By: Howard Johnson, Florida's ARP Chairman, for the “Jacksonville”, Florida “Observer”

After assessing the enormous harm it does to individuals, businesses, and society as a whole, it’s easy to come to the conclusion that the federal income tax code is clearly the worst law in the United States.  The law itself is simply beyond the comprehension of those who write it, enforce it, and live under it.  It has a massive, wasted overhead cost of $235 billion annually.  It generates more than 40 million civil penalties each year, which the IRS issues like parking tickets.  Still, evasion has increased nearly 75% in the past decade alone.  It is almost impossible to comply with if you are honest, but easy to cheat if you are dishonest.

The income tax stifles our individual and collective prosperity.  It contains a highly regressive payroll tax of 15.3%, imposed only on low and middle income wages.  It hides the real tax burden from the American people, artificially inflating prices of all goods and services and taxes savings multiple times.  And finally, all personal financial and business decisions are driven more and more by tax consequences rather than by what is best for the family, business owners, employees and stock holders.

However, there is a new approach called the FAIRTAX.  This Bill in Congress now, will not use income as a basis for taxation; no one’s paycheck will be taxed.  In fact no income of any sort will be taxed – no payroll tax, no gift and estate tax, no AMT and no capital gains tax.  There will be no corporate tax and the IRS will go away.

But before I get into the details it is important to understand how the FAIRTAX came about.  Backed by some of the best economic minds in the country on tax issues, including researchers from such distinguished universities as Harvard, Stanford, Boston University, Rice, MIT and the National Bureau of Economic Research, the FAIRTAX  was one of the most thoroughly studied public policy issues ever to be introduced in Congress. 

$22 million dollars and four years of work went into its development before it was introduced for public debate.  The academic research was constantly exposed to real-life taxpayers, which created an interactive process between the academics and taxpayers.  In short, the plan was developed like any successful product – with both market acceptability and theoretical efficacy.  And unlike revenue Bills that regularly pass through Congress a diverse array of methodologies was used to test the FAIRTAX concept.

Now, how much will the FAIRTAX be and how will it work?  All income-based taxes will be replaced with a single, federal consumption tax of 23% imposed only on new goods and services at the final point of sale.  It is also important to know that the tax must be revenue neutral, that is, it must raise the same amount of money as current law.  But, the cost of all goods and services will decrease by as much as 22% and the take home pay of American workers will increase by 7.65%.  And to protect the poor and seniors, a universal pre-bate will be paid to all legal households that apply for it.

What would the benefits of the FAIRTAX be?  First, Corporate taxes, payroll taxes, compliance costs, deferred tax liability – all would go away.  Businesses could finally focus solely on making better products and maximizing value rather than playing tax games.  The FAIRTAX would make U.S. companies doing business abroad more competitive because the cost of our tax system would not be “exported.”  Further, “imports’ would have our consumption tax applied in the U.S. leveling the playing field for American products.  America will become a tax haven and monies overseas would be repatriated to America’s shores.  And finally, organized labor and business leaders will finally have a public policy on which they can agree.

So, why invest in the FAIRTAX?  The un-taxing of all savings and investments, the repeal of corporate taxes, personal income taxes and payroll taxes, the elimination of hundreds of billions in yearly in compliance costs will have a rapid and dramatic positive effect on the economy.  It will remove government as an economic partner in our lives and businesses and allows all Americans to keep their entire paycheck.

It will have a dramatically beneficial effect on society as a whole.  Punishing work and savings and rewarding non-work will be a thing of the past.  Over 52% of registered lobbying in Washington relates to the present tax code.  The FAIRTAX will also become the most effective campaign finance reform ever devised.  Spending and lobbying to influence the tax code will disappear when the tax code no longer accommodates loop holes, deductions, exemptions and favors of any kind.

And finally, our businesses and all of our citizens will have more economic opportunity, and our nation will be a more productive, stronger and safer place for our children and grandchildren.