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The FairTax Plan HR 25/S25

The FairTax Plan HR 25/S25. The need for fundamental reform has never been greater:. 75 percent of Americans are more interested in tax reform – making the system fairer and simpler – than in tax cuts. 59 percent of Americans are dissatisfied with the current system

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The FairTax Plan HR 25/S25

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  1. The FairTax Plan HR 25/S25

  2. The need for fundamental reform has never been greater: • 75 percent of Americans are more interested in tax reform – making the system fairer and simpler – than in tax cuts. • 59 percent of Americans are dissatisfied with the current system • 64 percent believe that the system requires major changes or a complete overhaul. Poll conducted by Wirthlin Worldwide, March 2000.

  3. Why reform the current system? • It distorts economic activity; • Depresses total income and employment; • Hides the cost of government; • Is complex, and expensive to comply with and enforce; • Is subject to abuse by both taxpayers and the IRS; and • Is considered unfair.

  4. Four Attributes of a Good System: • Fairness • Visibility • Neutrality • Simplicity (The FairTax meets all four requirements!)

  5. Americans support the FairTax: • Polls show that while only 30 percent of individuals initially supported a national retail sales tax (NRST), once given the details, 70 percent of these same individuals favored a NRST. • Market research confirms these results. Only two weeks of educational advertising in three test markets produced large swings in favor of the FairTax. Support increased by 11 percent and opposition dropped 13 percent -- a 24 percentage point swing. Results from Wirthlin Worldwide (March 2000) and Market Strategies (September 1996).

  6. The FairTax untaxes the poor: • Eliminates payroll taxes, which are more burdensome than federal income taxes for 75 percent of Americans. • Rebates taxes on spending up to the poverty level so that no one pays taxes on essentials. • A single mother with two children can spend $16,090 without paying any taxes. If she spends twice that ($32,160), her effective tax rate is only 11.5 percent compared to 15.3 percent today.

  7. FAIR TAX REBATE TABLE

  8. FAIR TAX PROGRESSIVE GRAPH

  9. The FairTax is progressive. Spending by a family of four Based on rebate at 2004 Poverty Levels

  10. FairTax dramatically increases purchasing power: • Gross Domestic Product would increase by 10.5 percent in the first year, equivalent to about $4,000-$6,000 in average family income. • Would result in an immediate increase of 2.4 percent in family wealth. • Raises the real wage rate by 8 percent. • Prices would fall by 20 to 30 percent, keeping the the final price of a product largely constant, but an individual would keep their entire pay check.

  11. Creates new factories… • Eighty percent of corporate heads in Europe and Japan said that they would build their next factory in the U.S. when asked how their operations would change if the U.S. replaced the current tax code with a border-adjustable National Retail Sales Tax. (Survey by Princeton Economics) • Twenty percent said they would relocate their international headquarters to the United States.

  12. … while creating jobs in and beyond those factories: • Industry outputs and production would rise by 20 percent in the short-term and by 30 percent in the long-term. • Initially, the labor supply would increase by more than 25 percent. This will decline in the long-term, but remain constant at 10 percent higher than current supply.

  13. Gives the U.S. an export advantage: • U.S. exporters’production costs will drop by 20% on average providing an immediate boost to their competitiveness overseas. • Exports would jump 26.4 percent in the first year. • Ultimately, exports would remain more than 13 percent higher than the level under the current system. • Imports and exports will be put on a level playing field. Exported goods will not be subject to the FairTax, but imported goods will be subject in the same manner as domestic production.

  14. Revolutionizes interest rates: • As savings and investment dramatically increases, the pool of funds available for borrowing increases, decreasing the relative cost of borrowing those funds. • The FairTax eliminates the tax costs that the lender must pay on their earnings, dropping interest rates toward today’s tax-exempt rate. • Rates will decrease by 25-35 percent under the FairTax.

  15. Increases investment: • Because the FairTax eliminates punitive taxation of savings and investment would increase by 76 percent in the first year. • For the following ten years, investment would remain 20 to 60 percent higher. • In the long-term, investment would remain constant at approximately 15 percent higher than under the current tax code.

  16. Boosts the stock market: • Replacing the present tax system with the FairTax will cause the stock market to appreciate. Lower interest rates mean that the present value of expected future income will increase. Thus, lower interest rates cause stock prices to rise. • The FairTax reduces the top marginal tax rate to 23 percent compared to 57 percent today; increasing the expected future return on corporate stock and the value of corporate stock.

  17. Reduces compliance costs… The FairTax eliminates: • The $724 small businesses spend on compliance for every $100 they pay in taxes; • Compliance costs that consume between 2 to 3.5 percent of GDP; and • The $250 billion that Americans spend annually to comply with the federal tax code, which equates to $850 for each man, woman and child in the U.S.

  18. … resulting in a $250 billion tax cut: • The FairTax removes the hidden and embedded costs of our current tax structure from the economy. • The FairTax decreases compliance costs by 90 percent, resulting in savings for Americans, lower costs for consumer goods and less economic inefficiency. • This equates to a $250 billion tax cut, without having to reduce spending or tax revenues.

  19. Why the FairTax? • It is actively supported by over a half million Americans. • It makes every American a voluntary taxpayer. • It is fair, visible, simple and revenue neutral. • No other bill eliminates all corporate and personal federal income taxes, as well as the regressive payroll tax.

  20. Why now? • America is ready • It will stimulate the economy • It’s bipartisan • It’s what our founding fathers intended • It will fix Social Security as well

  21. WHAT CAN WE DO? • Call your legislator’s office and ask that they support FairTax HR 25 • Sign the FairTax Petition • Support FairTax activities in your area • Support FairTax with $$ contributions Visit www.fairtax.org for more information

  22. The FairTax Plan HR25/S25 Prepared by volunteers of Americans for FairTaxation

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