This weeks release. Good info for letter writers.
How much of your neighbor’s income taxes are you paying? Maybe $1,973?
FairTax.org says this broken system has to be replaced.
Houston – “It is time we stopped forcing American taxpayers to pay other people’s taxes,” stated Tom Wright, executive director of FairTax.org. “We need a simple system anyone can understand – like the FairTax. Simple sales taxes encourage compliance via simplicity, while making it harder to run and hide. With a tax system so simple my 11-year-old can explain it, it is much harder to strike the backroom, special-interest deals that make our current system so complex.”
“In a statement to the Advocate Service Committee on Senate Finance on July 21, 2004, Nina E. Olson, National Taxpayer Advocate, stated that the average taxpayer paid $8,265, and of that anywhere from $1,973 to $2,288 is making up for the tax avoidance of others,” continued Wright. “With lost revenues (non-compliance) from $257 billion to $298 billion (annually!), this means that the honest 130 million taxpayers paid on average from $1,973 to $2,288 more in taxes to subsidize the unwillingness or inability of some taxpayers to pay their fair share. In other words, if everyone paid their fair share, average individual income taxes paid per taxpayer could have been from 24 to 28 percent less.”
Wright added, “The evidence grows: The income and Social Security tax systems are bankrupt. And their replacement is not only possible but viable and historically proven. The FairTax offers long-needed simplicity, efficiency, and fairness to all Americans by eliminating the income and payroll taxes. The plan proposed by FairTax.org eliminates all forms of federal payroll withholding, allowing all Americans to keep 100 percent of their paychecks. They will no longer have to fear the IRS and will know that their neighbor down the street is now paying his fair share.”
Karen Walby, Ph.D., FairTax chief economist added, “Nina Olson must agree. In her testimony before Congress she said, ‘If we divide the 2001 net tax gap estimate of $255 billion by 130 million individual taxpayers, we can see that each of those taxpayers in 2001 paid, on average, an extra $2,000 to subsidize the unwillingness or inability of some taxpayers to pay their fair share.’”
Tom Wright exclaimed, “$2000 dollars! What family could not use that? And what about some more time to spend as they wish? According to a recent study by the non-partisan Washington, D.C. think tank, The Tax Foundation, individuals, businesses, and nonprofits spent an estimated 5.8 billion hours complying with the federal income tax code, at an estimated cost of over $194 billion. This amounts to imposing a 20.4-cent tax compliance cost for every dollar the income tax system collects. Time is money. Let’s put that in terms of manpower hours. 5.8 billion hours per year is a work force of over 2,774,000 people – larger than the combined populations of Dallas, Detroit, and Washington, D.C. combined and more people than work in the steel industry and the auto, computer, and airline manufacturing industries altogether. Basing an estimate on data from 1995 through 2001, the cost of compliance could reach from $244.3 to $267 billion in 2007. The impact of the recently enacted Economic Growth and Tax Reform Reconciliation Act of 2001 could lead to an estimate of the cost of compliance as high as $350 billion by 2007. Is this the way our economy and American taxpayers should be burdened? The almost 600,000 members of FairTax.org say enough is enough.”
Compliance costs are regressive, hurting low-income Americans hardest. Dr. Walby added, “Here’s why compliance costs are regressive: Businesses and nonprofits pay 55.6 percent of compliance costs, with the remaining 44.4 percent paid by individuals. Compliance costs paid by individual taxpayers with adjusted gross incomes under $20,000 are 4.53 percent of income; whereas taxpayers with AGI over $200,000 incur a compliance cost of only 0.29 percent. Is that fair? Our members think not. And what about the earned income tax credit? No less than 72 percent of EITC filers used paid tax preparers. In 2001, fully $1.9 billion or six percent of the $32.4 billion in total EITC claimed went to the payment of loan fees, tax preparation services, and filing fees. Partly because the EITC program is so complicated (the instruction booklet is 55 pages), it has a high level of noncompliance and unacceptable nonparticipation. Of the $30.3 billion in EITC refunds in 1999 (2001 GAO report), 27 to 31.7 percent were paid incorrectly. The FairTax resolves these issues by allowing Americans to keep 100 percent of their paychecks (minus state income tax withholding).”
Tom Wright explained further, “Compliance costs are also killing small businesses, America ’s job generator. In 1991, for example, the last year the cost of the system was examined in depth, businesses spent three-fourths as much to comply with the tax laws as they paid in actual tax. The compliance burden is especially heavy on small corporations. Looking just at tax regulations, firms with between 20 to 50 employees incurred per-employee costs of $1,202, whereas firms with more than 500 employees incurred compliance costs of $562 per employee. Double the burden for the small business owner! Small businesses are the backbone of America and they need relief.
In addition to the private sector compliance costs, the government has costs for enforcing the tax code: The IRS budget. The budget was under two billion in the 1970s and has grown to over $10 billion in 2005. A bloated growth rate that is further aggravated by the cold hard facts that compliance is not related to taxpayer expense. The FairTax slashes compliance costs. Under the FairTax, 130 million plus individuals would no longer have to file tax returns, period. Only businesses selling goods or services file state sales tax returns. They remit the national sales taxes collected along with their state sales taxes once per month. They no longer have to administer income tax withholding and payroll deduction on wages paid to their employees. Under the FairTax, the number of tax filers decreases by more than 80 percent. To further support this, research by The Tax Foundation says the replacement of the income tax with a national retail sales tax would reduce compliance costs by 95 percent.”
“Let’s remove this economic albatross from around the necks of the small businessman, the average taxpayer and all Americans. The FairTax (HR 25/S 25) is the answer for our income and payroll tax burden. It is open, accountable, simple to understand, and fair to all Americans,” concluded Mr. Wright. “No loopholes, no exceptions, and no American pays any federal taxes – hidden or obvious – up to poverty level consumption.”
What is the FairTax plan?
The FairTax plan is a comprehensive proposal that replaces all federal income and payroll taxes with an integrated approach including a progressive national retail sales tax, a rebate to ensure no American pays federal taxes up to the poverty level, dollar-for-dollar revenue neutrality, and the repeal of the 16th Amendment. This non-partisan legislation (HR 25/S 25) abolishes all federal personal, gift, estate, capital gains, alternative minimum, Social Security, Medicare, self-employment, and corporate taxes and replaces them all with one simple, visible, federal retail sales tax – collected by existing state sales tax authorities. The FairTax taxes us only on what we choose to spend, not on what we earn. It does not raise any more or less revenue; it is designed to be revenue neutral. So it is also cost neutral – the final cost for goods and services changes little under the FairTax. The FairTax is a fair, efficient, transparent, and intelligent solution to the frustration and inequity of our current tax system.
What is Americans For Fair Taxation (FairTax.org)?
FairTax.org is a non-profit, non-partisan, grassroots organization dedicated to replacing the current tax system. The organization has hundreds of thousands of members and volunteers nationwide. Its plan supports sound economic research, education of citizens and community leaders, and grassroots mobilization efforts. For more information visit the web page: www.fairtax.org or call 1-800-FAIRTAX.