THE PARTY OF ``OWE'' -- (House of Representatives - March 17, 2009)
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Mr. LINDER. I thank the gentleman for yielding and for organizing this Special Order.
I think it might be good right now to repeat what the Fair Tax is.
The Fair Tax would repeal all taxes on income. No more corporate income tax, personal income tax, no more payroll tax. Most Americans pay more in payroll taxes than income taxes. That pays for Social Security and Medicare. We would get rid of the gift tax, the estate tax, the alternative minimum tax. No more tax on income at all. And instead, we would tax a national sales tax on everything that you purchased.
On average today, the average income American gives the government 33 cents out of every dollar he earns. Under the Fair Tax, they would give the government 23 cents out of every dollar they spend and raise the same amount of money.
Now we are going to come to this point because economic forces are going to drive us to this point. I had the privilege of visiting with Chairman Bernanke last week or 10 days ago or so. One day, whether I am here or not, this Congress is going to decide the only way to go is to a more fair tax, that taxes not what you put into society, but what you take out.
Today we know that on average, 22 percent of what you pay for is the embedded cost to the IRS. With all of the companies that it takes to get a loaf of bread to your table, there are payroll taxes, income taxes, there are compliance costs, they get embedded in that price system. That is the only way a business can pay a bill is through price. And you pay that business' light bill, their rent, and their tax bill.
If we have a price system that is inflated by 22 percent because of the embedded cost of the IRS, that makes us less than competitive in a global economy and jobs move into better tax jurisdictions offshore.
Secondly, the Tax Foundation said that last year we spent $350 billion filling out IRS paperwork. We spend another $125 billion a year calculating the tax implications of a business decision. If we are spending in excess of $450 billion a year just to fill out forms to send them in, that is inefficient. That is stupid. It is like paying for a dead horse. You get nothing from the transaction.
Third, the underground economy is about $2 trillion a year. And the more complex our code gets, the easier it is to go underground and avoid paying taxes. They are not contributing.
Fourth, there is today in offshore financial centers in dollar-denominated deposits $13 trillion. My point to Chairman Bernanke was this: that is money that would be on shore in our markets, in our banks, if we didn't have an IRS.
All four of those issues: the embedded costs, the compliance costs, the underground economy, and the offshore investments, would be eliminated and fixed by getting rid of the IRS. None of them will be touched by nibbling around the edges of our current tax system.
Fifth is this point. We are having a serious problem starting in real estate in America because people can't afford to pay their mortgages. Some made bad choices, but that is a simple fact. Under the Fair Tax the average income earner would have a 50 percent increase in take-home pay. They would pay their mortgages. Now all of this stuff gets fixed in the economy without spending $700 billion here and $700 billion there without raising taxes and everything, as Mr. Mica said.
Lastly, this point: we have never taxed wealth in America; we tax wages. The first thing very wealthy people do is stop getting wages so they pay 15 percent on capital gains and dividends, and if the Obama plan goes through, they will pay a 20 percent tax. But they don't pay anything to Social Security and Medicare because they have no wages.
When Mrs. Kerry had to release her tax return in 2004 during the Presidential election, it showed she had $5.1 million in income the previous year. She paid a 12 percent tax on it. She paid nothing into Social Security and Medicare. She had no wages. This taxes wealth when it is spent. It is fair to assume that she spent a good part of that $5 million on several houses and travel. And in that case if she had spent it all, she would have put $400,000 into Social Security and Medicare, but we don't tax wealth when it is spent today.
Now what would happen if all of this comes to pass? Our studies from outside consultants say that in the first year we would have a 10.6 percent increase in the GDP. I asked Chairman Greenspan when he was chairman if that was inflationary, and he said not at all. We would have a 72 percent in capital spending, and we know that real take-home pay for workers increases in exact correspondence to capital spending.
We would have jobs coming here. An informal study done at Princeton many years ago asked 500 international companies located in Europe and Japan: What would you do in your long-term planning if the United States eliminated all taxes on capital and labor and taxed only personal consumption? Eighty percent said they would build their next plant in the United States.
If you are selling to Detroit, you would rather be in Detroit because transportation costs are high. But we have driven them off with tax policy.
We have lots of debates on the floor of this House, but punishing people who go offshore, locking up their accounts, they are not leaving because they hate America, they are leaving because we kicked them offshore with confiscatory tax policies.
This will come to pass, and it will be fair, and I hope one day we can give back to the American people and the freest society ever known the privilege of anonymity. No one should know as much about us as our Tax Code. We should have no agency of the Federal Government that knows more about us than we are willing to tell our children. Under this system, there would be no agency that knew how you made your money, how much you made, or how you spent it. You could anonymously go into any store, buy something, have the tax collected there just like we do in 45 States with the sales tax, and we would contract with those States to collect the money and remit it to us. We would have a system of government that was fair.
Let me just close with this comment. During the debate in 1912 when income tax was hot and heavy in the United States, one southern Senator made a statement that was considered so ridiculous and outrageous that he was laughed off the floor of the Senate. Here is what he said. He said, ``Mark my words, if we pass this, in time they will be taking 10 percent of everything you earn.'' It was considered ridiculous, but it did bring back to mind my favorite country song, if 10 percent is enough for Jesus, it ought to be enough for Uncle Sam.
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Mr. LINDER. I think that is correct. And in the last Presidential election, Governor Huckabee did run on the Fair Tax. In your State, he won the Republican primary. And he told me he ran because of the Fair Tax Organization in Iowa. We have organizations in 50 States, and most States have dozens of them. These are people who, no matter that happens to me or you or the folks right now pushing this idea, they are not going to let it die. If you Google ``Fair Tax,'' you will find that they are meeting in every State, every week. Somewhere along the way it winds up in the literature.
The American people are going to demand this. If you remember the debates from the Republican primary, it came up in virtually every debate and brought down the house. So I don't think it is going to go away because the American people are not going to allow it.
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