In 1994, three Houston businessmen met for lunch. As was common, they began commiserating about the ridiculousness of the federal income tax system. But at this particular lunch, they decided to do something about it.

Each of them pledged $1.5 million as seed money to hire the best tax experts in America to identify the faults with the current federal tax system, to determine what American citizens would like to see in tax reform, and then to design the best system of taxation. With their initial infusion of $4.5 million, these three men raised an additional $17 million. That money funded focus groups with citizens around the country as well as studies done by nationally prominent experts in tax policy. The market research also included telephone surveys, targeted advertising, and measurement of Web site hits from that advertising.

The research was extensive and distinguishes the resulting FairTax from every other tax reform proposal ever put forward. The FairTax is a thoroughly and professionally researched response to the question: “What do the American people want in their tax system?”

The tax policy experts hired to research and develop the FairTax came from University of Maryland, Boston University, The Cato Institute, Harvard University, The Heritage Foundation, Rice University, Baker Institute for Public Policy, Massachusetts Institute of Technology and other equally highly-respected American institutions. The final result was a bi-partisan bill sponsored by Rep. John Linder (R–Ga.) and Rep. Collin Peterson (D-Minn.).

Originally submitted to the House of Representatives as HR 2525, “The Fair Tax of 1999,” it was resubmitted in the current session of Congress in January 2009 as HR 25, “The Fair Tax Act of 2009.”

In January 2006, an additional $2 million was spent in research to make sure the FairTax was still the best tax replacement solution for our nation’s current economic situation. The results showed that it is.

These studies make the FairTax the most thoroughly researched tax plan ever presented to Congress.

For the federal government to take such a significant step as to eliminate the income tax code in favor of a national consumption (sales) tax will require evidence of overwhelming support from the American people. Therefore, Americans for Fair Taxation was established and is currently developing organizations in each of the states to educate people and encourage their support of the FairTax.

Since it was founded in 1995, Americans for Fair Taxation has grown to become the largest tax reform organization in the United States, with over 300,000 registered supporters and members. The real number of American supporters can’t be measured except by the growing number of congressional co-sponsors which is currently the largest number ever achieved by any tax reform legislation.

Discussions with focus groups of Americans showed that citizens want a tax system that provides fairness, simplicity and visibility. The FairTax achieves these objectives through equal taxation at one rate for everyone with the tax rate prominently displayed on every cash register receipt.

FairTax plan

The FairTax replaces the entire income tax system with a single, simple 23-percent inclusive (30-percent exclusive) consumption or sales tax on all services and new goods – no tax on used goods. No American citizen pays any federal tax on the purchase of basic necessities through a monthly “advance” to every household, based solely on the number of people in the household – not on income.

The FairTax would:

* End all personal and corporate federal income taxes and filings

* Eliminate tax loopholes and lobbyists – no exemptions, deductions or special interest groups

* Broaden the tax base: all citizens, illegal aliens and visitors (50 million per year) pay the FairTax

* Motivate people to work hard by permitting every employee to keep his or her entire paycheck – no payroll or income tax withholding

* Help and support the poor and needy – no federal tax on basic necessities

* Let retirees keep their full pension and Social Security checks, untaxed

* Let everyone keep their capital gains and investment incomes, untaxed

* Encourage savings and investment, creating greater national growth, jobs and productivity

* Consider education an investment; tuition at all levels is not taxed

* Eliminate gift and inheritance or estate taxes, and the Alternative Minimum Tax

* Encourage return of wealth invested in foreign tax havens, providing much-needed capital to fuel the growth of America’s economy

* Promote exporting by removing embedded taxes, leading to more jobs in America

* Discourage importing, as imports are taxed the same as domestically produced goods

* Stimulate U.S. economic growth through the proven free-enterprise system

* Make the federal tax rate very visible, and therefore, politically risky and difficult to increase

* Raise the same amount of revenue for the federal government as the income tax system does

* Free nearly $300 billion spent each year to comply with current income tax regulations

* Eliminate the IRS, freeing $10 billion and lowering the cost of enforcement

* Repeal the 16th Amendment through companion legislation, forbidding taxation of income

Under the FairTax plan, the federal government will receive the same amount of revenue as it does under the current income tax system, but does so in a fair, simple and visible means by allowing everyone to decide how much tax they are willing to pay through the purchases they make and when they make them.

Additional information about the FairTax plan is available at the Pennsylvanians for the FairTax Web site, PaFairTax.org; at the Americans for Fair Taxation Web site, FairTax.org; or by contacting Dayton, volunteer FairTax state director in Pennsylvania, at ddayton@pafairtax.org.

Recommended for you