Fair Tax Summary

Although the Fair Tax appears at first consideration to be the answer to our tax woes, please read the statement immediately following the chart.

[1] Testimony by the Arthur Hall, Tax Foundation and before the House Ways and Means Committee, 1998.

The following is taken from a statement given by the founder of the American Constitutional Research Service to the Committee on Ways and Means, United States House of Representatives, June 1995

A national sales tax would give Congress an across the board percentage of our economy by laying an internal tax, whether such revenue is needed or not. The national sales tax idea would do ill to our nation as it is an internal system of taxation which ultimately increases the cost of goods manufactured on American soil, burdens the American Citizen in its collection, and is to be paid BY the farmer, mechanic, laborer, etc. who will continue to see the intrusion of the "tax gatherer of the United States" if such a system is adopted!

It is also important to note how imposts and duties (external taxation) were successfully used to encourage domestic manufacturing and assist in building a strong industrial base. The first revenue raising Act imposed an across-the-board tax on imports which was higher for imports shipped in foreign owned foreign built vessels, and discounted the tax for imports arriving in American owned American built ships.

This skillful use of external taxation gave American ship builders a hometown advantage and predictably resulted in America's merchant marine becoming the most powerful on the face of the planet. In addition, our national treasury was filled by foreigners paying for the privilege of doing business on American soil.

But this was back when members of Congress, and those running for Office, put American interests first and would have considered NAFTA, GATT and the WTO as acts of sedition, and would have tarred and feathered those promoting such surrender of America's sovereignty.

A national sales tax plan which omits external taxation as a principal source to fill our national treasury, is in fact a surrender of national sovereignty to the advantage of foreign interests!

In closing, many of the same people who promoted the NAFTA, GATT and the WTO (the free trade crowd) are now promoting various forms of tax reform ... each proposal cleverly maintaining internal taxation as a principal means to raise a national revenue. Let us continually keep in mind the important distinction between internal and external taxation while working toward the elimination of income taxation and strive to return to the Founding Father's original tax preform package which provided the means allowing America to become the economic envy of the world.

	FairTax, H.R. 2525 Linder-Peterson	Federal Income Tax Pre-2001 Law	Flat Tax, H.R. 1040 Armey
16th Amendment	Proposes repeal.	No change.	No change.
Complexity	Individuals do not file. Businesses need only to deal with sales tax returns.	Very complex; 20,000 pages of regulations; I.R.S. incorrect over half of the time.	Withholding continues. Individuals and businesses must still track income and file income tax forms.
Congressional Action	23% Linder/Peterson Fair Tax Act of 2001 (H.R. 2525). Employees receive 100% of pay. Social Security and Medicare funded from consumption tax revenue, not your paycheck. (H.J.Res45) - Will repeal the 16th Amendment.	Used by lobbyists and the wealthy for tax-breaks and loopholes. Used by bureaucrats for social engineering.	Rep. Armey’s H.R. 1040 has some problems, but is far superior to current law.
Cost of Filing	No personal forms are filed. Significant cost savings.	$225 billion in annual compliance costs. 1	Significant simplification costs are somewhat reduced.
Economy	Un-taxes wages, savings, and investment. Increases productivity. Produces significant economic growth.	Taxes savings, labor, investment, and productivity multiple times.	Imposes a tax burden some of which is still hidden in the price of goods and services.
Equality	Taxpayers pay the same rate and control their liability. Tax paid depends on life style. All taxes are rebated on spending up to the poverty level.	The current tax code violates the principle of equality. Special rates for special circumstances violate the original Constitution and are unfair.	The flat tax is an improvement over the current income tax, but it is still open to manipulation by special interests.
Foreign Companies	Foreign companies are forced to compete on even terms with U.S. companies for the first time in over 80 years.	Current tax code places unfair tax burden on U.S. exports and fails to neutralize tax advantages for imports.	A flat tax taxes exported goods and does not tax foreign imports to the U.S., creating unfair competition for U.S. manufacturers and businesses.
Government Intrusion	As the Founding Fathers intended, the FairTax does not directly tax individuals.	Current tax code requires massive files, dossiers, audits, and collection activities.	A flat tax still requires personal files, dossiers, audits, and collection activities.
History	45 states now use a retail sales tax.	The 1913 income tax has evolved into an antiquated, unenforceable morass, with annual tax returns long enough to circle Earth 28 times.	A flat tax just won’t stay flat. Starting out nearly flat in 1913, the income tax grew out of control with top rates over 90% until the Kennedy administration.
Interest Rates	Reduces rates by an estimated 25-35 percent. Savings and investment increase.	Pushes rates up. Biased against savings and investment.	Reduces rates 25-35 percent. Neutral toward savings and investment.
Investment	Increases investment by U.S. citizens, attracts foreign investment.	Biased against savings and investment.	Neutral toward savings and investment.
IRS	Abolished.	Retained.	Retained with reduced role.
Jobs	Makes U.S. manufacturers more competitive against overseas companies. Escalates creation of jobs by attracting foreign investment and reducing tax bias against savings and investment.	Hurts U.S. companies and decreases available jobs. Payroll tax a direct tax on labor.	Positive impact on jobs. Does not repeal payroll tax on jobs.
Man-hours required for compliance	Zero hours for individuals. Greatly reduced hours for businesses.	Over 5.4 billion hours per year.	Reduced.
Non-filers	Reduced tax rates and fewer filers will increase compliance.	High tax rates, unfairness and high complexity harm compliance	Reduced tax rates and improved simplicity will improve compliance.
Personal and Corporate Income Taxes	Both are abolished.	Retained.	Retained in a different form.
Productivity	Increases.	Inhibits productivity.	Increases.
Savings	Increases savings.	Decreases savings.	Increases savings.
Visibility	The FairTax is highly visible and easy to understand. No tax is withheld from paychecks.	The current tax code is hidden, embedded in prices, complex, and incomprehensible. Taxes are withheld from paychecks.	The business component of the flat tax and payroll taxes are hidden and would be embedded in prices. Taxes are withheld from paychecks.