The

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The FairTax Plan HR 25/S25
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The need for fundamental reform has never been
greater

• 75 percent of Americans are more interested in
  tax reform making the system fairer and simpler
  than in tax cuts.
• 59 percent of Americans are dissatisfied with the
  current system
• 64 percent believe that the system requires major
  changes or a complete overhaul.
• Poll conducted by Wirthlin Worldwide, March
  2000.

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Why reform the current system?

• It distorts economic activity
• Depresses total income and employment
• Hides the cost of government
• Is complex, and expensive to comply with and
  enforce
• Is subject to abuse by both taxpayers and the
  IRS and
• Is considered unfair.

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Four Attributes of a Good System

• Fairness
• Visibility
• Neutrality
• Simplicity

(The FairTax meets all four requirements!)
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Americans support the FairTax

• Polls show that while only 30 percent of
  individuals initially supported a national retail
  sales tax (NRST), once given the details, 70
  percent of these same individuals favored a NRST.
• Market research confirms these results. Only two
  weeks of educational advertising in three test
  markets produced large swings in favor of the
  FairTax. Support increased by 11 percent and
  opposition dropped 13 percent -- a 24 percentage
  point swing.
• Results from Wirthlin Worldwide (March 2000) and
  Market Strategies (September 1996).

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The FairTax untaxes the poor

• Eliminates payroll taxes, which are more
  burdensome than federal income taxes for 75
  percent of Americans.
• Rebates taxes on spending up to the poverty level
  so that no one pays taxes on essentials.
• A single mother with two children can spend
  16,090 without paying any taxes. If she spends
  twice that (32,160), her effective tax rate is
  only 11.5 percent compared to 15.3 percent today.
  

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FAIR TAX REBATE TABLE
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FAIR TAX PROGRESSIVE GRAPH
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The FairTax is progressive.
Spending by a family of four Based on rebate at
2004 Poverty Levels
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FairTax dramatically increases purchasing power

• Gross Domestic Product would increase by 10.5
  percent in the first year, equivalent to about
  4,000-6,000 in average family income.
• Would result in an immediate increase of 2.4
  percent in family wealth.
• Raises the real wage rate by 8 percent.
• Prices would fall by 20 to 30 percent, keeping
  the the final price of a product largely
  constant, but an individual would keep their
  entire pay check.

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Creates new factories

• Eighty percent of corporate heads in Europe and
  Japan said that they would build their next
  factory in the U.S. when asked how their
  operations would change if the U.S. replaced the
  current tax code with a border-adjustable
  National Retail Sales Tax. (Survey by Princeton
  Economics)
• Twenty percent said they would relocate their
  international headquarters to the United States.

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while creating jobs in and beyond those
factories

• Industry outputs and production would rise by 20
  percent in the short-term and by 30 percent in
  the long-term.
• Initially, the labor supply would increase by
  more than 25 percent. This will decline in the
  long-term, but remain constant at 10 percent
  higher than current supply.

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Gives the U.S. an export advantage

• U.S. exportersproduction costs will drop by 20
  on average providing an immediate boost to their
  competitiveness overseas.
• Exports would jump 26.4 percent in the first
  year.
• Ultimately, exports would remain more than 13
  percent higher than the level under the current
  system.
• Imports and exports will be put on a level
  playing field. Exported goods will not be
  subject to the FairTax, but imported goods will
  be subject in the same manner as domestic
  production.

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Revolutionizes interest rates

• As savings and investment dramatically increases,
  the pool of funds available for borrowing
  increases, decreasing the relative cost of
  borrowing those funds.
• The FairTax eliminates the tax costs that the
  lender must pay on their earnings, dropping
  interest rates toward todays tax-exempt rate.
• Rates will decrease by 25-35 percent under the
  FairTax.

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Increases investment

• Because the FairTax eliminates punitive taxation
  of savings and investment would increase by 76
  percent in the first year.
• For the following ten years, investment would
  remain 20 to 60 percent higher.
• In the long-term, investment would remain
  constant at approximately 15 percent higher than
  under the current tax code.

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Boosts the stock market

• Replacing the present tax system with the FairTax
  will cause the stock market to appreciate. Lower
  interest rates mean that the present value of
  expected future income will increase. Thus,
  lower interest rates cause stock prices to rise.
  
• The FairTax reduces the top marginal tax rate to
  23 percent compared to 57 percent today
  increasing the expected future return on
  corporate stock and the value of corporate stock.

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Reduces compliance costs
The FairTax eliminates

• The 724 small businesses spend on compliance for
  every 100 they pay in taxes
• Compliance costs that consume between 2 to 3.5
  percent of GDP and
• The 250 billion that Americans spend annually to
  comply with the federal tax code, which equates
  to 850 for each man, woman and child in the
  U.S.

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resulting in a 250 billion tax cut

• The FairTax removes the hidden and embedded costs
  of our current tax structure from the economy.
• The FairTax decreases compliance costs by 90
  percent, resulting in savings for Americans,
  lower costs for consumer goods and less economic
  inefficiency.
• This equates to a 250 billion tax cut, without
  having to reduce spending or tax revenues.

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Why the FairTax?

• It is actively supported by over a half million
  Americans.
• It makes every American a voluntary taxpayer.
• It is fair, visible, simple and revenue neutral.
• No other bill eliminates all corporate and
  personal federal income taxes, as well as the
  regressive payroll tax.

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Why now?

• America is ready
• It will stimulate the economy
• Its bipartisan
• Its what our founding fathers intended
• It will fix Social Security as well

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WHAT CAN WE DO?

• Call your legislators office and ask that they
  support FairTax HR 25
• Sign the FairTax Petition
• Support FairTax activities in your area
• Support FairTax with contributions

Visit www.fairtax.org for more information
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The FairTax Plan HR25/S25
Prepared by volunteers of Americans for
FairTaxation