As Americans’ irritation with the income tax reaches a fevered pitch, a group of citizen activists work to spread “good news”: There is another way for the government to collect revenue without prying into individuals’ personal finances and without the filing of confusing, sometimes lengthy forms.
It’s called the “Fair Tax,” and its most ardent supporter is a group called Americans for Fair Taxation. The concept is simple: Charge consumers a tax on non-essential purchases at a rate relative to the current income tax, while removing the current wage-based tax system altogether. But there’s a complicated side, as well — informing a public living in an income-tax culture that the Fair Tax exists and that it is a viable option.
While the concept is in legislative form in Congress, the Fair Tax movement is about more than passing a particular piece of legislation. It is a movement spurred on by people who believe an income tax is inherently unfair and un-American. They are people who don’t just want tax relief — they want tax reform. And they’re not politicians.
Danny Clark is a truck driver from Georgia who spends most of his time on the road. But that doesn’t stop him from spreading the word about the Fair Tax. Clark has been known to spark so much interest in the issue over his radio communications with other truckers, that it is not uncommon for inquirers to meet him at truck stops for the printed information Clark carries with him. Indeed, if there is Fair Tax literature at a truck stop, it was likely Clark who put it there.
But Georgians don’t just get their Fair Tax information at truck stops. Americans for Fair Taxation State Director David Klepinger is a self-employed entrepreneur who uses his adaptable schedule to plug tax reform in between his business obligations. Using his own money, Klepinger flies to national conventions to place Fair Tax literature into the hands of attendees.
Another self-employed Fair Tax advocate is Robin Cyr, AFT district director in Maine. Cyr makes his living repairing appliances. So committed is Cyr to tax reform that he has spent $200 of his own money to buy radio air time for Fair Tax promotional information, and gave another $1,500 to help AFT pay for a national magazine ad. But he spends more than money; he also spends his time — logging countless hours in various online chat rooms in the evenings, informing participants about the Fair Tax.
Tax reformers aren’t just businessmen. AFT’s Wisconsin District Director Al Ose has made it his mission to connect headlines from current events to the issue of tax reform, which affects practically every aspect of life, activists say. He has written dozens of letters on the subject, and last year, he participated in a neighborhood parade with his daughter, where he passed out literature on the Fair Tax. Holding regular meetings to help educate his community about tax reform, Ose’s enthusiasm is representative of the passion that drives tax reformers.
And the movement is catching on. In the last year, AFT’s online-community membership has increased seven-fold, and its membership via mail has grown by over 150,000. The group has nearly doubled its financial contributors and has identified, trained and assisted over 100 new district and state directors as volunteers, according to Carrie Ardelian, AFT’s vice president of field operations.
And the manpower is showing results. Over the last 12 months, AFT has generated over 30,000 phone calls and tens of thousands of e-mails to congressional offices in support of the Fair Tax and delivered thousands of postcards to the White House, urging the president’s support of fundamental tax reform. Leaders of the movement have appeared on affiliate TV stations from every major television network, have been featured on over 2,000 talk-radio stations across the country and have appeared or been featured in over 25 print publications.
Now boasting a membership of over 400,000, AFT is a 501c(4) nonprofit, non-partisan organization founded in May 1995. Headquartered in Houston, Texas, the organization also has an office in Washington, D.C., where it conducts tax-reform lobbying and testifies before Congress.
While the movement is based on tax reform, namely the elimination of the income tax, AFT has championed a specific bill in Congress appropriately titled the Fair Tax Act.
Known as H.R. 2525 in the 106th Congress, the bill was reintroduced in the 107th Congress last week, though the new bill number is not yet reflected in the Congressional Record. As with H.R. 2525, the bill is sponsored by Rep. John Linder, R-Ga., who noted that nearly $20 million has been privately raised and spent on economic and market research into the Fair Tax.
“Research we have had done at Harvard’s economics department suggests that 22 percent of what one pays for at retail for personal consumption is the embedded cost of the IRS,” said Linder.
In other words, the prices of products in the retail market are inflated by 22 percent so retailers can cover their own taxes. This concept can be illustrated by considering the cost of a loaf of bread. Everyone involved in the creation of the loaf — from the farmer that grows the wheat to the manufacturers of the equipment the farmer uses and proprietors who sell the end product — will attempt to recover all of their costs, including their tax burdens, through the sale of their goods.
Also known as the National Retail Sales Tax, the Fair Tax has been scrutinized by critics as placing an undue and unfair burden on the poor, who do not have discretionary income and can buy only the necessities of life such as food, clothing, housing and medicine. But Linder counters this argument.
“I want to say that the poor are [already] paying it. Everything that anyone, rich or poor, buys has a 22 percent burden of the embedded cost of the IRS. Getting rid of the IRS will undo that burden.”
Linder’s proposal would eliminate all federal income and payroll taxes, to be replaced by a 23 percent federal retail sales tax collected only once at the point of final purchase. Used items and business-to-business transactions would not be taxed, and families would receive pre-paid rebates for taxes charged on necessities such as food and medicine.
The Department of Health and Human Services annually calculates the cost of necessities for families. Under the Fair Tax proposal, a check would be issued at the beginning of every month that equals the department’s figures up to the poverty line.
That rebate is intended “to offset the entire tax consequences of spending up to the poverty line,” said Linder. “The Federal Department of Health and Human Services tells us that poverty-level spending, which is $8,500 for a household of one or $25,000 for a household of five, will be enough spending to provide the necessities, the essentials of living — food, clothing, health care, housing. We believe that anyone should be able to buy those essentials with no tax consequences, and our rebate will cover those.”
“By authorizing this one sales tax, we will eliminate the personal income tax, the business income tax, the payroll tax, the death tax, the capital gains tax, the sell-employment tax and the gift tax. And, in doing so, we eliminate the IRS and all of its associated problems,” he continued.
One of the “problems” associated with the income tax is the exemptions and regulations current tax laws require to be “fair,” resulting in the complicated nature of the current system. As evidence of the burdensome complication of the income tax, Linder pointed to a recent investigation by Treasury Department employees. Acting as citizens, the employees made phone calls to the IRS public helpline to get assistance with tax returns. According to the Treasury Department, 47 percent of the responses they received from the IRS were in error.
“That is up from 25 percent four years ago. But our Treasury Department, in which the Social Security resides, tells us that 47 percent of their responses are wrong. They do not understand the system. It is time for it to go away,” the congressman remarked.
Accordingly, Linder again introduced the Fair Tax Act, which, like last year’s bill, enjoys bipartisan support. Minnesota Democrat Collin Peterson intends to repeat his role as lead cosponsor of the bill.
“Before I came to Congress, I made my living as a CPA, and I can tell you that no one really understands the current tax system. And every time that Congress has acted to ‘simplify’ the system, they have only made it worse. Under the Fair Tax system, people will get to keep every penny of their paycheck. People will have more control over their own money and their own choices about how they want to use it,” Peterson said last year about H.R. 2525.
“It will be especially good for American agriculture because exports and business inputs would not be taxed. In fact, it could solve our balance of trade problems because our exports will not have taxes built into their prices. And, it will be good for the family farmers who want their children to inherit the farm because there will be no inheritance tax,” he continued. “I think that when people learn more about this idea, they will get behind it. I know it will take time to make this kind of change in the tax system, but I think the time is right to be making this kind of proposal because Americans are fed up with what we have now.”
Indeed, the benefits of the Fair Tax have not escaped the attention of farmers and other business organizations. The American Farm Bureau Federation, the Associated General Contractors of America, National Small Business United and several other groups have given their formal endorsements of the proposal.
Policy groups and think tanks have lent their support to tax reform, as well.
“Well-known groups like the National Taxpayers Union, Citizens for an Alternative Tax System and the Heritage Foundation, despite differing perspectives, share an important pledge: The current federal income tax system is economically destructive and inconsistent with the principles of a free society,” states AFT.
The growing tax-reform movement has its share of proponents, but the supporters still have an uphill battle ahead of them. After its introduction in 1999, H.R. 2525 was finally given a hearing in April 2000, though it was not passed out of committee. The newly introduced bill is sure to face the same hurdles, though AFT and Linder are ready for the battle and are rallying the troops.
In his statement to the House introducing the 2001 Fair Tax Act, Linder called his colleagues to action on the issue of tax reform.
“I believe that the time for tax reform has come,” he said. “While I certainly believe that the Fair Tax is the best change, I believe we should have an open debate on others. I am willing to talk about the flat tax. It is better than the current system. I also believe that we virtually passed the flat tax in 1986 with only two levels of taxation and eliminating many of the deductions, and we have amended it 6,000 times since then. For as long as we know something about you and where you make your income and how much you make and how you spend it and invest it, we can find ways to tax it. America deserves this debate so we can totally revamp the system.”
In his conclusion, the congressman directed his comments to the speaker of the House: “We cannot change this world alone, but with the help of our colleagues and the enthusiasm of America, we will.”
The April edition of WorldNet magazine is devoted entirely to an in-depth examination of the income tax, the 16th Amendment and the legal strategies opponents are using to challenge them. Titled “Tax revolt: How Americans are challenging the IRS and the 16th Amendment,” it is available from WND’s online store.