When VAT rates are increased, it looks like another increment of inflation to the unawar
consumer. It's central to the design of the FairTax that it is added only once: at the point of sale to the retail purchaser. It's an upfront charge, not a series of hidden costs. If you hear someone refer to the FairTax as a
VAT, you can be sure you're listening to someone who hasn't done his homework. Or who, for whatever reason, it trying to torpedo the FairTax.
Source: The FairTax Book, by N.Boortz & Rep.J.Linder, p.153-154
May 31, 2006
John Linder:
AMT was introduced as a "spite" tax in 1969
The alternative minimum tax (AMT) was introduced in 1969 as a "spite" tax. It seems that some politicians didn't like that fact that just a few years earlier 150,000 high-achieving individuals rudely took advantage of the perfectly legal deductions and
credits available to them--and paid no federal income tax. So the AMT was passed to force a second calculation of your earnings and deductions. How does it work? If a taxpayer's deductions exceed a certain percentage of their gross income, they lose
deductions. That'll teach 'em!The bad news? The AMT was never indexed to inflation--a little fact that eluded the average American during the debate in the AMT legislation, since most American taxpayers were completely uninterested in the proceedings.
Today, however, thanks to the failure to index the AMT, disaster is waiting around the corner. By 2010, about 35 million Americans will be forced to pay the AMT. The victims will no longer be just "high-earning individuals," but middle Americans.
Source: The FairTax Book, by N.Boortz & Rep.J.Linder, p.155-156
May 31, 2006
John Linder:
Income taxes are seized; consumption taxes are voluntary
The FairTax was designed be economists and researchers at the best American universities, with help from some of America's most accomplished businesspeople.
As such, it was designed to benefit the American free enterprise system and to promote economic liberty. There is nothing coercive about the FairTax.
Under its provisions, each and every family in America can meet its basic needs with no federal tax consequences at all.
It is only when you choose to spend above the level of basic necessity that you begin to pay any taxes to support the operation of the federal government.In short... income taxes are seized. Consumption taxes are paid. Which way do you want it?
Source: The FairTax Book, by N.Boortz & Rep.J.Linder, p.176
May 31, 2006
Milton Friedman:
VAT is most efficient way to raise government revenue
The VAT, or value-added tax, is essentially a sales tax that is added at every step in the production of retail goods. The VAT is popular with politicians, for the very reason that the people should shun it: It's capable of producing huge amounts of
revenue while remaining virtually hidden from consumers.When VAT rates are increased, it looks like another increment of inflation to the unaware consumer. Milton Friedman said it best: "That VAT is the most efficient way to raise revenue for the
government. It is also the most effective way to increase the size of government."
It's central to the design of the FairTax that it is added only once: at the point of sale to the retail purchaser. It's an upfront charge, not a series of hidden costs.
If you hear someone refer to the FairTax as a VAT, you can be sure you're listening to someone who hasn't done his homework. Or who, for whatever reason, it trying to torpedo the FairTax.
Source: The FairTax Book, by N.Boortz & Rep.J.Linder, p.153-154
May 31, 2006
Ronald Reagan:
1982: Extended withholding to interest and dividends
The reality of April 15 as we know it under the withholding scheme, instead of being a day when Americans are focused on what the government is costing them, most of us are instead focused on how much we're getting back from that government.Since
1943, there have been plenty of efforts to expand the withholding scheme. In the 1970s, Pres. Carter attempted to have withholding extended to interest and dividends. Americans seemed to understand that having taxes withheld on interest would cost
them additional earnings. The effort failed, but it was revived a few years later in 1982. With the enthusiastic support of Pres. Reagan, politicians cited the budget deficit as a reason to expand withholding to include dividends and interest earnings.
Congress authorized the additional withholding measure in 1982 but, to put it mildly, the American people were not pleased. The withholding measure for interest and dividends was repealed a month after it went into effect.
Source: The FairTax Book, by N.Boortz & Rep.J.Linder, p. 29-30
May 31, 2006
Page last updated: Feb 06, 2014