Replace All Federal Taxes on Income with the Fair Tax Act , HR 25
Ken H. Responds to VAT Chattering.
(This went to 50 newspapers this morning.)
The Consumption Tax That Does Make Sense
The recent trial balloon out of perennially cash-hungry Washington testing whether Americans would abide a European style Value Added Tax is suffering the same fate as the doomed Hindenberg. The sooner this idea crashes and burns, the better. The proposed VAT would be added on top of the badly broken income tax, increasing American's tax burden and hiding even more federal taxes from plain sight. Yet another hidden federal tax would take the nation in exactly the wrong direction.
There is, however, a consumption tax that restores the proper relationship between citizen and government, brings about a new era of American economic growth and cuts the Gordian knot of complexity, unfairness and damage to our economy caused by our own tax system. Most significantly, this consumption tax, called the FairTax, reveals the price tag of federal spending to taxpayers picking up the tab. The most compelling virtue of the FairTax, in fact, may be that it turns every consumer in the United States into a "stakeholder" who will finally pressure politicians to limit spending. For this reason and because it strips Congress of the ability to manipulate the tax code for power and profit, the FairTax finds stiff opposition inside Washington and growing support outside the beltway.
Advocates for pending FairTax legislation rail against the destructive effects and corrupted application of the income tax system. They point to trillions of dollars of private investment that are expected to flow into the United States with elimination of corporate and capital gains taxes. They love the idea of illegal immigrants and the entire underground economy joining the tax base. They endorse the idea of an universal monthly "prebate" to offset the tax on the necessities of life which eliminates federal taxes on the poor and provides the middle class with dramatic tax reductions. And they like the idea of a simple, visible tax on consumption that entirely replaces the income tax system, freeing work, savings and investment from the hobbling effect of such taxes.
But it is the medicine for the Achilles heel of our democracy that may prove the most compelling strength of the FairTax. Our Founding Fathers warned that when, in a democracy, the public discovers that it can vote itself wealth from the public treasury, self-government may destroy the economic foundation of the nation. Many would argue that cynically ambitious candidates and elected officials have been buying votes with the public treasury for years.
Top economists across the nation helped design the FairTax and have proved that it can replace all revenues now collected under the income tax system. Under the FairTax, every retail purchase of new goods and services is subject to federal taxation. The tax paid at the cash register is visible, unlike taxes that are now hidden through payroll withholding and embedded within the price of goods and services. The FairTax visibly connects federal spending to earnings. Today, by contrast, massive spending for entitlements, stimulus projects, pet projects and every other government program seems like “free money” to a lot of voters. One need only look at the courting of the powerful senior citizen’s block of voters, or the growth of “earmarks” to understand the siren song of such promises both to elected officials and to the body politic. Neither voters nor politicians have been able to resist spending beyond our means.
The effect is destructive as politicians from both parties have taken us down a path of unsustainable debt. Some economists cite current and obligated future government debt at the local, state and federal level as so large that it threatens the “full faith and credit” of the United States.
Our destructive answer has been to spend even more by borrowing more from foreign creditors—both to assuage public fears and to address real problems. We are now immorally spending the earnings of our children and grandchildren on both the current challenges of our modern society and the politically popular wishes of entrenched interest groups across the political spectrum. The other primary answer from national leaders has been to collect less by legislating tax cuts in the legitimate hope that lower taxes will spur investment. If we were not already in such deep debt, the debate between the two sides might make sense and a rational middle ground might be achieved. But with more than $11 trillion of national debt, a looming Social Security IOU for tens of trillions more and $40-60 trillion of debt at the state and local level, this argument begins to look a lot like zealots endlessly arguing over whether to bake bread or grow wheat while standing in the middle of a long-parched desert.
Under the income tax system our earnings belong first to the federal government with only the remainder belonging to the citizen. Payroll withholding and direct taxation of earnings turns the whole notion of the American citizen as sovereign on its head and creates a nation of citizens--and now their offspring-- working first for our government. The FairTax restores the role of the citizen by insisting that what we earn belongs first to us and only through our consumption decisions is money then provided for the common good. Most significantly, it makes clear to every American the cost of government promises and programs. In this, the FairTax may prove not just a far better tax system but the best way to both strengthen our economy and provide needed medicine to our Republic.
By Ken Hoagland
Ken Hoagland is a national director of FairTax.org, the grassroots campaign to replace the income tax system with a non-regressive national retail sales tax. Pending legislation now has 53 co-sponsors. Find more information at FairTax.org
The Consumption Tax That Does Make Sense
The recent trial balloon out of perennially cash-hungry Washington testing whether Americans would abide a European style Value Added Tax is suffering the same fate as the doomed Hindenberg. The sooner this idea crashes and burns, the better. The proposed VAT would be added on top of the badly broken income tax, increasing American's tax burden and hiding even more federal taxes from plain sight. Yet another hidden federal tax would take the nation in exactly the wrong direction.
There is, however, a consumption tax that restores the proper relationship between citizen and government, brings about a new era of American economic growth and cuts the Gordian knot of complexity, unfairness and damage to our economy caused by our own tax system. Most significantly, this consumption tax, called the FairTax, reveals the price tag of federal spending to taxpayers picking up the tab. The most compelling virtue of the FairTax, in fact, may be that it turns every consumer in the United States into a "stakeholder" who will finally pressure politicians to limit spending. For this reason and because it strips Congress of the ability to manipulate the tax code for power and profit, the FairTax finds stiff opposition inside Washington and growing support outside the beltway.
Advocates for pending FairTax legislation rail against the destructive effects and corrupted application of the income tax system. They point to trillions of dollars of private investment that are expected to flow into the United States with elimination of corporate and capital gains taxes. They love the idea of illegal immigrants and the entire underground economy joining the tax base. They endorse the idea of an universal monthly "prebate" to offset the tax on the necessities of life which eliminates federal taxes on the poor and provides the middle class with dramatic tax reductions. And they like the idea of a simple, visible tax on consumption that entirely replaces the income tax system, freeing work, savings and investment from the hobbling effect of such taxes.
But it is the medicine for the Achilles heel of our democracy that may prove the most compelling strength of the FairTax. Our Founding Fathers warned that when, in a democracy, the public discovers that it can vote itself wealth from the public treasury, self-government may destroy the economic foundation of the nation. Many would argue that cynically ambitious candidates and elected officials have been buying votes with the public treasury for years.
Top economists across the nation helped design the FairTax and have proved that it can replace all revenues now collected under the income tax system. Under the FairTax, every retail purchase of new goods and services is subject to federal taxation. The tax paid at the cash register is visible, unlike taxes that are now hidden through payroll withholding and embedded within the price of goods and services. The FairTax visibly connects federal spending to earnings. Today, by contrast, massive spending for entitlements, stimulus projects, pet projects and every other government program seems like “free money” to a lot of voters. One need only look at the courting of the powerful senior citizen’s block of voters, or the growth of “earmarks” to understand the siren song of such promises both to elected officials and to the body politic. Neither voters nor politicians have been able to resist spending beyond our means.
The effect is destructive as politicians from both parties have taken us down a path of unsustainable debt. Some economists cite current and obligated future government debt at the local, state and federal level as so large that it threatens the “full faith and credit” of the United States.
Our destructive answer has been to spend even more by borrowing more from foreign creditors—both to assuage public fears and to address real problems. We are now immorally spending the earnings of our children and grandchildren on both the current challenges of our modern society and the politically popular wishes of entrenched interest groups across the political spectrum. The other primary answer from national leaders has been to collect less by legislating tax cuts in the legitimate hope that lower taxes will spur investment. If we were not already in such deep debt, the debate between the two sides might make sense and a rational middle ground might be achieved. But with more than $11 trillion of national debt, a looming Social Security IOU for tens of trillions more and $40-60 trillion of debt at the state and local level, this argument begins to look a lot like zealots endlessly arguing over whether to bake bread or grow wheat while standing in the middle of a long-parched desert.
Under the income tax system our earnings belong first to the federal government with only the remainder belonging to the citizen. Payroll withholding and direct taxation of earnings turns the whole notion of the American citizen as sovereign on its head and creates a nation of citizens--and now their offspring-- working first for our government. The FairTax restores the role of the citizen by insisting that what we earn belongs first to us and only through our consumption decisions is money then provided for the common good. Most significantly, it makes clear to every American the cost of government promises and programs. In this, the FairTax may prove not just a far better tax system but the best way to both strengthen our economy and provide needed medicine to our Republic.
By Ken Hoagland
Ken Hoagland is a national director of FairTax.org, the grassroots campaign to replace the income tax system with a non-regressive national retail sales tax. Pending legislation now has 53 co-sponsors. Find more information at FairTax.org
Replies to This Discussion
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Permalink Reply by micheleking on
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Pretty danged grim w/out FairTax. Great article, thanks.
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Permalink Reply by Randy Stone on -
This is a great post, thanks Jim for passing this along
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Permalink Reply by Jim Tomasik on
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Thanks goes to Ken for a timely response!
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Both articles were great. Looked at Heritage Foundation again because of the article (March 01, 2005) By Daniel J. Mitchell. Still see no support for FairTax. I think these are some of the guys that were soliciting info for helping Republocrats get to a short list. Really disappointing.
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Permalink Reply by Mark Philip Lampton on
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Dear Sir,
May I respectfully suggest that as National Director for FairTax.org you might direct the organizations clout and resources to use the impending bankruptcy of Chrysler and GM to demonstrate to the American electorate the advantage of a national sales tax. To wit, earlier this decade a former GM executive, Gus Stelzer, calculated that 50% of the sticker price of a new Cadillac goes to pay for FICA taxes, state and federal income taxes, corporate tax and other local and state taxes, to include property and state taxes.
Meanwhile foreign produced automobiles--and more importantly auto parts, as even US manufactured vehicles rely heavily on foreign supply chains--are not subject to the same taxes, due to the US' current status as a free trade nation, with the exception of those local and state sales taxes. The exception would be to foreign made automobiles such as Honda or Toyota, which have large numbers of plants in the US which produce the bulk of those firms' manufactures to the US market, but even these firms have reciprocal agreements with the IRS designed by multinationals to limit their tax exposure to one nation at a time, which allow them to pay their taxes to their own nations.
Under the FairTax, the embedded US taxes in GM and Chrysler automobiles would be eliminated and applied, via the FairTax to the--greatly reduced--sticker price of those automobiles, putting them on a more level playing field with other vehicles on the US market. This may not ultimately make much of a difference as it does nothing to address other issues, such as possibly unrealistic labor agreements with the UAW and CAFE fleet fuel efficiency standards which may force these companies to produce cars the American people do not wnat to buy. Nonetheless, the switch in the tax structure will do nothing to exacerbate the problems and will more than likely reduce the severity of the crisis by making the costs of US manufactured vehicles more comparable with those of foreign companies.
The advangtage to our group in adding our--still limited, it would seem--voice to this debate would be twofold. 1. to draw positive attention to our group by using the great media attention to a current economic and legal crisis to demonstrate to the American people how the FairTax may contribute significantly to its solution. 2. to bridge the gaps between those anti-tax activists on the right who are largely in favor of free trade and those groups on both the right of the spectrum--paleoconservatives, Pat Buchanan, Lou Dobbs--and the left of the spectrum--AFL-CIO, all of the groups who applauded Clinton and Obama during the primaries for promising to redesign NAFTA--and focus their efforts on a solution which will increase the costs of foreign manufactures relative to American manufactures, not by violating any of our current trade pacts or raising costs to consumers, but by elminating taxation costs in the manufacturing life cycle of American products in exchange for taxation solely on finished products on the retail markets, taxes that will apply equally to foreign products competing with American ones.
Thank you for taking the time to consider my ideas--I have joined this group with the hope that it will allow national organizations to recieve immediate ideas and feedback from the grass roots. I would greatly appreciate any comments and criticisms.
V/R,
MPL
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Dear Mark,
All good points and all good ideas but our ability to forcefully communicate these points through national advertising remains severely constrained. I even try not to travel so that such funds are available to the most important work. We are just now turning the corner on truly self-sustaining operations through a growing membership willing to contribute. To get us to this point we have made very painful decisions over the past 27 months in slashing overhead so that available resources were almost exclusively devoted to growing the base. It has almost been like starting the FairTax campaign all over again.
In past years there has been "stop and start" funding through large donors that while making the underlying research possible--and the drafting of the original legislation--damaged steadily gaining momentum and anything more than immediate-term planning--when it was medium and long term strategic decisions most needed. By necessity, I have employed every low-cost and no-cost mass communication tactic to accomplish the first two elements of any successful national advocacy campaign: education and recruitment. It is slowly and inexorably working--but not nearly fast enough. To force Congressional action, to have the resources necessary to organize in states where the FairTax has hardly been mentioned, to get the FairTax on the lips of every American and to escape our "right-wing fringe" image so we are properly perceived as as an "American citizen's national movement", we need at least 5 million more supporters and a lot more mass communications. We need every passionate and well reasoned FairTaxer--like you--to pitch in outside the FairTax family.
All of this is to say that these very valid points can and should be disseminated through the web, in face-to-face talks, on every possible blog and social network site and a hundred other ways. I am asking you and all others reading here to help spread these points. Those with any access to union members should work now to get these points across. Local union meetings, Rotaries, Chambers of Commerce monthly meetings, senior clubs and many other local groups are hungry for luncheon speakers. Not all mass communications, in other words, require money--letters to the editor, blogs and posts, Facebook, You Tube and other social network sites--especially outside the FairTax family--can grow the base and create our needed national momentum. Progress and technology has provided us with the means if we have the passion and committment to use it. Win the American people over first and the Washington pundits who have largely slammed the doors on us will follow.
The recent Rasmussen Poll shows us that we are closing in on half the US population supporting replacement of the income tax system with a national sales tax. It also reveals that among Democrats we have far less support. This poll tells us that we are making progress and significantly, where we must devote far more effort--the left. The fact is, the FairTax offers so many advantages to those on the left (and indeed, across the political spectrum) that this poll gives us both welcome news about existing support and our marching orders--talk less to each other and more to fellow citizens who need to learn about the FairTax. Here is the issue that can unite the right and left but it requires extraordinary effort, abandonment of the partisan passions that divide us and patient reasoning to overcome right/left mistrust and polarization.
I will incorporate these timely and well considered thoughts--and thank you for them-- into what we write and talk about every week on radio shows. But let me ask you and every reader here to do the same at local union meetings, internet forums, letters to the editor and call in shows. You've provided important "steak" --with everyone's help, together we can provide the "sizzle".
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Amen. Education of the public is the key. 60 million Fairtax signs held up at our courthouses will be the victory.
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Permalink Reply by Tony on
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Fantastic response!!
As for advertising.....Oklahoma FairTax Inc is already advertising in Tulsa and pushing into Oklahoma City via Public Service Announcements.
Let the system work for us :)
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And "LIBERTY" back to our nation.
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Permalink Reply by Deidre Pavlick on
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Very nice letter Ken. Curious, what papers was this sent to? And is there any permission to send it to others?
Thanks,
Dede Pavlick
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All the bigs. Permission granted. Use it as you can for print or online. Ken
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We do need to make a big noise behind this auto industry fiasco.
This was my list: w-n-m com., congressional scorecard, NAACP, the big shindig in MO, 10th Amend States adopting FairTax.
Where is the info about going around to the local gov.? I know that was one of the things Mr. Hoagland coord. So w/ all of those things, I think the bases are covered. Behind the MO thing, we'll get a huge boost. That and cont. 2 talk to everyone we come in contact.
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