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The federal tax code is a complex, unintelligible mess, and America needs to embrace the simplicity of a national consumption tax known as the Fair Tax, according to Rep. Tom Price, R-Ga., who is just one of many conservatives touting the idea as Americans rush to meet the federal income tax deadline.
“PROBLEM: folks sacrificing precious time, money and peace of mind on a broken complex tax code. SOLUTION: the #FairTax,” tweeted Price on Tuesday. Fellow Rep. Jack Kingston, R-Ga., also tweeted support for the Fair Tax and the abolishing of the IRS.
Price said the first thing Americans need to recognize is that the current tax system is a disaster.
“Our current system actually punishes the things that we say that we want as a society,” he said. “We say we want hard work. We say we want success. We say we want entrepreneurs, risk taking, investment and all those kinds of things. Yet our tax system punishes every single one of them. So many of us believe that we need think more fundamentally and more creatively about it and come up with a tax system that doesn’t just massage what we currently have but puts in place a system that actually rewards those things.”
Listen to the WND/Radio America interview with Rep. Tom Price, R-Ga.:
Fair Tax supporters call for the income tax and payroll taxes to be eliminated and replaced with a national sales or consumption tax in a move that would be revenue neutral and clear out all the confusion and bureaucracy from the system.
"The IRS goes away. All the taxes related to income at both the business and the individual level go away, and we would have a national retail sales tax that would replace that," Price said. "It would bring in the same amount of money, but what it would do is reinvigorate the economy and get the economy rolling in a big, big way because it would encourage jobs to come back from overseas. It would encourage investment, encourage savings, encourage entrepreneurship, encourage hard work and reward success in big, big ways."
Based on current consumption and levels and national revenue figures, the Fair Tax would be roughly in the 20-23 percent range. Price said that may seem steep, but it's actually a good deal when you take out income taxes and consider one other important fact.
"Each and every one of us pays right now about a 23 percent tax in every single good or service that we purchase, but you don't know about it. It's embedded in the system. For example, businesses add into the price of their product an amount that's about equal to 23 percent of the cost of the product to cover their taxes. Businesses don't pay taxes. The consumers that use the businesses do," said Price, who argued once those business taxes go away, the retail prices will go down and Americans would pay about the same as they do now once the Fair Tax was applied.
Price said one caveat to installing a Fair Tax is not just the scrapping of the federal income tax but to pass a new constitutional amendment forbidding an income tax. He said otherwise the Fair Tax could become a nightmare.
"What we don't want is both a consumption tax and an income tax. That's the worst of both worlds," he said. "So when you hear people talking about a Value Added Tax (VAT), that's a consumption tax as well, but it is in addition to income tax. That would be a terrible prospect, because then you give the federal government even more money to expand the bureaucracy and create an ever-larger federal government."
The most common Democratic Party complaint about the Fair Tax is that the rich and poor would pay the exact same percentage in taxes for the same items. Price said that worry is unfounded.
"The way the current bill solves that is to provide everybody with what's called a prebate, so the amount of monies that are felt to be needed for essential services like food, clothing and shelter, one would get a prebate to cover the cost of the Fair Tax on those items. Everybody gets it, so that those at the lower end of the economic spectrum are actually benefited to a greater degree under the Fair Tax than they currently are," Price said.
In late February, House Ways & Means Committee Chairman Dave Camp introduced his version of tax reform that includes fewer tax brackets and an attempted simplification of the system through closing loopholes. Price said it's a step in the right direction toward more of a flat tax system but doesn't go far enough.
There is a House bill calling for the adoption of the Fair Tax, HR 25, but Price said there's not nearly enough backing, even among Republican leaders and members, to advance the resolution right now.