The fair tax
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The Fair Tax. Americans for Fair Taxation. The Fair Tax Founders. Where Did it Start? Leo Linbeck* and two business associates (*Chairman and CEO, Linbeck Corp; Past Chairman, Federal Reserve of Dallas) $4.5 mil. seed money from three associates

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The Fair Tax

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The Fair Tax

Americans for Fair Taxation


The Fair Tax Founders

Where Did it Start?

  • Leo Linbeck* and two business associates(*Chairman and CEO, Linbeck Corp; Past Chairman, Federal Reserve of Dallas)

  • $4.5 mil. seed money from three associates

  • Funded studies at major universities and financial institutions


Economic Research Participants

  • The Argus group (David Burton and Dan Mastromarco)

  • Boston University (Larry Kotlikoff)

  • Cato Institute (Steven Moore)

  • Harvard University (Dale Jorgenson)

  • Heritage Foundation (Bill Beach)

  • National Bureau of Economic Research (Jim Poterba)

  • Rice University, Baker Institute for Public Policy (George Zodrow)

  • Massachusetts Institute of Technology (Joseph Kahn)


FairTax Objectives

  • Simplicity

  • Fairness

  • Eliminate Loop Holes

  • Protect the Poor

  • Encourage Investment

  • Stimulate Business/Job Growth


Recommended System

  • A Consumption Tax

  • Replaces all Federal Taxes

    • Except special purpose excise taxes

  • Applies to all Consumption Expenditures

    • Personal

    • Business

    • Government


The Fair Tax Replaces

  • All personal and business income taxes

  • All capital gains and investment income taxes

  • All social security and Medicare payroll taxes

  • All gift and inheritance taxes


The Fair Tax Base

  • Fair Tax is imposed on ALL consumption:

    • Personal

    • Business*

    • Government

  • *Fair Tax is NOT imposed on:

    • Purchases used in a product for subsequent sale through a retailer


Special Provisions

  • Rebate to all Americans for tax on the necessities of life

    • At the poverty level, households have a zero tax rate

  • Charities do not collect a tax on donations

    • They are not a consumer

  • Educational institutions do not tax tuition or other receipts and gifts

    • Expenditures for education are treated as an investment


Fair Tax BaseSource: National Income Product Accounts, Survey of Current Business, Aug., 1996 (From Emancipating America from the Income Tax by D. R. Mastromarco and D. R. Burton)


Rate Determination

Total Taxes Collected + RebateTotal Consumption Expenditures

The necessary tax rate: 23%

  • Results in lower taxes for 95% of All Americans!

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Tax Inclusive vs. Tax Exclusive Rates

  • Income Tax Rate of 23% is Tax Inclusive

    • Income includes the tax that is paid

  • Fair Tax Rate of 23% is Tax Inclusive

    • Equivalent to an exclusive rate of 29.9% added to a purchase

    • $100 purchase + 29.9% = $129.9 gross purchase

    • $29.9 tax divided by $129.9 = 23%

  • No American can pay more than 23% of his gross purchases for Federal Taxes


Fair Tax Rebate—Year 2008


FAIR TAX EFFECTIVE TAX RATE

-11.5% 0.0% 11.5% 17.2% 20.1% 22.8%


The Fair Tax Stimulates Economic Growth

Through encouragement of:

  • Reinvestment of tax free earnings

  • Reinvestment of tax free dividends

  • Reinvestment of untaxed capital gains

  • Increased personal savings and investment

  • Foreign capital investment

  • Lower interest rates


Compliance/Tax Evasion

  • Easier tax enforcement

    • 90% reduction in tax filers

    • Only audits of customer shipments from manufacturers needed

    • Cash register records of retails

  • Relative simplicity of Fair Tax will encourage compliance


Why Prices Will Decrease 18-28%


The Fair Tax Accomplishes:

  • It lets every worker keep their entire paycheck—NO income or payroll taxes

  • It lets retirees keep their pensions and social security checks—Untaxed

  • It lets everyone keep capital gains and investment income—Untaxed

  • It encourages savings and investments


The Fair Tax Accomplishes:

  • It eliminates gift and inheritance taxes

  • It taxes spending of inherited/gifted wealth more fairly

  • It ends personal and corporate income tax filings

  • It eliminates the $225 billion cost of the income tax industry


The Fair Tax Accomplishes:

  • It eliminates the need for the $8 billion IRS

  • It encourages repatriation of wealth from tax havens

  • It encourages foreign capital investment

  • It stimulates exports

  • It stimulates economic growth and job formation


The Fair Tax Accomplishes:

  • It eliminates all tax loopholes

  • It has a significantly lower cost of enforcement

  • It eliminates a significant percent of congressional lobbyists

  • It makes the real federal tax rate visible to voters—every time the cash register rings


Flat Tax vs. Fair Tax


Probable Fair Tax Effect on State Tax Policy

  • Repeal State Income Tax

    • Enforcement too expensive without IRS

  • Eliminate Exemptions to State Sales Tax

    • Necessary to become Fed tax collector

    • Too confusing to have different rates

  • Become Fed Tax Collector

    • Collect 1/4% from Feds


The Fair Tax Is:

  • Deceptively Simple

  • Extraordinarily Efficient

  • Fair to all Tax Payers


What do we want from you?

  • Join FairTax Nation

  • Participate in

    • Tea Parties and special events

    • Community Meetings

    • State Organization

  • Let elected officials at State and Federal know you want the FairTax

  • Contribute $$ to support effort (even ¢)


Americans for Fair Taxation

  • www.fairtax.org

  • 1-800-FAIRTAX

  • www.ohfairtax.org


  • Login