Why Democrats Should Support The FairTax

What do you know of The FairTax?
What have you heard about The FairTax?

Let's not beat about the bush, without bipartisan support The FairTax cannot become reality.

What most people don't realize however is that The FairTax hits all the major requirements requested by the Democrat party for tax reform.

From www.WhiteHouse.gov
'...the President is calling on the Congress to enact comprehensive tax reform that meets the following five principles'

  • Lower tax rates.
    The tax system should be simplified and work for all Americans with lower individual and corporate tax rates and fewer brackets.
  • Cut inefficient and unfair tax breaks.
    Cut tax breaks that are inefficient, unfair, or both so that the American people and businesses spend less time and less money each year filing taxes and cannot avoid their responsibility by gaming the system.
  • Cut the deficit.
    Cut the deficit by $1.5 trillion over the next decade through tax reform, including the expiration of tax cuts for single taxpayers making over $200,000 and married couples making over $250,000.
  • Increase job creation and growth in the United States.
    Make America stronger at home and more competitive globally by increasing the incentive to work and invest in the United States.
  • Observe the Buffett Rule.
    As multi-billionaire Warren Buffet has pointed out, his average tax rate is lower than his secretary’s. No household making over $1 million annually should pay a smaller share of their total income in taxes than middle-class families. This rule will be achieved as part of overall reform that increases the progressivity of the tax code

Let us take the 5 points from President Obama and compare them to what The FairTax does.

1. Lower tax rates
The FairTax lowers tax rates for the vast majority of Americans. More importantly it lowers them from those most in need.
The FairTax is in fact more progressive than the current income tax with those with more wealth paying more in taxes.
Click this chart to show just how progressive the tax rate is.
As you can see those at or below the poverty level (those most in need) pay 0% in taxes and under the prebate system (un taxing up to poverty level spending) actually see an increase in their quality of living.

2. Cut the deficit.
While cutting the deficit is a spending issue more than a tax issue, with a growing economy and thus an increase in tax revenue the extra funds can be used to reduce the deficit. This however will be separate to The FairTax and something we must make sure is done once the bill has passed.

4. Increase job creation and growth in the United States.
Nothing will increase job creation and economic growth than making the US a haven for businesses. No longer are we taxing the entities that create the jobs but we're taxing the wealth of those running them. No more corporate loopholes and exemptions, when they spend they pay into the system. They can just buy from overseas you say? Why would they when the US is now more competitive than ever in the global marketplace.

5. Observe the Buffett Rule.
While this is more geared towards the income tax where the more you make the more you should pay it transfers over nicely to The FairTax. People with money to spend today spend it. Under The FairTax the more wealth you have the more you spend and thus the more you pay in taxes. Warren Buffet can buy a shiny new car and pay The FairTax while his secretary buys a used car and she pays no taxes.
Currently Mr. Buffet does not get a paycheck so he does not pay income taxes. His earnings come from investments where he pays capital gains taxes at a lower rate than his secretary who pays the income taxes and payroll taxes.
Under The FairTax they both pay the same tax and as Mr. Buffet has more wealth will pay a higher rate than his secretary who would not have as much wealth.


From the Democrat Party leadership during the tax reform debates in 2005:

?Fairness:
Tax reform must not result in tax increases on middle-income families, and we
must uphold our commitment to progressive taxation. Millions of middle-income Americans
are paying more than their fair share as a result of an overly complicated, loophole-ridden tax
code. This tax burden will only increase as more families are ensnared by the Alternative
Minimum Tax (AMT). By 2010, the AMT is expected to hit 33 million taxpayers, up from just 1
million in 1999. We believe that tax reform must include a long-term solution to protect
middle-income taxpayers from the AMT’s unintended consequences.

?Simplification:
We must make the tax code far less complex. The tax code and its
regulations currently span more than 60,000 pages, thousands of which have been added
since the mid-1990s. It takes the average family nearly 7 1? hours longer to complete their
tax return than it did in 1994, and tax changes made since 2001 have only served to further
complicate the tax code. The following example illustrates how the current tax code is
unnecessarily complex. Parents with children in college must choose between two nonrefundable
tax credits and the higher education deduction, all of which are calculated
differently with different income limits and phase-outs. Moreover, parents saving for their
children to attend college have to decipher three different saving mechanisms. It is a
taxpayer’s nightmare.

?Fiscal Responsibility:
We must not add to the deficit; indeed, we must steadily reduce it.
Revenue neutrality is especially important given the historic level of debt. Democrats are
committed to reforming the tax code without burying our future under a mountain of national
debt.

Let's address the points one by one.

1. Fairness
While no one thinks taxes are fair the government must be funded somehow and while a progressive tax The FairTax is still the fairest tax reform bill out there. The FairTax treats everyone the same. Everyone pays the same way and no one has any loopholes or exemptions slanting the tax code in their favor. The prebate (un taxing everyone up to the poverty level) is also fair as every household receives the same treatment yet the wealthiest still pay the largest percentage while the poor pay the lowest percentage. We're not sure how it can be fairer than this.

2. Simplification
This we see as being in two stages. 1. The bill must be simple and 2. the process must be simple.
The bill itself is less than 150 pages long and has a plain English version available for those of us who don't speak 'legislation'.
The plan itself requires no filing on an individual basis as all taxes are collected at the cash register and even those businesses collecting it are reimbursed for their time and resources in remitting the funds to the government.
There is no need for a multi-billion dollar federal agency (the IRS) and you have no receipts to keep and file every year.
Now the prebate has been up for debate as a large burden on the government but with prepaid credit cards being readily available these can be handled by companies such as Mastercard or VISA thus making it even simpler on the government and us.

3. Fiscal Responsibility
The FairTax is revenue neutral. What this means is it brings in the same amount of money the government currently receives.
The FairTax also fully funds social security and medicare from a more stable revenue stream so our seniors will lose no benefits.
The FairTax is simply a way to replace how the government generates its revenue, it does not cut or do away with any programs currently in effect.
And as we said before on the Presidents points, The increase in revenue from the economic growth can be used to reduce the deficit and pay down the national debt. But we must make sure those funds are used for that purpose.

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Oklahoma FairTax and Americans For Fair Taxation are non-partisan groups and welcome support from all sides of the political spectrum.
We need support from Democrats in order to further The FairTax bill to benefit all Americans.
If you have any questions, concerns or additions please do not hesitate to contact us and we'll be happy to help in any way we can.
Thank you for your time.

 

If you would like to learn more, get involved and help with our goal please browse the website and we look forward to meeting you shortly.
Search the 'Library of Congress' and track the progress of HR.25 The FairTax