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The Fair Tax

Floor Speech

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Date:
Location: Washington, DC

Mr. WOODALL. Mr. Speaker, this is my first time down here as a freshman during Special Orders, my first time trying to coordinate charts and talk the talk and walk the walk all at the same time.

But I'm excited about it because I'm down here to talk about the Fair Tax. And if folks don't know what the Fair Tax is, it's H.R. 25. You can find it at www.thomas.gov, that site that everybody should have bookmarked if you care about what goes on here on the House floor. Because if you don't know, everything that goes on here is available in realtime at www.thomas.gov. It's done through the Library of Congress. It's not a Republican thing or a Democrat thing. It's just the real deal, what's actually happening down here.

And if you go and you look up H.R. 25, it's the Fair Tax. What the Fair Tax is is a bill that repeals all income-based Federal taxes and replaces them with consumption-based taxes.

Now, my friend from Texas (Mr. Gohmert) was just down here on the House floor, Mr. Speaker. He was talking about our Founding Fathers and those things that were happening between 1776 and 1787. And in that time, we funded all the Federal Government with consumption taxes--it was not income taxes; it was consumption taxes--under the theory that if you had enough resources to go out and buy that silver tea set from England, then you had enough resources to help fund the Republic. And if you spent all your time working on your farm, and you just barely had enough money to buy thread at the local five-and-dime, then we weren't going to tax you as heavily.

If you look at this poster, Mr. Speaker, in 1913, right before the income tax began, we had 400 pages of Tax Code in America. Just the last century, in the 1900s, 400 pages of Tax Code and regulations. By World War II, that 400 pages had grown to 8,000 pages, 20 times as much Tax Code by the end of World War II. By the time we were in Korea, 14,000 pages of code and regulation. By the 1970s, 19,000 pages of code and regulation. And in the 1980s, 26,300 pages of Tax Code and regulation.

Now, Mr. Speaker, I'm a reader. I love to sit down and educate myself through the written word; but I have to tell you, 26,000 pages of Tax Code and regulation is going to make a criminal out of all of us because you can't possibly understand all of the ramifications of the tax consequences of your decision.

Do you remember 1986? That was the last time we fundamentally overhauled the Tax Code. 1986. In fact, if you go to www.Thomas.gov, like I suggested, and you look at the laws and regulations, you'll see the Tax Code of 1986. It was the Tax Code of 1954, updated Tax Code to 1986. That was the last time we flattened rates and broadened the basis. Flattened the rates and broadened the base. And where did we end up? Between 1984 when we had 26,000 pages of Tax Code and regulation, we went through this process of simplifying the income tax, and 10 years later in 1995, we have 40,000 pages of Tax Code. By simplifying the income tax, we grew it from 26,000 pages to 40,000 pages.

Now, Mr. Speaker, if you're like me, you go out and you shop around. Are you going to use the H&R Block tax software? Are you going to use the Microsoft tax software? What kind of tax software are you going to use, because you hate paying accountants to do your taxes for you.

You know, I used to just sit down with a pen and paper and do it myself. I used to go through with my calculator and do it myself, but it has gotten too complicated. Why? Because since I have reached the age of majority in 1988, here we have 1995 when I'm coming out of college, between 1995 and 2004, we added another 20,000 pages to the Tax Code, from 40,000 pages to 60,000 pages. In 2007, to 67,000 pages; 2008 kept it to just a little over 67,000 pages. And in 2009, it jumped another 3,000 pages; 70,000 pages of tax legislation.

And to be clear, Mr. Speaker, when we talk about tax legislation, we're talking about the ways in which the government separates you and me and all of the American people from our paycheck. That's all there is in the Tax Code. All the Tax Code is, is how do we separate the American people from their productivity? It takes 70,000 pages in 2009 to sort that out. And 71,000 pages in 2010. And now, 72,000 pages of Tax Code in 2011.

Folks, what the FAIR Tax does, H.R. 25, it asks the question that if we could start from scratch--and by scratch I mean from the 72,000 pages that we do today, to just a blank sheet of paper--if you could start from scratch and draft the Tax Code that America ought to have instead of the one that has been forced upon us, what would you do? What would you do?

Well, there's a lot of difference of opinion on what to do, but simplification seems to be one of those things that we can all agree on.

You know, I didn't come to this House to try to be a good Republican. I came to this House to try to be a good American, and there are lots of opportunities to do that. I like to think those things occur simultaneously more often than not. But look at what folks are saying about the United States Tax Code.

I'll quote House minority leader Nancy Pelosi: Any tax reform and closing of loopholes, which is really important for us to do as a sense of fairness, must also reduce the deficit.

Right, because if you close the loopholes, if you close all of the lobbyist-funded loopholes, close all of the special exemptions and exceptions and carve-outs, by definition it brings in more money.

Mr. Speaker, did you get the free golf cart in the 2009 tax bill? Does anyone want to admit to having gotten the free golf cart?

In 2009, in the name of a good energy bill, in the name of green energy, we in the wisdom here in the U.S. House and across the way in the United States Senate, of course I wasn't here at that time, but in our wisdom we created a tax credit, a $6,500 tax credit if you would go out and buy an electric vehicle.

Well, Americans are smart, and I love that about America. We are ingenious folks. And what folks figured out was that the $6,500 that folks were giving them if they'd go out and buy an electric vehicle, if you put brake lights, seat belts and side view mirrors on your golf cart, you could get yourself a free golf cart.

Well, it turns out, because we produce golf carts in the great State of Georgia, you couldn't actually get an American golf cart for $6,500. But our friends in China were willing to import a golf cart to America for $6,500, Mr. Speaker.

And so in the fall of 2009 and the spring of 2010, the IRS had to release guidance--hear this, Mr. Speaker--the IRS had to release guidance that said when we first crafted the free golf cart regulations, we said you actually had to have delivery of the cart by December 31. But so many Americans are trying to avail themselves of the free golf cart provision that we're going to change the rules here in late December and say really all you need is a VIN number from the manufacturer, and that'll give them several more months to fill all the orders.

Really, Mr. Speaker? Is that what we need in the Tax Code, a Tax Code that distributes free golf carts to folks who likely didn't even want a golf cart but it was free, and so they availed themselves of it?

Nancy Pelosi agrees with me that we need to get rid of those loopholes.

Senate majority leader Harry Reid: Our tax system is broken and needs to be fixed.

Let's take the poll, Mr. Speaker. Let's go to the most liberal Democrat in the House, to the most conservative Republican in the House, who doesn't agree with majority leader Harry Reid? Our tax system is broken and needs to be fixed.

And we have the ability to start with a blank sheet of paper and make it the way we want to make it. Listen to our President, Mr. Speaker.

This is President Barack Obama: You've got too many companies ending up making decisions based on what their tax director says instead of what their engineer designs or factories produce, and that puts our entire economy at a disadvantage.

That's true. Talk to any small business owner, find anybody who's at a CFO or CEO level in a business close to you and ask that question: Are you making business decisions, or are you making tax decisions?

And every single time they make a tax decision instead of a business decision, America loses. Their shareholders may win in the short term. Profits may gain in the short term. But when we in America decide we're going to do something to comply with these ridiculous 75,000 pages of Tax Code, instead of doing what's best for business, instead of what's best for customers, instead of what makes sense, America loses. And in these challenging economic times, we cannot lose that productivity.

Let me go back to President Barack Obama. He says this: We need to make America the best place on Earth to do business. The Tax Code is a barrier government can remove, a burdensome corporate Tax Code with one of the highest rates in the world.

Hear that. We talk so much about Republicans and Democrats. Here, common sense coming from the President of the United States: We need to make America the best place on Earth to do business. A barrier government can remove is a burdensome corporate Tax Code with one of the highest corporate tax rates in the world.

Folks, that's agreement. I will tell you, if I had to characterize him, Mr. Speaker, I would tell you that the President sits a little further to the left than I do. If I had to characterize my own voting record, I'd say I sit a little further to the right than most folks here in this House. But this is common is ground that we can all agree on.

Let me just show you what that tax rate is.

I hope the colors are showing up, Mr. Speaker, for folks back in their offices watching on TV because the red line here is the U.S. corporate tax rate. The blue line is the OECD average excluding the U.S. Now the OECD is that group of developed nations around the world, those folks that we would say have free economies and growing economies.

This chart goes back to 1981. It goes back to the beginning of the Reagan era. You see America's corporate tax rate higher than the average tax rate in the rest of the world. This is that tax reform that I talked about in 1986 where you see the tax rate dramatically drop--dramatically drop--and for a short period of time, Mr. Speaker, we became, on the red line, more productive and more competitive with the rest of the world as the rest of the world was on the blue line.

And look at those years. Do you remember those years--1988, 1989, 1990? Do you remember those productive years? I think that's when the yuppie label came around and folks were buying all their fancy automobiles and the first of the big houses. I was just coming of age in that time, but I remember the conspicuous consumption. And why? Because America was creating wealth. And then what happened? Here's the tax increase of the Clinton years, bumps right up there, and you see a flat line of American corporate taxation at about 39 percent, that flat red line of corporate taxation. Fair enough. I prefer predictability. I think we ought to know the direction things are going, and I think we ought to be able to plan to make business decisions.

Here is a very predictable line of corporate taxation. But what's the rest of the world doing? While America has a very predictable 39 percent tax rate, what's the rest of the world doing? Getting lower and lower and lower. Lower and lower and lower and lower. Folks, do you know who can't leave America? The American worker. Folks in my district. They can't leave. Capital can leave. A click of a mouse and you can take a billion dollars and move it overseas. If you have a business in America, you can pack up your bags and go. I talk to CEOs every day who do exactly that. They say, Rob, it's just not worth it doing business in America.

Why? Because we're not competitive. Do you want to talk about growing jobs? Mr. Speaker, let's talk about keeping the jobs that we've already got.

I see in the Chamber my friend from Iowa, Mr. Steve King, who has struggled with these issues firsthand and who I know understands as a small businessman before he came to this House what it means to be out there trying to make payroll and trying to stay competitive.

And if the gentleman would indulge me, what do you think it would mean for jobs in America if we got this U.S. corporate tax rate line below that world average, if we, once again, made it competitive to build jobs in America?

BREAK IN TRANSCRIPT

Mr. WOODALL. Why not take it to zero? Well, I'll tell you what I might hear back home, I say to my friend. And what do you want to do? Do you want to give business a free pass? Because my understanding is there are only two places we can get taxes. We can either take them from me or we can take them from McDonald's. And wouldn't I rather tax McDonald's than tax me?

BREAK IN TRANSCRIPT

Mr. WOODALL. But you ask the all important question, I say to my friend. Why not take the rate to zero? Why are we arguing about whether it ought to be 25 or 23? I just quoted the President of the United States. He said, let's make America the most competitive place in the world to do business. Well, if we were to lower it to 10, maybe somebody else is going to lower it to 9. If we lower it to 8, maybe somebody else lowers it to 7. What if we take it to zero? And I have voiced my concern that, well, if you take it to zero, that means I, as the American consumer, have to pay all the taxes because corporations won't be paying taxes anymore.

And what my friend, who has years and years, decades and decades of experience in the private sector says is, there's no secret drawer where American businesses get the money to pay taxes. I go out and I buy a Coca-Cola. Where does Coca-Cola get the money to pay taxes? They charge it to me in the price of the product.

My friend is saying that the only taxpayer in America today is the American consumer. There is no other taxpayer. Businesses don't pay taxes--people pay taxes, whether it's the CEO of that business who has a high salary and he pays taxes on his salary, whether it's the consumer of that business who pays in a higher price, or whether it's the shareholder of that business who pays through lower dividends and lower rates of return.

Why not take the corporate tax rate to zero so we will be the most competitive economy in the world?

I yield to my friend.

BREAK IN TRANSCRIPT

Mr. WOODALL. As Coca-Cola is spread out all over the world, where they happen to have their corporate headquarters in Atlanta, but for how long? But for how long? We talk so much about trying to grow jobs in America. What about just trying to keep the jobs that we've got? What about just trying to make it a joy to do business in America instead of making it a hassle to do business in America?

You might not believe this, Mr. Speaker, but this is a $10 haircut I just got over the weekend. You probably think I paid a lot more than that for this haircut. But as you think about what the gentleman from Iowa said about where costs are hidden, where taxes are hidden, I paid $10 for this haircut. But Derek, my barber, he had to pay 15.3 percent in self-employment taxes. So $1.50 of that $10 went straight to the Federal Government in self-employment taxes. Now he's a good barber, so I suspect he is in higher than the 15 percent tax bracket, but let's just say for the sake of argument, he's in the 15 percent income tax bracket. So out of my $10 haircut, he had to take a $1.50 right off the bat and send it to the government in self-employment taxes, then take another $1.50 right off the bat and send it to the Federal Government in income taxes. So for the $10 haircut he charged me, he's only taking home $7 to feed his wife and kids. So is it a $10 hair cut, or is it a $7 haircut?

What we tell Americans is, oh, we're going to lower your tax burden. But what we've done is to hide that tax burden in the cost of everything we buy because if Derek didn't have to pay those $3, he'd be charging me $7 for a haircut, and he would still take $7 home to feed his kids.


To have an honest discussion about what kind of spending we ought to do in this place, I think we have to bring all of those hidden taxes out of price. Not only does it make us more competitive, as you suggested, but it makes it possible for us as Americans to have an honest discussion about is government doing too little or is government doing too much.

And I think, as you suggested the studies suggest, it's about 22 percent of the cost of everything that we buy, on average, that is hidden taxes that we think we're getting away with, but that we are actually paying at the checkout counter.

BREAK IN TRANSCRIPT

Mr. WOODALL. Well, I would say to my friend, you talk about cultural transformation, I would tell you that transformation is actually taking us back to that entrepreneurial, self-reliant experience that America began as a Nation. This business of hiding taxes and trying to make people think they're getting something for nothing, that's a relatively new experience in American culture, and it has transformed this country.

I'm big on saying you've got to have skin in the game. To make good decisions you have to have skin in the game. Right now, 50 percent of the American population isn't paying any income taxes. They don't think they have skin in the game. Now, they do because they're paying tax in all of these hidden consumption opportunities that you and I are talking about, but they vote as if they're getting something for free.

And as a Nation, if we're going to make responsible decisions--particularly as it comes to borrowing from our children and our grandchildren--we have to let Americans know what they are really paying for the size and scope of government. And that's not to say they can't say, I understand how much I'm paying and I'm willing to pay even more, or I hate how much I'm paying and I'm going to pay less. But it will absolutely bring us away from a culture that believes there is a free lunch and back to a culture that understands that decisions have consequences and that there is no taxpayer in America except for we, the American consumers.

BREAK IN TRANSCRIPT

Mr. WOODALL. I thank my friend.

You're absolutely right. When I talk to young people--I try to get out to the middle schools and high schools in my district every week when we have time back home--I say, I've got a $10-an-hour job in my congressional office. Who wants to come to work for me? Who wants to come to work for me? And I just gave a powerful presentation about how you can come here and return America to its foundational roots. All the hands go up. And I say, now, just to be clear, though, we're going to have to put a $9 income tax on that $10 an hour, so you're only going to be able to take home $1 at the end of the day. Now, who wants to come work 80 hours a week for me? And all of the hands go down.

The power to tax is the power to destroy, and we use that power here. With all due respect to our colleagues on both sides of the aisle, the Fair Tax that I supported--that you were such a strong supporter of--it has detractors on both sides of the aisle, because what the Fair Tax says is we're not going to manipulate your behavior through the Tax Code anymore. Because the Tax Code allows us to say, if you buy wool sweaters, we're going to give you a tax credit; if you buy polyester sweaters, we're going to take taxes away from you. If you go out and buy Levi's jeans, we're going to give you a tax credit; if you go out and buy Lee jeans, we're going to take taxes away from you.

Over and over and over again we decide who's supposed to win and who's supposed to lose, and we punish or reward the American people and the American small business environment through the Tax Code. And what you and I have said in the Fair Tax is, I don't want that power in Washington. I give that power back to the American people. You choose what kind of jeans you want to wear. You choose what kind of sweater you want to buy. You choose whether you want a golf cart or not.

We are not in the business of picking winners and losers. We're in the business of raising as little revenue as is necessary to run this Federal Government. And that takes power away from this body right here. And it is only those folks who believe that the American people are still smarter than you and I are who want to return that power. And I thank you for being my partner in that.

BREAK IN TRANSCRIPT

Mr. WOODALL. If the gavel is in the air, I'll just say to the Speaker, if you needed more information, Mr. Speaker, you could find it at www.fairtax.org, or you could visit my Web page at Woodall.house.gov. This really does speak to the challenges of America.

I thank the Speaker for the time, and I thank my friend from Iowa.


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