Letter from Senator Diane Feinstein (D-CA) to a consituent -
August 22, 2005
Thank you for contacting me about the "Fair Tax Act of 2005" (H.R. 25). Please know that I appreciate hearing from you and welcome the opportunity to respond.
As you know, several proposals have been introduced in Congress to reform the federal tax system. One such idea, the "Fair Tax Act," would eliminate income
tax, all payroll taxes, the self-employment tax, and other taxes, and replace it with a retail consumption tax. I do not support this retail sales tax proposal
because experts have pointed out it will either add more to our current deficit or require the sales tax to be raised to over 40 percent. With this being the case,
I do not believe that it will provide the freedom and economic opportunity it appears to promote.
In fact, the National Retail Federation reports that a national sales tax would "derail the economy." Federation economists concluded that economic growth
would shrink by 3.1 percent in the first year of a national sales tax. Now is not the time to place our economic prosperity at risk with an untested and
regressive tax scheme.
Nonetheless, I understand that there is interest in simplifying or replacing the income tax system with a new framework that some feel would make the
government less intrusive, and that would create an environment more conducive to saving money. President Bush has assembled the Advisory Panel
on Federal Tax Reform to consider ideas to simplify and improve the Federal tax system. I look forward to hearing the panel's recommendations, which
are due on September 30.
Again, thank you for your letter. Please know that as Congress debates tax legislation during the 109th Congress, I will be sure to keep your comments
in mind. I value and respect your opinion and hope that you will continue to share your thoughts and ideas with me. If I can be of further assistance,
please do not hesitate to call my Washington, D.C. staff at (202) 224-3841. Best regards.
United States Senator
Dear Senator Feinstein,
Thank you for your response to my question about the FairTax Act of 2005. I appreciate your taking the time to let me know your position on tax reform.
I am very concerned about your non-support of S. 25 - the FairTax Act. I am concerned about the sources you quote as the basis for your decision. I am sure the
experts from the National Retail Federation are quite astute and knowledgeable. I am concerned that they have an agenda that skews their recommendations. I am
concerned that you allow yourself to be guided by their recommendation in lieu of the recommendation from other, more objective studies.. and in lieu of the wishes
of your constituents.
The NRF estimate of a 40 percent sales tax is incorrect. Studies indicate that a 23 percent (tax-inclusive) NRST rate will provide revenue neutral government funding.
The studies were led by Dale Jorgensen, Chair of the Economics Department at Harvard University. The researchers had no agenda but to analyze and design the best
system of taxation possible.
In addition to the original studies, a letter was recently signed by over 75 leading economists endorsing the FairTax. These equally astute, knowledgeable and unbiased
academicians recommended the FairTax as the best system of taxation for America. I trust their judgment. I hope that you would do the same. (the letter is attached.)
The NRF claim of "derailing the economy" is obvious hyperbole and propaganda. All objective forecasts and common sense indicate that the FairTax Act would, instead,
unleash our economy. The hundreds of billions of dollars now spent on Income Tax compliance could be spent, instead, expanding business, growing jobs and
consumption. The only thing "derailed" would be the K Street lobbyists and the industry of devising and selling tax code breaks. Even us in the hinterlands understand
how this works.
I applaud the Tax Reform Panel and their efforts to find a better way of taxation. Please do consider their recommendations. Hopefully, they will recommend that you
vote to implement the FairTax Act. If the Tax Reform Panel recommends anything but FairTax, please consider the wishes of all of us that voted for you in the last
election. Please consider that voters in the next election are learning more about FairTax every day. Please understand that the more we learn, the more we support it.
Please understand that we are looking to you for the leadership needed to implement FairTax.
Thank you again for your response and for your consideration of the FairTax Act. You have represented your constituency well on many other issues. Please represent
us again on tax reform. Please support the FairTax Act and co-sponsor S 25.