One of the perspectives that is often lost in the analysis of tax bases, rates, economic growth and the details of this study or that study is the cultural effect that taxation has on a population.

While I have no interest in using government as a tool for social engineering, the fact is that funding a government, regardless of its size, will have an influence on a culture’s behavior. And it seems reasonable to say that the level of that influence will be proportional to the size of the government.

And since our federal government has grown from around 3% of our combined productivity at the beginning of the last century to around 20% at the beginning of this century, it probably makes sense to spend some time considering the manner in which we compel people to commit so much of their personal effort for the collective.

Representative Steve King from Iowa provides an excellent anecdote about the cultural effects of taxation and the contrast in paridigm that causes people to focus on what they want others to pay for under an income tax model as opposed to what they personally want to pay for in a consumption model:

New Hampshire State Senator Robert Clegg is currently running for congress in New Hampshire’s 2nd congressional district. A Republican, Senator Clegg served four terms in the New Hampshire House of Representatives prior to his current term in the state senate.

Senator Clegg is a supporter of the FairTax and offers this post to The Fair Tax Blog with his thoughts on the “stimulus” package and the FairTax:

This week folks will see checks in the mail from the federal government. As part of the so-called stimulus package, the government is returning $600 that it originally took from your paycheck. Apparently Washington politicians have come to the realization that more money in your pocket will stimulate the economy and create jobs. The cost of notifying you of the $600 being returned to your pocket is somewhere in the neighborhood of $42 million and that didn’t even cover the cost of printing new checks and mailing them back to you!

Imagine if the government had left that money in your paycheck in the beginning. Imagine if the government didn’t spend $42 million to let you know it was sending you back some of your hard earned dollars. Imagine if the government didn’t spend millions more of your money sending you back your money.

That is why I am a proponent of the Fair Tax. Lets leave the paycheck with the family. Let’s not tax the worker who takes on a second job to send his daughter to college rather than sitting back relying on the government to increase taxes to do it for him. Let’s change the system to one where your purchasing decisions determine what taxes you pay and your productivity is rewarded not punished.

It’s time for America to allow a family to work hard to better itself, to feed itself, to nurture the belief that a self-sufficient, self-reliant population is a better place than one that waits for government to do it all. We need to reward hard work. We need to leave the paycheck in the pocket of those who have earned it. The time has come for a Fair Tax.

NH State Senator Bob Clegg

Pulled from discussion on Yahoo Groups… 

Congressman Linder held a teleconference town hall meeting on April 28th 2008 (tuesday night) @ 7 pm on the FairTax.  In the conference, he said that he would agree to add language to the bill to delay implementing the FairTax until after the 16th amendment is repealed. This was in the context of his meeting with Senator McCain, who said that we would have to repeal the 16th.  Linder seemed to be implying that he was open to that idea, if that is what it took to get Senator McCain on board.  He has no intention of withdrawing HR 25 from this session of congress and reintroducing it under a new bill # unless it would mean a major increase in support, such as getting Senator McCain.  In the past, Linder has decided against making changes between sessions because of the difficulties surrounding informing all of the co-sponsors.  Linder says that the bill will not come out of committee this year – while Chairman Rangel has been verbally supportive, he isn’t taking any action.  He also said that the “flatter” tax proposal that Senator McCain has proposed isn’t revenue neutral.

It is quite common to hear the flat taxers object that we have to repeal the 16th first or else we would end up with both.   In the past, Linder has also considered adding sunset language so that we would not have to delay implementation for several years until the 16th could be repealed.

McCain seems to have a talent for knowing what sells, even if it transcends party direction or consistent political ideology. By not endorsing the FairTax, is he losing his touch? Or maybe he is selling to the media – is he thinking that despite support from the electorate, the media will not like the FairTax?

Poster Jim Bennett offers these thoughts on McCain’s support of the Flat Tax:

I was disappointed in McCain’s speech May 15, 2008 in Columbus, Ohio, in which he endorsed the wrong tax reform plan. McCain, speaking about the Flat Tax, HR1040, claimed correctly that millions of taxpayers would file under a flat tax and save billions in the cost of preparing their returns. The Flat Tax does represent a vast improvement over today’s Byzantine code and has been implemented successfully in 16 foreign jurisdictions, in which former Soviet republics and satellites are strongly represented (Two more are about to adopt it, and three are actively considering it).

The weakness in the Flat Tax, however, is that it continues to be an income tax retaining the IRS. Congress, in increments, is certain to return it to today’s code that serves us poorly.

The Flat Tax has less popular support than the Fair Tax. It has one sponsor in the House, Michael Burges, R-TX26, and 8 co-sponsors (some of whom also are Fair Tax co-sponsors), all Republicans. The Fair Tax, by contrast, has one sponsor in the House and 69 co-sponsors, and can count at least one Democrat. There are other Democratic supporters in the House who have been discouraged by Speaker Nancy Pelosi from signing on as co-sponsors.

The Fair Tax, furthermore, can count several hundred thousand among its supporters throughout the country. The Flat Tax, championed by Steve Forbes, has a more limited following.

The National Association of Realtors opposes the Flat Tax because of the loss of the local property tax and mortgage interest deductions. The NAR does not oppose the Fair Tax – nor should it.

The choice by McCain of the Flat Tax is an unfortunate distraction and will be redressed over time.

On the same note, Julia Malone notes Linder’s concern with a Libertarian candidate endorsing the FairTax and the Republican candidate not endorsing it:

Republican Rep. John Linder is fretting aloud that Libertarian presidential candidate and fellow Georgian Bob Barr could draw enough votes from “fair tax” enthusiasts to tilt the outcome in a close state contest next November.

Linder, himself an ardent advocate of abolishing the IRS and replacing it with a form of national sales tax, said Tuesday that Barr’s support of this “fair tax” concept could win enough votes to affect the results in Michigan, Florida and even in Georgia.

The expected Democratic nominee Sen. Barack Obama “is going to turn out a helluva vote” in the normally safe Republican state of Georgia, Linder said.

He said he is contacting advisers of the presumptive GOP nominee, Sen. John McCain, to urge them, “Do not take this lightly.”

Linder’s prescription for solving the problem is, not surprisingly, for McCain to embrace the fair tax idea too.

A message from John Linder

Friends,

I am extremely happy to tell you that HR 25, the FairTax, has been reintroduced and is alive and well in the 111th Congress.  Not only that, the FairTax has been dropped with more original co-sponsors than it has ever had.  This is an incredible accomplishment, and it has everything to do with you and the immense passion and work you have put into it.

As a citizen co-sponsor of the FairTax you have played an active role in illustrating to other Members of Congress that the FairTax is important to you and is the right step for America to once again regain her prominence.  Thank you for that.

Our citizen co-sponsor effort has become a powerful tool, as I hoped it would.  This means we need to work together to enhance and strengthen it.  Our goal in Congress is to reach 100 co-sponsors on the bill, and our goal for the citizen co-sponsors is to reach 100,000.  I truly believe that if our citizen co-sponsors can achieve that goal, then that will be the catalyst for HR 25 crossing that 100 co-sponsor threshold.  So now is the time, if you haven’t gotten a friend to join the fight, do it today by sending them to www.johnlinder.com. If you already have, thank you; now go try and find ten more.

The success of the FairTax to date has been tremendous, and it is all a result of your hard work.  It is incumbent upon all of us that we step up our efforts  to ensure that the FairTax has not yet reached its peak, but is still climbing.

Thank you again for all you do,

John

The Washington Post reports that in an effort to raise additional revenue, policymakers are discussing a VAT.

With budget deficits soaring and President Obama pushing a trillion-dollar-plus expansion of health coverage, some Washington policymakers are taking a fresh look at a money-making idea long considered politically taboo: a national sales tax.

A recent Rassmussen report did a poll on the idea and stated that:

To raise additional money for the government, just 18% of Americans nationwide favor a national sales tax. The latest Rasmussen Reports national telephone survey found that 68% oppose such a tax. There is more support for the concept if sales tax revenue is used to provide health insurance for all Americans. In that scenario, 40% favor a national sales tax and 49% are opposed.

The report went on to ask additional questions that reflect the FairTax system.

A plurality of Americans would support a national sales tax if it meant getting rid of the federal income tax: 43% favor that trade-off, but 38% are opposed. Pluralities of Republicans and unaffiliateds like the idea, while a plurality of Democrats are against it.

Forty-eight percent (48%) say a national sales tax is fairer than an income tax while 26% hold the opposite view. The sales tax is viewed as fairer by 52% of Republicans, 44% of Democrats and 49% of unaffiliateds.

Jessica Wexler, who worked the Obama campaign, posted her speech from the Mid America FairTax Rally on FairTax Nation. I have copied and posted the speech below.

Hello, I am Jessica Wexler. I am a strong supporter of the FairTax. I have volunteered with FairTax KC for the past year and written an organizing manual to be used by Fair tax supporters across the country. So there is no confusion, I am a Democrat. I have worked 20 hour days, 7 days a week, for months at a time. I have slept on office floors with blankets pulled from the trunk of volunteers’ cars. During Senator McCaskill’s campaign, I learned the benefit of a union hall with showers, even if they were behind a door marked Men’s. On Novemeber 4th while polls were closing and parties were starting. I was still at President Obama’s Raytown office, working to insure every vote was counted. I have organized teachers in New Orleans and registered voters through Rock the Vote. I have been in favor of the FairTax for several years. Ever since my uncle, for those of you who don’t know him, he is the FairTax KC Geezer, gave me a small paperback book to read. My uncle and I disagree on all the major hot button issues from abortion to gun rights, social security to the death penalty. To sum it up we disagree on how the government should spend our tax dollars. We are in complete agreement on how the government should collect those tax dollars. The FairTax!

I am here to speak about why I, a democrat, support the FairTax. Why other Democrats must support the FairTax. And why it is crucial that the FairTax is a nonpartisan issue both on a local and national scale.

My top 3 reasons for supporting the FairTax are it will increase jobs, widen our tax base, and gives me control over the money I earn.The FairTax increases jobs by eliminating some of the major reasons, such as the capital gains and corporate income taxes, that caused and continue to cause U.S. companies to leave the U.S.

The FairTax widens our current tax base. Under the FairTax; People making money from criminal activity such as drugs pay taxes. Illegal Immigrants pay taxes. People being paid under the table pay taxes. People who once used accountants, attorneys, and financial advisors to find loopholes in our current system pay taxes. Everyone in the U.S. who buys anything new will pay taxes.

With the FairTax; I will finally have control over my money. Managing a nonprofit in Kansas City earning $30,000 a year I was bringing home $418 a week. With the FairTax in place I would be brining home my entire pay check of $576 a week. That’s an increase of $632 per month, totaling $8,216 for the year. A college graduate with $21,000 in student loans would be able to pay off the loans within 3 years using only the increase in salary. I will no longer have to wait a year to receive a refund on the money I earned that the government borrowed interest free; my money will be there every payday.

Fellow Democrats must support the FairTax because it simplifies our tax system, boosts our economy, and is far more Progressive than our current tax system.

We all agree that our current tax system is complex and hard to understand with over 70,000 pages of tax code. According to Money magazine, 99% of us will pay a tax professional to file an incorrect tax return! Democrats want a simplified tax system. The Fair Tax is the simplified tax system! Pay a tax once on new items purchased and that’s it. Buy anything used clothing, books, house, car there is NO Federal tax.

The FairTax will boost our economy in a number of ways. The most important way due to our current unemployment is it will creat jobs. There is over 13 trillion dollars in offshore accounts. The FairTax will bring back an estimated 2-3 trillion dollars in the first year alone to be invested here at home.

The third reason Democrats must support the FairTax is that it is far more Progressive than our current system. Under the FairTax Low-income households experience five times the benefit increase as compared to high-income households. This gives us a greater opportunity to move up the economic ladder and achieve the American Dream.

It is crucial that the FairTax has nonpartisan support. On the National level the FairTax cannot pass without bipartisan support. Our current Senate is made up of 57 democrats, 2 independents, and 40 republicans the House of Representatives is made up of 256 democrats and 178 republicans. We must persuade those on both sides of the aisle to gain passage of the FairTax.

I can not stress enough the importance of nonpartisan support at the local level. Imagine if my uncle never gave me the book, or if I was close minded and unwilling to learn about the FairTax because of all the issues we disagree on. There are entire families of strong Democrats that don’t have an Uncle to persuade them to take the time and learn about the FairTax. If we supporters of the FairTax dismiss the Democrats, we lose 50% of our potential supporters. Everyone must decide if the FairTax is their number 1 issue above all other issues, that is the only way the FairTax can succeed. Most Democrats don’t realize they have a vested interest in the FairTax. Simply because they are unaware of the facts and have been convinced that the FairTax is a Republican issue. We must show them that the FairTax is an American Issue. We have to be welcoming and inclusive of all people willing to listen.

I discovered at my first FairTax meeting that if my uncle was not there I as a liberal democrat would have ran away and never come back. To look at the crowd before me today, it is safe to assume that the majority of you are not Democrats. Democrats are not here for the same reasons I was ready to runaway. At the meeting volunteers were discussing inviting Sarah Palin to speak at an event, and pro-McCarthyism to name a couple of the topics that made me uncomfortable. I was thinking to myself. “What on earth am I doing attending an event with right wing republicans? I need to re-evaluate the FairTax, if this is an example of other supporters.” I am happy to say, I now have great relationships with everyone at FairTax KC. I talk to Earl and John at least once a week. Never would have guessed how well we get along and how many things we are in agreement on. Thankfully, I was able to explain how isolating their unconscious actions were to an outsider.

Now we remind each other that all social issues are left at the door. If you want to discuss the War in Iraq go right ahead, just NOT at a FairTax meeting or FairTax event. All of FairTax KC pamphlets, emails, and speeches are examined to insure that they are inclusive of all people. We have formed a strong grass root organization that thrives on diversity and stays focused on what matters: the FairTax. A year ago, we had 200 email addresses after reevaluating and marketing our ideas to be inclusive of all political parties and organizations we now have over 4,000 email addresses. We have to take the time and make the effort to be inclusive, Not exclusive. I am standing here today as evidence that a staunch liberal democrat does support the fairtax without compromising my liberal views on social issues. Thank you!

With the recent election shift, we’re looking at John Boehner as the Speaker of the House and Eric Cantor becoming Majority Leader.  Boehner never let the FairTax out of committee when he was House Majority Leader in 2006.  So, what will happen with the FairTax?  FairTax is a big issue with the Tea Party so perhaps we’ll see some movement this year, certainly more sponsorship.  Eric Cantor is a staunch supporter of Paul Ryan’s Roadmap for America.  What do you think of this overall plan and its hybrid income tax/vat proposal?

Here are the principal elements:

• Health Care. The plan ensures universal access to affordable health insurance by restructuring the tax code, allowing all Americans to secure an affordable health plan that best suits their needs, and shifting the control and ownership of health coverage away from the government and employers to individuals.

It provides a refundable tax credit—$2,300 for individuals and $5,700 for families—to purchase coverage (from another state if they so choose) and keep it with them if they move or change jobs. It establishes transparency in health-care price and quality data, so this critical information is readily available before someone needs health services.

State-based high risk pools will make affordable care available to those with pre-existing conditions. In addition to the tax credit, Medicaid will provide supplemental payments to low-income recipients so they too can obtain the health coverage of their choice and no longer be consigned to the stigmatized, sclerotic care that Medicaid has come to represent.

• Medicare. The Road Map secures Medicare for current beneficiaries, while making common-sense reforms to save this critical program. It preserves the existing Medicare program for Americans currently 55 or older so they can receive the benefits they planned for throughout their working lives.

For those under 55—as they become Medicare-eligible—it creates a Medicare payment, initially averaging $11,000, to be used to purchase a Medicare certified plan. The payment is adjusted to reflect medical inflation, and pegged to income, with low-income individuals receiving greater support. The plan also provides risk adjustment, so those with greater medical needs receive a higher payment.

The proposal also fully funds Medical Savings Accounts (MSAs) for low-income beneficiaries, while continuing to allow all beneficiaries, regardless of income, to set up tax-free MSAs. Enacted together, these reforms will help keep Medicare solvent for generations to come.

• Social Security. The Road Map preserves the existing Social Security program for those 55 or older. For those under 55, the plan offers the option of investing over one-third of their current Social Security taxes into personal retirement accounts, similar to the Thrift Savings Plan available to federal employees. This proposal includes a property right, so those who own these accounts can pass on the assets to their heirs. The plan also guarantees that individuals will not lose a dollar they contribute to their accounts, even after inflation.

The plan also makes the program permanently solvent by combining a modest adjustment in the growth of initial Social Security’s benefits for higher-income individuals, with a gradual, modest increase in the retirement age.

• Tax Reform. The Road Map offers an alternative to today’s needlessly complex and unfair tax code, providing the option of a simplified system that promotes work, saving and investment.

This highly simplified code fits on a postcard. It has just two rates: 10% on income up to $100,000 for joint filers and $50,000 for single filers, and 25% on taxable income above these amounts. It also includes a generous standard deduction and personal exemption (totaling $39,000 for a family of four), and no tax loopholes, deductions, credits or exclusions (except the health-care tax credit).

The proposal eliminates the alternative minimum tax. It promotes saving by eliminating taxes on interest, capital gains, and dividends. It eliminates the death tax. It replaces the corporate income tax—currently the second highest in the industrialized world—with a business consumption tax of 8.5%. This new rate is roughly half the average in the industrialized world and will put American companies and workers in a stronger position to compete in a global economy.

Read more about the Roadmap for America at Paul Ryan’s site.

I haven’t had time to follow the FairTax situation closely in recent months, but this caught my eye:

WOODALL INTRODUCES FAIRTAX BILL ON DAY ONE WITH

RECORD NUMBER OF ORIGINAL CO-SPONSORS

Washington, DC—On Wednesday, January 5, 2011, Congressman Rob Woodall (GA-07) introduced H.R. 25, the FairTax. The FairTax legislation eliminates the current income tax paradigm and replaces it with a system of taxation based on consumption. The bill was introduced on Wednesday with 47 original co-sponsors—the most original co-sponsors the bill has ever had for its initial introduction.

“I committed to the Seventh District of Georgia that my efforts in Congress would focus on reclaiming freedom for theAmerican people. It is for that reason that I am proud to make the FairTax—the only bill that restores transparency and simplicity to our tax code—my very first action in Congress. I have said since its inception that the FairTax is not a tax bill; it is a freedom bill,” Woodall said.

Woodall, who was sworn-in to Congress earlier in the day, played an integral role in crafting the original text of the FairTax as former Congressman John Linder’s Chief of Staff when the bill was originally introduced in 1999.

“Our current tax system is a bloated, convoluted mess that gives government power over Americans’ pockets. With 47Members of Congress and counting signing their names to the FairTax, we are closer than ever before to voting on legislation that eliminates the frustrating mess that is the IRS.”

Although the FairTax was introduced with 47 original co-sponsors, Woodall anticipates adding many more Members of Congress to the bill. Once the FairTax is introduced with the original co-sponsors, Members are able to sign on to the bill as co-sponsors throughout the 112th Congress.

“The number of signatures on the FairTax this time around is a testament to the will of the people. It is clear that Americans do not want to have their hard-earned money taken away and they want to reclaim the freedom to spend their money how they choose and when they choose.”

The list of original co-sponsors is as follows:

1) Tom Price (GA)
2) Brian Bilbray (CA)
3 ) John Carter (TX)
4 ) Michael Conaway (TX)
5 ) John Duncan (TN)
6) Virginia Foxx (NC)
7) Steve King (IA)
8 ) Michael McCaul (TX)
9) Pete Olson (TX)
10 ) John Sullivan (OK)
11 ) Mac Thornberry (TX)
12) Phil Gingrey (GA)
13) Roscoe Bartlett (MD)
14) Don Young (AK)
15) Ander Crenshaw (FL)
16) Todd Akin (MO)
17) Lynn Westmoreland (GA)
18) Tom Graves (GA)
19) Gus Bilirakis (FL)
20) Ted Poe (TX)
21) Randy Neugebauer (TX)
22) Jeff Miller (FL)
23) Robert Wittman (VA)
24) Jack Kingston (GA)
25) Marlin Stutzman (IN)
26) Jeff Flake (AZ)
27) Billy Long (MO)
28) Cliff Stearns (FL)
29) Tim Walberg (MI)
30) Dennis Ross (FL)
31) Dan Boren (OK)
32) Mo Brooks (AL)
33) Darrell Issa (CA)
34) Richard Nugent (FL)
35) Tim Scott (SC)
36) Blake Farenthold (TX)
37) Jeff Duncan (SC)
38) Rob Bishop (UT)
39) Mike Pence (IN)
40) Sandy Adams (FL)
41) John Mica (FL)
42) Sue Wilkins Myrick (NC)
43) Dan Burton (IN)
44) John Culberson (TX)
45) James Lankford (OK)
46) Mike Pompeo (KS)
47) Gary Miller (CA)

###

Jennifer Drogus
Communications Director Congressman-elect Rob Woodall
Seventh District of Georgia

202.225.4272 | jennifer.drogus@mail.house.gov