- The Washington Times - Monday, January 31, 2000

A quiet battle over the future of our tax system is taking place as reformers vie for the hearts and minds of Americans. Reporting from the battlefield, we can tell you proudly that support for our current income tax system is at its nadir. Americans are ready for a complete tax overhaul,and much of the debate centers around two leading plans, a national sales tax and the flat tax.

The newest plan, the FairTax (HR 2525), uniquely appeals to left and right, Republicans and Democrats. Introduced last summer by Reps. John Linder, Georgia Republican, and Collin Peterson, Minnesota Democrat, the FairTax would replace the payroll, income and death taxes with a retail sales tax on new goods or services. This would result in no tax on the poor, work, savings, investment, entrepreneurship or marriage.

There are many similarities between the FairTax and flat tax. Both have similar tax bases. Both would tax income only once, impose one rate, simplify tax preparation, slash tax planning and compliance costs and greatly raise average incomes and wealth.

However, there are key political and policy differences. The FairTax was designed not only to maximize economic growth, but also to achieve broad political appeal.

The FairTax untaxes the poor. No other reform does this. The FairTax eliminates all payroll taxes and income taxes and its rebate ensures that the purchase of necessities would be tax-free. By increasing taxes collected by businesses that are embedded in the prices of things we buy, retaining all payroll taxes and repealing the earned income tax credit, the flat tax would increase the tax burden on most poor working Americans.

Workers would keep their whole paycheck and retirees their entire pension. No other reform measure permits taxpayers to do this, allowing them more money to spend, save or invest. The FairTax would maximize upward mobility by not taxing the primary vehicle of transport to a better life wages. The FairTax is the ultimate upward-mobility plan for working Americans. The FairTax respects privacy and civil liberty. Congressional hearings and General Accounting Office reports prove the IRS has often treated taxpayers unfairly. The FairTax is the only plan that completely does away with tax filings, audits, seizures and liens for individuals. Businesses would still need to file, but those filings would be a tiny fraction of today's requirements.

The FairTax eliminates hidden taxes. The current system's payroll and corporate taxes disguise much of the tax burden in the prices of consumer products, while the FairTax is displayed with each purchase. A tax system that honestly shows the tax burden will bring more accountability to tax and spending policies by Congress. The flat tax increases hidden taxes. Under today's income tax, and under the flat tax, no one ever really knows exactly how much tax they pay. Under the FairTax, every penny will be visible.

The FairTax lets American-made products compete fairly. With increasing public concern about free trade, the FairTax has a significant edge. Many foreign countries give tax rebates on exports, yet American goods are shipped around the world with our costly tax system built into the prices. Under the FairTax, American and imported goods would pay the same tax when they are sold here. The FairTax stops job-killing taxes on our exports and makes American products more competitive here and around the world. The flat tax would continue the current system's tax on exports and exemption of imports.

It is a reform we can keep. We learned from the sad experience of the 1986 tax reform law that income tax reform laws don't stay simple or flatter for long. The FairTax would scrap the income tax apparatus altogether, which would keep taxes simple and fair for a long, long time.

Finally, the FairTax advocates have worked hard to keep their efforts bipartisan. This bipartisan approach is already paying off as politicians and their constituents take a new look at tax reform.

In two decades since it was proposed, the flat tax has not made significant progress toward passage. But in less than six months since introduction of the FairTax, it has gathered impressive support. Americans for FairTaxation, a leading citizens group promoting the FairTax, now has more than 250,000 supporters. National Small Business United, National Taxpayers Union, Associated General Contractors, and many respected state small business groups all support the FairTax. Arthur Andersen's annual national small business survey confirms that small firms favor the FairTax over either the flat tax or current tax system.

The FairTax is on the move and for good reason. It represents the best chance of achieving, and keeping, genuine tax reform.

David Burton and Dan Mastromarco are partners with the Argus Group and co-authors of the FairTax bill. David Keating is president of Citizen Strategies and former executive vice president of the National Taxpayers Union.

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