Jewish World Review June 11, 2004 / 22 Sivan, 5764
Ready for the 'fair tax'? 10 minutes with
Georgia Republican Saxby Chambliss
How would you like to eliminate every single federal tax you pay personal income tax, Social Security, Medicare, corporate, self-employment, capital gains, gift and inheritance?
How would you also like to see the 16th Amendment repealed and the IRS and its oppressive, complicated and unfair tax code disappear forever?
It will happen if a simple, fundamental tax-reform idea the Fair Tax Bill (H.R. 25) ever makes it through Congress. The fair tax, a bipartisan tax reform that has signed up 50 co-sponsors in the House and Senate, would scrap all federal taxes and replace them with a 23 percent national sales tax on everything you buy.
It sounds too simple and too good to be true. But a lot of serious studying and thinking has gone into the idea, first put before the House in 1999 by Georgia Republican John Linder. To find out more about the fair tax, on Thursday I talked with Republican Saxby Chambliss of Georgia, Linder's ally and co-sponsor in the U.S. Senate.
Q: What, in a nutshell, is the fair tax?
A: The fair tax is a replacement for the current income tax code that we've adhered to in this country for decades. It's designed to replace a very complex, unfair tax system with a system that is very, very fair. It would allow individual taxpayers to determine how much in taxes they want to pay, simply by virtue of determining how much money they want to spend, because it is a retail sales tax.
(It replaces) all of our taxes, whether income taxes, Social Security taxes, Medicare taxes, whatever, with a national sales tax. There's a large community of support for it around the country.
Q: The current system would be replaced by a 23 percent national tax on sales?
A: That's the estimate that it would take a 23 percent national sales tax to replace the current system.
Q: Probably most people who've thought about this would go much higher if it meant ending the IRS and withholding taxes. But 23 percent still sounds high to most people.
A: Most people think, "Gee whiz, how in the world am I going to pay a 23 percent sales tax on top of what I pay now when I buy at retail?" First of all, people need to look at the paycheck they get at the end of this week and look at the taxes that are deducted from that paycheck.
If they eliminate all of the federal deductions ... then they all of a sudden realize, "Hey, I'm going to have a lot more money in my pocket." ... (T)hey'll be able to afford that 23 percent sales tax because they'll simply have more money to spend.
Q: And you'd never have to fill out an income tax form?
A: That's correct. There are billions of dollars that are spent on tax preparation every year. Interestingly enough, the accountants like the fair tax. ... (T)hey really make their money advising and managing people in the business community on the world of taxation, not by filling out tax returns each year.
Q: Who, if anyone, is actively working against the fair tax or is afraid of it?
A: There are some people who think the flat tax is a better way to go and, of course, they are in opposition to it. There are some people who don't think we need to eliminate charitable deductions as a tax vehicle, ... (The flat tax) sounds pretty simple. You pay about a 15 percent flat tax, and you can fill out your tax return on a 3-by-5 index card. The problem with it is ... you don't eliminate the Internal Revenue Service. Somebody's got to audit those tax returns you send in. With the fair tax, you'd basically eliminate the Internal Revenue Service.
To those folks who think that without charitable deductions we would not have the size of charitable contributions we have today, I would simply say that, "Look, people will have more money in their pockets." Those people who are inclined to give to charitable institutions, in my opinion, will give more money, because they'll have more money to spend.
Q: For those who are concerned about the size of government and would like to see the amount of taxes as a percentage of national income go down, is that part of the fair tax deal?
A: That's exactly what would happen. It's been projected ... that the embedded cost on any item you buy at retail has an added cost of 23 percent just by virtue of the current tax code. When you eliminate that 23 percent, you automatically have a reduction in the retail cost of everything from a loaf of bread to an automobile.
When goods are cheaper, we're more competitive in the world market. This would make us much, much more competitive than we are today and would help with the balance of trade. There really is no downside to this.
Q: What about poor people?
A: People who are at a poverty level who can't pay that 23 percent would get a check every month for the amount of money that it's anticipated they would spend based on their income. Folks who make a lot of money, who pay a lot in taxes today, would still pay the lion's share of the taxes, because if they make a lot of money, they're going to spend a lot of money. They would therefore pay their fair share. It's a very simplified tax system that is a fair tax system, exactly as it's titled.
Q: When will everyone in the country know what the "fair tax" is? It doesn't get the ink that the flat tax does.
A: It's difficult to make a change like this in a system that's been in place for as long as our income tax system has been in place. There aren't too many people who would tell you that they think our current system is fair. When you talk about changing to a much simpler and fairer system, they like the idea. But they're used to doing what they're doing. They're used to paying taxes the way they've been paying them, and it just takes a lot of education of folks to move them in the direction of a major change like this.
Go on the Internet. Go to our Web site (www.fairtax.org) and you'll see right quick that in the long run, when everybody pays their fair share of taxes including those people who pay in cash today, who virtually pay no taxes their share of taxes will go down.
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JWR contributor Bill Steigerwald is an associate editor and columnist at the Pittsburgh Tribune-Review. Comment by clicking here.
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© 2002, Bill Steigerwald