Here is an interview with Congressman John Linder on the Fair Tax legislation he has introduced into Congress.
Take a moment and think about that. Over 60,000 pages of tax code! And it seems to get worse every year.
What would our economy be like if that chain was removed from around the neck of the American worker and American business? The growth that would ensue would seem almost like a miracle.
Is that really possible? To remove that chain? Yes. In fact there is a Bill in Congress that will do exactly that. And More. The bill is set up to eliminate the IRS and put a consumption tax in place.
The primary sponsor of the bill is Congressman John Linder, the United States Representative from Georgia. We interviewed Congressman Linder, and at the time, there were 60 co-sponsors of the bill in the Congress and Senate.
Here is that interview:
U.S. Representative • (GA-7)
FOR IMMEDIATE RELEASE
June 30, 2006
CONTACT: DERICK CORBETT
FAIR TAX Q&A
Everyday Wisdom: In simplest terms, what is the Fair Tax?
Congressman John Linder: The FairTax is a single rate, universal personal consumption tax that abolishes all federal income taxes--including personal, estate, gift, capital gains, alternative minimum, corporate, Social Security, other payroll, and self-employment taxes--and replaces them all with one simple, visible, federal retail sales tax.
Everyday Wisdom: If The Fair Tax is enacted, what do you believe will be the most important consequences?
Congressman John Linder: Economic growth is number one, and within economic growth are a host of other large benefits. When the Joint Committee on Taxation asked a half dozen different economic groups to analyze the impact on the American economy of a shift to a consumption tax, every economist—from the most liberal to most conservative—reported that a consumption tax would improve America’s growth. That growth means (1) we lose fewer jobs to foreign lands, (2) we borrow fewer dollars from foreign governments, (3) we export more goods made by American workers, (4) we improve the productivity of the American worker, who is already the most productive in the work, and more.
Everyday Wisdom: We've read the Fair Tax book, and it's obvious that an important concept for people to understand is that of "embedded taxes." What are embedded taxes?
Congressman John Linder: I have started a number of businesses in my life, and I have never found a secret drawer where money piled up for me to pay my business taxes. There was no drawer for business income taxes, no drawer for payroll taxes, and no drawer for paying accountants and lawyers to help avoid taxes. In every business, the only mechanism for finding the money to pay all of these tax costs is the price of the product that the business sells. In other words, these are not “business tax costs” at all because they are simply passed along to the consumer, who then pays this “embedded tax”—the tax is embedded in the price of the product and passed along by business.
Since every business involved in making a product must pass these costs along, and because there are literally hundreds of businesses involved in the production of every item, these costs add up in a hurry. Consider a simple loaf of bread. That loaf has the tax costs of the wheat farmer, the tractor maker, the trucking company, the wheat processor, the baker, the bag maker, another trucking company, the advertising company, and the retailer (just to name a few) all embedded (hidden) in the cost of that loaf of bread when you, the consumer, finally purchase it.
Everyday Wisdom: How will poorer families be able to afford the sales tax?
Congressman John Linder: Looking at the bread example above, we see that that low-income Americans are already burdened by this large embedded tax. We also know that low-income Americans are burdened by the income tax and more importantly the payroll tax, the largest tax that most Americans pay.
The FairTax not only eliminates these burdensome taxes but also provides a tax rebate that would totally untax all Americans up to poverty level spending. For a family of four, this means that the first $26,000 of spending is completely tax free.
For millions of Americans trying to climb the economic ladder, the FairTax offers true tax-free living for the first time in 100 years, and with that tax-free lifestyle comes the opportunity to save and build a better future.
Everyday Wisdom: Will the Fair Tax affect Social Security or Medicare?
Congressman John Linder: The benefits and programmatic elements of Social Security and Medicare would not change in any way. However, both of these programs face serious funding deficiencies in the coming years, and the FairTax would strengthen Social Security and Medicare by paying these benefits out of the general sales tax revenues. And it is important to note that the sales tax would be collected from 300 million Americans and 51 million visitors to our shores, expanding the pool of persons who pay into the system. As a result, revenues to Social Security and Medicare would double, as it is expected that the size of the economy would double in about 14 years under the FairTax.
Everyday Wisdom: You wrote a book about the Fair Tax with Neal Boortz, a radio talk show host. How did that come about and how has the book done?
Congressman John Linder: Neal and I have been friends for 30 years and we have talked about the unfairness of the current code for almost that long. “The FairTax Book’’ was published last August and made it to the top of the New York Times Bestseller List for paperback nonfiction. When a book about tax reform is at the top of the bestseller list for multiple weeks, you know that you’ve struck a nerve and the grassroots demand for fundamental reform in America is building.
Everyday Wisdom: You recently had a Fair Tax rally in Georgia, how was the turnout? Will there be more rallies?
Congressman John Linder: The turnout exceeded all of our expectations when 4,500 people packed the Gwinnett Convention Center in May for the first FairTax rally. People drove for hours to come to the rally and I believe that over 3,000 people were turned away. This is a grassroots movement, so there will certainly be more rallies. In fact, the next rally is already being planned for Orlando, Florida.
Everyday Wisdom: Where do you see the most opposition to the bill coming from? Won't it take away power from politicians in Washington?
Congressman John Linder: The FairTax would eliminate the need to pass massive tax bills filled with special exemptions and credits for special interests. The overwhelming majority of people in Washington are there to do what they believe is best for the nation – we just disagree on the details of how to achieve these goals. And the best way to achieve fundamental tax reform is another one of those big debates. However, it should be noted that there are some who work in Washington whose intellectual capital is their knowledge of how to game the tax code and who benefit from continually complicating the tax code. These folks are not big supporters of a bill that would eliminate the need for exemptions, deductions and credits within their tax code.
Everyday Wisdom: How much does it cost Americans and corporations in both time and money to fill out tax forms?
Congressman John Linder: Americans spend between 6 and 7 billion man-hours each year just filling out IRS forms. We spend that much time calculating the tax implications of a business decision, and we lose 18 percent of our economy to making tax decisions instead of economic decisions. The previous director of the Congressional Budget Office informed me that we spend $400 to $500 billion each year complying with the current tax code to remit $2 trillion. This is hardly an efficient way to raise taxes. In fact, studies show that it costs the average small business $724 to collect, comply with the current code and remit $100 to the Federal Government. And, ultimately, it is the American consumer who pays all of these compliance costs and the payroll taxes that get embedded into the costs of goods.
Everyday Wisdom: If you had to guess, how much extra income would come from the following three sources who with the present code avoid paying income tax:
Congressman John Linder: These numbers are substantial, but capturing additional tax isn’t the main goal. The goal is economic growth first, and fairness second. Bringing companies back to America won’t raise a penny in tax directly because businesses don’t pay the Fair Tax. But these businesses will hire employees and sell goods, and both activities will improve the economy and increase the tax base.
Everyday Wisdom: For people who like the idea of the Fair Tax, what can they do to help the bill become law?
Congressman John Linder: Across America, something is going on with the Fair Tax every single day. I have testified before my colleagues in Congress that the most important thing for all of us to do is to move forward by acknowledging that our current system is broken beyond repair. In terms of grassroots efforts, if you have passion for the FairTax, you should share that passion with others. And for those who have not yet formed an opinion on the FairTax, we should encourage them to study it. In addition, in order to keep those who are interested up-to-date on all the important FairTax developments, I have created a new FairTax web site at http://linderfairtax.house.gov that will serve as central meeting place where everyone can come to find answers to anything FairTax-related that they have questions about.
Everyday Wisdom: If this bill is passed what is the time frame before it could be in place?
Congressman John Linder: Once the FairTax is signed into law, we would like to provide 12 to 24 months before it actually begins. This will give the marketplace ample time to prepare and adjust.
Everyday Wisdom: Is this idea growing in the house and the senate?
Congressman John Linder: With 56 sponsors in the House of Representatives and four sponsors in the U.S. Senate, the FairTax is the most widely supported and cosponsored fundamental tax reform legislation on Capitol Hill. With almost a quarter of all Republican representatives as cosponsors, H.R. 25 has real momentum. For comparison, please remember that in 2002, we had just eight cosponsors in the House and none in the Senate.
Voters across the country continue to ask their members of Congress to support the FairTax, and those members are responding. One voter and one member of Congress at the time, we can make the FairTax a reality. With a growing list of co-sponsors, and the help of enthusiastic and hard-working FairTax supporters across the nation, the time is right for this kind of sweeping change.
More information on the Fair Tax:
Congressman Linder also has given us a paper titled "Key Principles of Fundamental Tax Reform." To read about these key principles,
Fair Tax for America's future
U.S.House of Representive John Linder has taken a leadership role in the effort to enact fundamental tax reform. His legislation, the Fair Tax Act (H.R.25) is a proposal for changing United States tax laws to replace all federal personal income taxes, payroll taxes, corporate taxes, and capital gains taxes. We support the idea of a fair tax for everyone.
To go to the top of this interview with Congressman John Linder, click here.