FairTax Plan Would Stimulate National Growth
By Leo Linbeck Jr.
Houston became the fourth-largest city in America because of the can-do resolve of its founders, decades of entrepreneurial effort and the vision that drove residents to dare to think they could make a port city 50 miles inland from the Gulf of Mexico. What has kept Houston growing, in spite of national downturns, is a pro-business attitude and one of the lowest state and local tax burdens in the nation.
Today, however, with U.S. unemployment holding at higher than 8 percent for more than 42 months, and an August Bureau of Labor Statistics report that showed a disappointing 96,000 new jobs created last month and four people dropping out of the job market for every one who found a job, Houston’s economy – like that of the rest of the nation – needs a boost. There is much national debate over how to stimulate economic growth – whether to spend or save our way out of debt. However, many are failing to address a major root cause of the problem – the 77,000-page federal income tax code, full of loopholes, contradictions and inequities that stymie business growth and polarize Americans into haves and have-nots.
For a growing number of Americans – more than 3,500 of them in Houston alone – the only solution is replacement of the current federal income tax with the FairTax, a federal consumption-based program that taxes citizens on what they spend, not on what they earn. The FairTax is a new, simple, transparent and totally equitable system of revenue generation that levels the economic playing field, does away with the $13 billion-a-year IRS bureaucracy and brings a $1 trillion efficiency to U.S. business every year.
The FairTax is a comprehensive plan to replace federal income and payroll taxes, including personal, gift, estate, capital gains, alternative minimum, Social Security/Medicare, self-employment and corporate taxes with a 23 percent consumption tax on new goods and services – no exceptions, exclusions or exemptions. Included in the plan is a constitutional amendment (HJR 16) that repeals the 16th Amendment and makes a federal income tax unconstitutional.
Last November, Americans for Fair Taxation released estimated incremental revenue projections had the FairTax been enacted in 2009 and 2010. The estimates, developed by Dr. David Tuerck, Chairman of the Economics Department and Executive Director of the Beacon Hill Institute at Suffolk University in Boston, demonstrated that the FairTax generated revenues for 2009 would have been $171 billion more than the IRS revenue and in 2010, $267 billion more.
It is also important to note that under the FairTax, Social Security and Medicare funds are no longer triple-taxed as they are under the income tax: first, when payroll taxes are initially withheld; second when the withheld payroll taxes are counted as part of the taxable base for income tax purposes; and finally, when the promised benefits are received. With the FairTax, Social Security operates exactly as it does today, except it is funded from a broad-based, progressive national retail sales tax versus a narrow, regressive payroll tax.
With the FairTax, consumers will pay the actual price of a product or service with no hidden taxes, and workers will keep 100 percent of the wages they earn. Additionally, the FairTax will eliminate the 15 percent to 25 percent cost discrepancy that manufacturers of American goods face when competing in international trade.
The FairTax lowers business compliance costs and eradicates the tax wedge that drives up the costs of U.S. goods both at home and overseas. Under the FairTax, imported and domestically produced goods incur the same U.S. tax. The FairTax removes all taxes on exports, restoring the international competitiveness of American manufacturers in the global marketplace, thereby further stimulating trade.
What all this means to America is the increased availability of funds to apply to debt retirement, positive economic growth and desperately needed job creation. Consider, for example, the plight of young Americans ages 18-29, 1.7 million of whom have been jobless for the past year, the highest unemployment rate for that age group since World War II. This is a generation in danger of becoming a lost generation, jobless and without meaningful prospects to become productive, contributing members of our society and future leaders of American commerce. The FairTax provides hope for bringing hundreds of thousands of lost jobs back to all Americans, young and old.
In Houston, we have a culture of dedicated, hardworking people and an expectation of making a fair wage for the work we do. Adopting the FairTax will go a long way toward ensuring the future competitiveness of our nation, our city and the people who call Houston home.