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An Open Letter to the United States Congress: Support the Fair Tax to Jumpstart Economic Growth!
May 12, 2011
Dear Member of Congress:
On behalf of the 362,000 members of the National Taxpayers Union (NTU), I urge you to support the “Fair Tax Act of 2011,” which would promote fairness and economic opportunity by repealing our complicated and onerous tax system in favor of a national sales tax. Introduced as H.R. 25 by Representative Woodall (R-GA) and as S. 13 by Senator Chambliss (R-GA), the Fair Tax restores transparency and simplicity to the Tax Code, which would result in substantial economic and social benefits.
Our current Tax Code, replete with an impenetrable maze of deductions, credits, and loopholes, has become an impediment to economic growth and good government. Under the current system, the withholding process makes it difficult to determine how much of a worker’s earnings are being used to fund the government. Consumers’ true tax burdens are also obscured due to levies, like payroll and corporate income taxes, which are embedded into the price of every good and service. By instituting a sales tax with a simple 23 percent tax-inclusive rate, the Fair Tax would eliminate all income and payroll taxes and make the cost of government plainly visible on cash register receipts. This would provide taxpayers with better information and enable them to more effectively hold elected officials accountable for allocating revenues wisely.
The Fair Tax would also eliminate the complexity and high rates that dampens economic growth and places us at a significant disadvantage in the global competition for investment. When combined with state taxes, American corporations face an average burden of nearly 40 percent, roughly 10 percentage points higher than the median rate in other developed nations. In addition, taxes on capital gains and dividends create distortions on capital allocation and formation that steer resources to tax-minimization and away from productive activities. By eliminating federal taxes on savings and investment, the Fair Tax would allow companies to reinvest their profits in jobs as well as allowing individuals to set aside more for retirement. At a time when Americans are simultaneously being squeezed by a poor economy and increased competition from emerging markets, the Fair Tax would make the United States a prime destination for investment and growth.
The Fair Tax accomplishes these ends while reflecting several features of our present Tax Code. The 23 percent tax inclusive rate is designed to replace revenues from the current scheme of income and payroll taxes dollar-for-dollar, ensuring a stable funding base for government that will permit elected officials to methodically pare back wasteful programs while establishing an affordable tax rate for the long-term. The Fair Tax also preserves every household’s ability to provide for itself, through a universal “prebate” based on the poverty level. This ensures progressivity while also treating all taxpayers, all income, and all products the same.
By promoting freedom, fairness, and economic opportunity the Fair Tax proposals introduced by Rep. Woodall and Sen. Chambliss would be dramatic steps forward for a tax code in dire need of reform. NTU applauds the introduction of the “Fair Tax Act of 2011” and we encourage all Members of Congress to work towards its passage in tandem with the repeal of the 16th amendment.
Federal Government Affairs Manager
108 North Alfred Street Ø Alexandria, Virginia 22314 Ø Phone: (703) 683-5700 Ø Fax: (703) 683-5722 Ø Web: www.ntu.org