Weatherford Democrat

February 21, 2013

The five principles of tax reform

Weatherford Democrat

Second in a series of commentaries in support of the Fair Tax Bill.


Reform is defined as removing abuse, eliminating bad practices and change for the better.

The American Institute of CPAs at their website has a list of criteria to evaluate proposed tax reform. The FairTax bill HR25/S122 is based upon the following five principles and is in compliance with the AICPA criteria for tax reform:

• Fair: This means no loopholes, no special deals, no exclusions, no class rates and no exceptions. Everyone is treated alike.

The present tax code divides us into classes based upon income. United we stand; divided we fall.

The Fair Tax is one rate of 23 cents per dollar in the sale price of all new goods and services. The rate of 23 percent is figured inclusively in the retail price of goods and services just like our present income and payroll tax rates are figured inclusively on our pay. The same 23 cents per dollar tax would be 30 percent if figured exclusively or as an addition to the sale price.

The Fair Tax system is progressive because of the rebate to not tax purchases up to the poverty level as determined by the Department of Health and Human Services. This monthly tax rebate in the Fair Tax system is called a “prebate” as it is sent out the first of each month to all registered families with valid Social Security numbers.

The Fair Tax is a progressive tax, capped at 23 percent, on the standard of living that the family can afford. Imagine regaining lost economic freedom by controlling how much tax you pay by controlling how much you spend.

The Fair Tax greatly reduces the taxing powers of politicians, lobbyists and special interest groups to use the tax code to their advantage and best interests.

• Simple: Read that as “easy to understand.”

Our present tax code keeps growing; it’s now over 74,000 pages. The IRS studies show the code is so complex that 16 percent of errors are due to code complexity and contradiction.

The Fair Tax is one tax, easy to understand and equals 23 cents on the dollar. It eliminates income tax, payroll, capital gains, gift, estate and self-employment taxes. The bill is 133 pages long, double spaced, and can be read on the Internet. Disposable income increases, with income tax and payroll tax deductions eliminated and the prebate added in, to pay the Fair Tax. The systems and processes are now in place to implement the Fair Tax with the states collecting the Fair Tax.

The Fair Tax would end the 240 million income tax filings and be collected by 20 million businesses that are registered and licensed by the states. To cheat now takes only you; with the Fair Tax it requires a conspiracy involving both the buyer and seller.

• Transparent: Means taxes are out in the open. You see and know what is being taxed and how much tax you paid.

Imagine no annual income tax filing every April 15th. As a country we spend over $460 billion each year to comply with the federal tax code. With the Fair Tax you get a receipt for every payment of Fair Tax with the purchase of a new good or service. The Fair Tax eliminates hidden taxes (now 22 cents per dollar) that business passes on to consumers in higher prices. The Fair Tax eliminates these taxes, so costs go down, prices go down; sales of USA goods and services will go up. Thus we get a jobs program at no cost. Change the tax code and the country gets a huge and free jobs and economic stimulus program.

• Supports economic growth. Our present tax code is hurting our economy by driving out and punishing the entry of jobs, companies and capital.

The Fair Tax makes the USA a tax-free haven for businesses, brings jobs, companies and $10 trillion to $12 trillion of offshore capital to our economy. It taxes the underground economy estimated to be $1 trillion to $1.5 trillion. Economic studies predict with the Fair Tax in place, first-year domestic investments go up 33 percent, employment up 3.5 percent, GDP up 2.4 percent with continuing increases through years five and 10.

• Revenue neutral: The new system brings in the same amount of money as the present system.

The Fair Tax raises the same total as the taxes that are eliminated. But now there is a bright future for economic growth. It does not change Social Security and Medicare and moves funding to a more stable tax base.

The solution is called the FairTax Bill HR25/S122. It moves the tax base from income, saving and investments to a tax based on consumption with a progressive national consumption/sales tax system.

Please do these actions: learn more at Sign up to support real, true tax reform. Call your U.S. representative and ask him or her to co-sponsor the FairTax Bill.

Paul Livingston is a FairTax volunteer and district director who resides in Jacksonville, Fla. Contact him at