FairTaxThe

FairTax.orgSM

The Fair TaxHR 25/S 13

The Fair TaxHR 25/S 13

Why Reform the Current System?•It Distorts Economic Activity;•Depresses Total Income and Employment;•Hides the cost of Government;•Its Complexity Significantly increases Compliance Costs and Enforcement Challenges;

Why Reform the Current System?

•Is subject to abuse by both taxpayers and the IRS;•It is widely considered unfair and inefficient, and•Puts US producers at a disadvantage in our increasingly global economy

Why Reform the Current System?

•Is subject to abuse by both taxpayers and the IRS;•It is widely considered unfair and inefficient, and•Puts US producers at a disadvantage in our increasingly global economy

Why Reform the Current System

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1400016500

19500

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45662

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60044

7032072536

0

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1913 1939 1945 1954 1969 1974 1984 1995 2001 2002 2003 2004 2009 2011

Total Pages of Federal Tax Rules(Internal Revenue Code, Treasury Dept Rulings, IRS Regs & other official pronouncements)

Source: Commerce Clearing House

FAIR TAX PLAN•Taxes all new goods and services purchased for personal consumption once, with no exceptions, at $0.23 out of every dollar spent – a revenue neutral rate.•Eliminates payroll and corporate income taxes which are embedded at each level of the US supply chain.•Would facilitate the repeal of the 16th Amendment by enacting the ONLY alternative revenue neutral proposal which would survive a repeal of the 16th.

FAIR TAX PLAN•Taxes all new goods and services purchased for personal consumption once, with no exceptions, at $0.23 out of every dollar spent – a revenue neutral rate.•Eliminates payroll and corporate income taxes which are embedded at each level of the US supply chain.•Would facilitate the repeal of the 16th Amendment by enacting the ONLY alternative revenue neutral proposal which would survive a repeal of the 16th.

FAIR TAX PLAN•Replaces federal income, estate, and payroll taxes.•Provides a simple, transparent, progressive national retail sales tax system administered through the existing sales tax operations.•Revenue Neutral: Generates sufficient revenue to replace, dollar for dollar, all federal income, estate, and payroll taxes (using static measurement).

FAIR TAX PLAN•Replaces federal income, estate, and payroll taxes.•Provides a simple, transparent, progressive national retail sales tax system administered through the existing sales tax operations.•Revenue Neutral: Generates sufficient revenue to replace, dollar for dollar, all federal income, estate, and payroll taxes (using static measurement).

FAIR TAX PLAN•“Prebates” every family, ensuring no American pays any federal tax up to the poverty level.•ONLY tax proposal developed using modern marketing techniques to find out what the American people, across the political spectrum, wanted in a tax system.

FAIR TAX PLAN•“Prebates” every family, ensuring no American pays any federal tax up to the poverty level.•ONLY tax proposal developed using modern marketing techniques to find out what the American people, across the political spectrum, wanted in a tax system.

The Fair Tax•Fair

•Simple•Transparent

•Replaces all Current Federal TaxesExcept excises (approx. 5%)

The Fair Tax•Fair

•Simple•Transparent

•Replaces all Current Federal TaxesExcept excises (approx. 5%)

Impact on you and your family•Take home your entire paycheck•Never file tax returns again•Eliminates personal tax records•Dramatically simplifies administrative burden and compliance costs for businesses•No estate planning necessary•Significantly increases demand for US produced goods, which means millions of new jobs created

Impact on you and your family•Take home your entire paycheck•Never file tax returns again•Eliminates personal tax records•Dramatically simplifies administrative burden and compliance costs for businesses•No estate planning necessary•Significantly increases demand for US produced goods, which means millions of new jobs created

How does it work?All new goods and services are taxed once,

at $0.23 out of every dollar spent

ButEmbedded taxes at each level of the supply

chain are eliminated

All Americans Pay Fair Share

How does it work?All new goods and services are taxed once,

at $0.23 out of every dollar spent

ButEmbedded taxes at each level of the supply

chain are eliminated

All Americans Pay Fair Share

How does it work?

There are no taxes collected on investments (Education tuition is an investment)

There are no taxes collected on used items

How does it work?

There are no taxes collected on investments (Education tuition is an investment)

There are no taxes collected on used items

What about the poor?

Prebate makes The FairTax progressive when measured against consumption

What about the poor?

Prebate makes The FairTax progressive when measured against consumption

2011 FairTax Prebate Schedule¹

One Adult Household Two Adult HouseholdFamily Size Annual

Consumption Allowance

Annual Rebate

Monthly Rebate

Family Size Annual Consumption

Allowance

Annual Rebate

Monthly Rebate

1 Person $10,890 $2,505 $209 Couple $21,780 $5,009 $417

and 1 Child $14,710 $3,383 $282 and 1 Child $25,600 $5,888 $491

and 2 Children $18,530 $4,262 $355 and 2 Children $29,420 $6,767 $564

and 3 Children $22,350 $5,141 $428 and 3 Children $33,240 $7,645 $637

and 4 Children $26,170 $6,019 $502 and 4 Children $37,060 $8,524 $710

and 5 Children $29,990 $6,898 $575 and 5 Children $40,880 $9,402 $784

and 6 Children $33,810 $7,776 $648 and 6 Children $44,700 $10,281 $857

and 7 Children $37,630 $8,655 $721 and 7 Children $48,520 $11,160 $930

¹The annual consumption allowance is based on the 2011 DHHS Poverty Guidelines as published in the Federal Register, January 20, 2011, p. 3638.

Effective Tax Rate: 2011

What about my Mortgage and Charitable Deductions?

•No more deductions needed•These deductions allow you to pay with untaxed dollars•You must itemize to claim deductions (Only one-third of taxpayers itemize deductions)•FairTax allows entire payment with untaxed dollars

What about my Mortgage and Charitable Deductions?

•No more deductions needed•These deductions allow you to pay with untaxed dollars•You must itemize to claim deductions (Only one-third of taxpayers itemize deductions)•FairTax allows entire payment with untaxed dollars

Balance of Trade

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Trade Deficit: 1968 to 2010

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Balance of Trade•Manufacturing operates at a substantial disadvantage on world market due to tax system.•IMPORTANT: This is not something that other countries are doing to us – we are doing it to ourselves!•REAL reform of this counter-productive system would mean the creation of good jobs and faster economic growth.•Manufacturing and agricultural sectors would be reinvigorated.

Balance of Trade•Manufacturing operates at a substantial disadvantage on world market due to tax system.•IMPORTANT: This is not something that other countries are doing to us – we are doing it to ourselves!•REAL reform of this counter-productive system would mean the creation of good jobs and faster economic growth.•Manufacturing and agricultural sectors would be reinvigorated.

Collateral Benefits•Illegal underground economy added to tax base•US assets stranded off shore by the current tax system ($11 trillion est.) would be repatriated

Continued

Collateral Benefits•Illegal underground economy added to tax base•US assets stranded off shore by the current tax system ($11 trillion est.) would be repatriated

Continued

Collateral Benefits•Because of faster growing economy, the federal budget deficit would be significantly improved.•Replaces payroll based funding of Social Security/Medicare, improving the solvency problem significantly.

Collateral Benefits•Because of faster growing economy, the federal budget deficit would be significantly improved.•Replaces payroll based funding of Social Security/Medicare, improving the solvency problem significantly.

Collection•Collection of such taxes now in 46 states.•Reduces tax form/filing complexity to an irreducible minimum – state sales tax form.•States and retailers get ¼ of one percent of taxes for collection.

Collection•Collection of such taxes now in 46 states.•Reduces tax form/filing complexity to an irreducible minimum – state sales tax form.•States and retailers get ¼ of one percent of taxes for collection.

Summary•Better, more efficient way to collect taxes•Provide same revenue to Federal Government•Take home entire paycheck•Never have to maintain tax records again•Never prepare Income Tax return again•Encourages savings for home ownership, education, and retirement•Funds Social Security, and Medicare

Summary•Better, more efficient way to collect taxes•Provide same revenue to Federal Government•Take home entire paycheck•Never have to maintain tax records again•Never prepare Income Tax return again•Encourages savings for home ownership, education, and retirement•Funds Social Security, and Medicare

Summary•Ensures all Americans pay fair share•Makes American products more competitive overseas and in our own domestic market•Significantly reduces effective rates for low and middle income Americans

Summary•Ensures all Americans pay fair share•Makes American products more competitive overseas and in our own domestic market•Significantly reduces effective rates for low and middle income Americans

SummaryAddresses this country’s most pressing tax related economic problems more effectively than any alternative:

•The spiral of complexity and ever higher compliance costs.•The trade deficit and lack of competitiveness of US produced goods in the global economy.•The looming insolvency of SS and Medicare.•Federal budget deficit.•The AMT (Alternative Minimum Tax)•Our chronically low savings rate

SummaryAddresses this country’s most pressing tax related economic problems more effectively than any alternative:

•The spiral of complexity and ever higher compliance costs.•The trade deficit and lack of competitiveness of US produced goods in the global economy.•The looming insolvency of SS and Medicare.•Federal budget deficit.•The AMT (Alternative Minimum Tax)•Our chronically low savings rate

Linkswww.fairtax.org

www.fairtaxnation.com

Linkswww.fairtax.org

www.fairtaxnation.com

Test Question:Were you paying attention?

• What are the three primary reasons that the FairTax would increase the rate of economic growth and create many (in the millions) good paying jobs in America?

Answer:

1. It would cause price shifts that would make US produced goods more competitive in all global markets (including our own).

2. It would save $250 billion or more per year in wasted compliance costs.

3. It would facilitate the repatriation of most of the est. $13 trillion stranded offshore by the current tax system.

Question #2

• Name at least 5 adverse economic trends that the current tax system contributes to that the FairTax would address?

ANSWER

1. The federal budget deficit – to the extent that slower economic growth (as opposed to spending) is a driver,

2. The trade deficit and ongoing loss of our manufacturing sector,

3. The incessant spiral of greater complexity and higher compliance costs,

4. Our extremely low savings rate – a source of concern to almost all serious economists,

5. The AMT (Alternative Minimum Tax)6. The looming insolvency of Social Security & Medicare7. Health care costs rising faster than the rate of inflation

Questions?Questions?