Tax Reform: Flat Tax vs. Fair Tax
Income-Tax Foes Regroup
Alliance for National Sales Levy Gains With Some Conservatives
Monday, August 20, 2007
The Wall Street Journal has an article about the Fair Tax, a proposal for a national sales tax to replace the complicated and often unintelligible tax code currently in place.
Fundamental tax reform is a key Republican policy to advance the prosperity of the American people. Earlier this year the House Republican Policy Committee had some discussions about the different routes to reforming the tax system. Former House Majority Leader Dick Armey (now Chairman of FreedomWorks) who is an advocate of the Flat Tax, which is a proposal for a standard tax rate applied to all individuals, spoke with members during a Policy Committee dinner.
In the House, Congressman Michael C. Burgess (TX-26) has led Flat Tax supporters since he was elected in 2002. The Freedom Flat Tax (H.R. 1040) would provide taxpayers the ability to chose a flat tax alternative to the current income tax system. Several House Republican Policy Committee members are all co-sponsors of this legislation. The Flat Tax aims to treat all taxpayers with equality because there will be a constant rate for everyone. Additionally, this proposal eliminates forever the death tax, the capital gains tax, the double tax on saving, and the double tax on dividends. Finally, the Flat Tax reduces the burden on families by eliminating their tax burden until they reach a certain level of income, based on family size.
Following the discussion of the Flat Tax with Mr. Armey, the Policy Committee hosted Denis Calabrese, Founder and Principal of the Patriot Group in Houston, Texas. Mr. Calabrese is an advocate for the Fair Tax and is Mr. Armey's former chief-of-staff.
Congressman John Linder (GA-7) has long been an advocate of the Fair Tax proposal and is the principal sponsor of H.R. 25, the Fair Tax Act, which would repeal the income tax and other taxes, abolish the IRS, and enact a national sales tax to be administered by the States. A number of Policy Committee members support this proposal, which has 63 co-sponsors in the House.
As the article points out, the Fair Tax would replace the current income tax with a 23% national sales tax on goods and services. Some critics point out that the Fair Tax would burden low-income families and individuals who spend most of their money on necessities like food and housing, but supporters of the Fair Tax include a proposal that would provide a "prebate" that eliminates their tax burden up to a certain point. This means that there would be no need to determine whether a good was tax-free or other classification issues that would complicate the system.
Both of these options are consumption based taxes, but they differ in how they are collected. The Flat Tax is collected when income is earned and the Fair Tax is collected when income is spent. These discussions were productive and we learned that the approaches to fundamental tax reform vary within the House Republican Conference, but the one thing that everyone could agree on, regardless of whether you support the Flat Tax, the Fair Tax, or something else entirely is that something needs to be done because the current system is broken.
We'd like to know what you think about this issue, so please leave your comments. Do you support the Fair Tax, the Flat Tax, something else, or leave it as it is now? What's the best way to present these alternatives to the American people?
| Posted by Policy Committee Staff (08-20-2007, 11:14 AM) filed under Unspecified |
Comments
Rather than trying to tinker with the tax code we should put more thought and energy into cutting the size of government.
Comment by: Ninersfan
August 21, 2007 01:48 PM