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Support the Fair Tax to Jump-Start Economic Growth!
An Open Letter to the House Committee on Ways and Means.
July 26, 2011
Dear Chairman Camp, Ranking Member Levin, and Members of the Committee:
On behalf of the 362,000 members of the National Taxpayers Union (NTU) we urge you to give your strongest endorsement to H.R. 25, the “Fair Tax Act of 2011,” and support its passage on the floor of the House. Throughout NTU’s 40-year-plus history we have advocated for fundamental tax reform that achieves lower, flatter, and simpler taxes for all Americans. By repealing the current onerous system in favor of a national retail sales tax, the Fair Tax Act, introduced by Representative Woodall (R-GA), is an excellent plan to achieve those ends. We feel that the passage of this legislation would not only restore transparency and simplicity to the Tax Code, but would also result in substantial economic and social benefits.
Our present Tax Code, replete with an impenetrable maze of deductions, credits, and loopholes, has become an impediment to economic growth and good government. The withholding process, for example, 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 by levies such as payroll and corporate income taxes, which are embedded in 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 dampen economic growth and place us at a significant competitive disadvantage globally. According to a new study from the Oxford University Centre for Business Taxation, the effective average tax rate for corporations in the U.S. is the second-worst among G20 nations. In addition, taxes on capital gains and dividends create distortions that steer resources toward tax-minimization efforts and away from productive activities. By eliminating these taxes, H.R. 25 would allow companies to reinvest their profits in jobs as well as allow 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. Furthermore, as NTU’s 11th annual “Taxing Trend” study indicates, the value of the time alone that individuals and businesses spend complying with the individual and corporate tax laws now exceeds $227 billion. H.R. 25 would substantially reduce this and other tax-induced deadweight losses.
The Fair Tax accomplishes these ends while answering several concerns from defenders of the status quo. 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 federal programs and a suitable starting point for a national discussion on the future size of government. The Fair Tax also preserves every household’s ability to provide for itself, through a universal “prebate” based on the poverty level. This has the effect of protecting against regressivity while also treating all taxpayers, all income, and all products the same.
By promoting freedom, fairness, and economic opportunity the Fair Tax proposal under your consideration would be a dramatic step forward for a Tax Code in dire need of reform. NTU thanks the Committee for its consideration of the Fair Tax Act of 2011 and we encourage you to report it favorably.
Sincerely,Brandon Greife Federal Government Affairs Manager