Americans For Fair Taxation Presentation to the 2009

Americans For Fair Taxation Presentation to the , 2009

The Fair. Tax Plan The ONLY tax proposal created and tested outside Washington using modern marketing techniques to find out what the American people, across the political spectrum, wanted in a tax system. ü Every demographic responded favorably to the Fair Tax message

Overview n n What the Fair Tax is NOT The Fair Tax Rate Why Change? - The Four Tests • • n Simplicity Efficiency Economic Growth Fairness? If you like what you heard …

The Fair. Tax is a tax that Eliminates: n n n Payroll Taxes and Self-Employment Taxes Death Taxes Individual Income Taxes - including AMT, investment income Corporate, Partnership and other Business Income Taxes

And the Fair Tax Eliminates: The Internal Revenue Service! n

The Fair Tax Replaces These With A n n n n Progressive National Retail Sales Tax (no tax on B to B) On New Goods and Services Without Exception Once and Only Once (no tax on used goods and services once tax is paid) Made Fair to the Poor (with “Pre-bate”) Is Revenue Neutral: Uncle Sam is left with Same Real Purchasing Power

Overview n n What the Fair Tax is NOT The Fair Tax Rate Why Change? - The Four Tests • • n Simplicity Efficiency Economic Growth Fairness? If you like what you heard …

The Fair Tax is NOT and the Fair Tax does NOT do the Following n The Fair Tax does NOT change Federal Government Spending

The Fair Tax is NOT and the Fair Tax does NOT do the Following n The Fair Tax does NOT change State and Local Taxation

Overview n n What the Fair Tax is NOT The Fair Tax Rate Why Change? - The Four Tests • • n Simplicity Efficiency Economic Growth Fairness? If you like what you heard …

The Fair Tax Rate The Rate: 23% Tax Inclusive 23% What does that mean?

The Fair Tax Rate: Is It 23% or 30% ? $1. 00 $. 77 $. 23

The Fair Tax Rate Will Prices Rise 30% Above Today’s Prices? No!

New Jacket: Today & With Fair Tax Today Your Gross Earnings $126 Your Take-Home Pay $100 Jacket Cost at Checkout $100 Consumer Benefit $0

New Jacket: Today & With Fair Tax Today FT @ 10% Savings Your Gross Earnings $126 Your Take-Home Pay $100 $126 Jacket Price Pre. Adjustments $100 Tax Costs Removed from Price of Jacket N/A $10 Pre-Fair Tax Price N/A $90 Add Fair Tax N/A $26. 88 Jacket Cost at Checkout $100 $116. 88 Consumer Benefit $0 $9. 12

The Fair Tax Rate n Will removing tax costs from business really lower prices before imposing the sales tax? • 1995 Airline Ticket Tax case

Overview n n What the Fair Tax is NOT The Fair Tax Rate Why Change? - The Four Tests • • n Simplicity Efficiency Economic Growth Fairness? If you like what you heard …

Why Change? The Four Tests To serve its people and country, a tax must meet FOUR TESTS: A Tax must be SIMPLE and TRANSPARENT 2. A Tax must be EFFICIENT 3. A Tax must be FRIENDLY TO ECONOMIC GROWTH 4. A Tax must be FAIR 1.

IRC: Simple/Transparent?

Simple/Transparent For a family of four, the average time required to pay federal income taxes is 37. 6 hours. (See Moody, Warchoik, Hodge, “The Rising Cost of Complying with the Federal Income Tax, ” Tax Foundation Special Report, 2005, No. 138, p. 9. )

Simple/Transparent The Fair. Tax Bill is 133 pages, double-spaced, wide margins Individuals “do their taxes” when they make purchases or pay bills.

Simple/Transparent The IRS Costs $10 Billion. Tax Compliance Costs for the rest of us are $350 (over 4 Iraq wars) Billion or 3% of GDP annually. Double that for lost opportunity costs, and you get $700 Billion or 6% of GDP annually – all lost to our tax code

Simple/Transparent Businesses can “do their taxes” at retail on one sheet of paper.

Simple/Transparent The Sales Tax Bureau Will Cost $1/2 Billion. State Tax Authorities will get ¼% of their collections Retail Merchants will get ¼% of their collections COMPLIANCE COSTS WILL BE NOMINAL

The Four Tests To serve its people and country, a tax must meet FOUR TESTS: 1. 2. 3. 4. A Tax must be SIMPLE and TRANSPARENT A Tax must be EFFICIENT A Tax must be FRIENDLY TO ECONOMIMC GROWTH A Tax must be FAIR

Efficient An Efficient Tax: 1. Captures Most of its Tax Base 2. At the Least Possible Cost to its Government

Efficient The Income Tax 1. Has 155, 000 collection points. 2. Has a “Tax Gap” of over $2, 000 per taxpayer 3. Is costly to administer, both for the government and for the taxpayers

Efficient The Fair. Tax reduces the tax gap: 1. Has 20, 000 collection points, maximum 2. Requires a willing seller and a willing buyer for evasion 3. Is easier to comply with because of simplicity and transparency 4. Is collected mostly by large retailers

Efficient n ¼% Who will administer the Fair Tax if there is no more IRS? • The States, 45 of whom have sales taxes already • States and Merchants, each, get 25 basis points for their trouble if they remit timely • Sales taxes are more efficient to administer ¼%

The Four Tests To serve its people and country, a tax must meet FOUR TESTS: 1. 2. 3. 4. A Tax must be SIMPLE and TRANSPARENT A Tax must be EFFICIENT A Tax must be FRIENDLY TO ECONOMIMC GROWTH A Tax must be FAIR

Economic Growth • David Walker, immediate former Comptroller General of the US, Warns of Crisis if we don’t change our savings and investment habits $Trillions in unfunded liability for SS and Medicare

Economic Growth David’s First Deficit

Economic Growth n n In the year 2040 revenues won’t be enough to even pay the interest on the federal debt. Our tax code discourages savings to address this problem

Economic Growth n Income Taxes Punish Savings • Debt-Counselling Service Claimed 6 out of 10 American Households have problems with Consumer Debt • Exception, Home Ownership, Tax Code Favors

Economic Growth David’s Second Deficit

Economic Growth n n The Fair. Tax stops taxing thrift and effort and productivity: 1. No taxes on interest, dividends, capital gains (including gains on the sale of your home) 2. No AMT 3. No estate, gift and GST tax

Economic Growth n Income Taxes Make Business Inefficient and Uncompetitive: • US Business Finances Through Debt (Source: Cato Institute) • Only the US has no border adjusted tax (European VAT’s) • Corporate Resources, including Board Meetings, are devoted to Tax Planning and Tax Avoidance

Economic Growth David’s Third Deficit

Economic Growth ü The Fair. Tax completely un-taxes business ü Eliminates tax compliance which falls heavily on small business.

Economic Growth n Foreign Companies Start to Invest in the United States • Princeton Econometrics Survey of 500 European and Asian Companies: if we had the Fair Tax: 400 would build their next facility in the United States n 100 would relocate their corporate headquarters to the United States n

Economic Growth n n The Fair. Tax completely un-taxes investment 12 Trillion in Offshore Capital is repatriated.

Economic Growth n n n Taxable income is 45% more volatile than consumption Puts Government in feast-andfamine, boom-bust cycles Governments spend more in the boom cycles but do not cut back in the bust cycles

Economic Growth: U. S. Personal Consumption? 8, 229 Annual Personal Consumption ( $ billions) 10, 000 $9, 270 Billion in 2006 1, 000 100 Annual Personal Consumption 1929 – 2006 $77. 4 Billion in 1929 Data by Bureau of Economic Analysis

The Four Tests To serve its people and country, a tax must meet FOUR TESTS: 1. 2. 3. 4. A Tax must be SIMPLE and TRANSPARENT A Tax must be EFFICIENT A Tax must be FRIENDLY TO ECONOMIMC GROWTH A Tax must be FAIR

Fairness Who’s against The Fair. Tax? Answer: 35, 000 Lobbyists for special interests, over half of whom benefit from loopholes in today’s complex tax code.

Fairness Wealthy people can hire lawyers and accountants to shelter income. The higher the tax rate, the more it pays to do so.

Fairness The Fair. Tax eliminates the two most regressive taxes today: 1. The Payroll Tax, and 2. The tax costs that are embedded in the price of every good or service purchased. These two taxes fall most unfairly on the poor.

Fairness The Family Consumption Allowance or “Pre-Bate” n What is the “Prebate”? • The “Prebate” is a check from the Government to each household to reimburse that household for tax on spending for essentials up to the Poverty Level (determined by HHS) • NOTE: THERE IS NO INCOME OR MEANS TESTING FOR THE PREBATE. EVERYBODY GETS IT

Fairness 2007 Fair. Tax Prebate Single Adult Household Two Adult Household Family Annual Monthly Size Consumption Rebate N/A N/A Allowance 1 1 person $10, 210 $2, 238 $196 and 1 child $13, 690 $3, 149 $262 couple $20, 420 $4, 697 $391 and 2 children $17, 170 $3, 949 $329 and 1 child $23, 900 $5, 497 $458 and 3 children $20, 650 $4, 750 $396 and 2 children $27, 380 $6, 297 $525 and 4 children $24, 130 $5, 550 $462 and 3 children $30, 860 $7, 098 $591 and 5 children $27, 610 $6, 350 $529 and 4 children $34, 340 $7, 898 $658 and 6 children $31, 090 $7, 151 $596 and 5 children $37, 820 $8, 699 $725 and 7 children $34, 570 $7, 951 $663 and 6 children $41, 300 $9, 499 $792 N/A Source: Federal Register, Vol. 72, No. 15, January 24, 2007, pp. 3147– 3148.

Fairness The Family Consumption Allowance or “Pre-Bate” § Illegal aliens do not qualify. In effect, Illegal Aliens go from being tax preferenced to being tax disadvantaged.

Fairness What if I’m lower-income ? No taxes are collected on used items Tuition is not taxed

Fairness n n Funds Medicare/Medicaid with a stable, growing tax base. Assures that Social Security will be there for future generations

Fairness Who Pays More? n n Foreign tourists (50 million) Imports (Foreign governments abate VAT’s on exports to U. S. , tax our imports with their VAT’s) Underground and Shadow Economy Spendthrifts – FT gets at wealth

Fairness • Social Security benefits are adjusted for the Fair Tax. • Inventory credit for sellers keeps prices from rising until benefits of the Fair. Tax take root.

Overview n n What the Fair Tax is NOT The Fair Tax Rate Why Change? - The Four Tests • • n Simplicity Efficiency Economic Growth Fairness If you like what you heard …

n Resources …

Help make it happen by: Buying a copy for yourself and several for your family and friends Giving a copy to your local library Sending a copy to your Congressman or Senator

Fair Tax is: Grassroots Single-Issue and Non-Partisan

Can it Happen? “Never doubt that a small group of thoughtful, committed citizens can change the world. Indeed, it is the only thing that ever has. ” Margaret Mead, 20 th Century Anthropologist

Can it Happen? “The Fair Tax will pass in five minutes once everyone knows about it (and has a basic understanding of it). ” Doug Hartlove, 21 st Century Retired Engineer from Somerville, NJ and Fair Tax Enthusiast, District Director NJ-11