1. Americans for Fair Taxation
The Fair Tax
Americans for Fair Taxation

2. The Fair Tax Founders Where Did it Start?
Leo Linbeck* and two business associates (*Chairman and CEO, Linbeck Corp; Past Chairman, Federal Reserve of Dallas)
$4.5 mil. seed money from three associates
Funded studies at major universities and financial institutions

3. Economic Research Participants
The Argus group (David Burton and Dan Mastromarco)
Boston University (Larry Kotlikoff)
Cato Institute (Steven Moore)
Harvard University (Dale Jorgenson)
Heritage Foundation (Bill Beach)
National Bureau of Economic Research (Jim Poterba)
Rice University, Baker Institute for Public Policy (George Zodrow)
Massachusetts Institute of Technology (Joseph Kahn)

4. Tax System Objectives Simplicity Fairness Eliminate Loop Holes
Protect the Poor
Encourage Investment
Stimulate Business/Job Growth

5. Recommended System A Consumption Tax Replaces all Federal Taxes
Except special purpose excise taxes
Applies to all Consumption Expenditures
Personal
Business
Government

6. The Fair Tax Replaces All personal and business income taxes
All capital gains and investment income taxes
All social security and Medicare payroll taxes
All gift and inheritance taxes

7. The Fair Tax Base Fair Tax is imposed on ALL consumption: Personal
Business*
Government
*Fair Tax is NOT imposed on:
Purchases used in a product for subsequent sale through a retailer

8. Special Provisions
Rebate to all Americans for tax on the necessities of life
At the poverty level, households have a zero tax rate
Charities do not collect a tax on donations
They are not a consumer
Educational institutions do not tax tuition or other receipts and gifts
Expenditures for education are treated as an investment

9. Fair Tax Base Source: National Income Product Accounts, Survey of Current Business, Aug., (From Emancipating America from the Income Tax by D. R. Mastromarco and D. R. Burton)
Description of Taxable Item
Billions (1995)
Personal Consumption Expenditures
$4,924.9
Purchases of New Homes $
Improvements to Single-family Homes $
Imputed Rent on Housing –$
Additional Financial Intermediation Services –$
Foreign Travel by U.S. Residents –$
Expenditures Abroad by U.S. Residents –$
Food Produced and Consumed on Farms –$
State and Local Government Consumption $
State and Local Government Gross Purchases $
Federal Government Consumption $
Federal Government Gross Purchase $
Less: Education Expenditures –$
Plus: Expenditures by U.S. Non-residents $
Fair Tax Base:
$5,978.2

10. Rate Determination Results in lower taxes for 95% of All Americans! =
Total Taxes Collected + Rebate Total Consumption Expenditures
The necessary tax rate: 23%
Results in lower taxes for 95% of All Americans!
_______________________________ =

11. Rate Determination
How can it result in lower taxes for 95% of All Americans?
By taxing
The underground economy
Visitors, tourists, and illegals

12. Why Prices Will Decrease 18-28%
Product/Service Labor Cost Loaded with:
Social Security and Medicare Taxes (employer half of payroll taxes included in labor overhead)
7.8125%
Business/corporate Income Tax
5–10%
Cascading of Taxes in Tiered Production
Total Tax Load in Product Prices
18–28%

13. Effect of FairTax on Prices
Price of goods under current system
$100

14. Effect of FairTax on Prices
Price of goods under income tax
$100
- Embedded taxes
- 18

15. Effect of FairTax on Prices
Price of goods under income tax
$100
- Embedded taxes
- 18
Wholesale cost of goods under FairTax 82

16. Effect of FairTax on Prices
Price of goods under income tax
$100
- Embedded taxes
- 18
Wholesale cost of goods under FairTax 82
+ Fairtax
+ 25

17. Effect of FairTax on Prices
Price of goods under income tax
$100
- Embedded taxes
- 18
Wholesale cost of goods under FairTax 82
+ Fairtax
+ 25
Sales price, tax inclusive,
under the FairTax
$ 107

18. Effect of FairTax on Paychecks
Get to keep whole paycheck
Income Tax
FairTax
Gross Pay
50,000
Income Tax (17% minus $5,150 deduction)
- 3,550
Payroll (7.5%)
- 3,750
Take Home Pay
42,700
Prebate (Single)
2,400
Effective Income/Purchasing Power
52,400
22.7%

19. Purchasing Power Under FairTax
Income Tax
FairTax
Net Income
42,700
52,400
Price of “Stuff”
100
107
Amount of Stuff You Can Buy
427
490
Added Purchasing Power Under FairTax
14.8%

20. Fair Tax Rebate—Year 2008 Household Size Poverty Level Annual Rebate
Monthly Rebate
Adult
$10,400
$2,392
$199
Adult + child
$14,000
$3,220
$268
Adult + 2 children
$17,600
$4,048
$337
Couple
$20,800
$4,784
$399
Couple + child
$24,400
$5,612
$468
Couple + 2 children
$28,000
$6,440
$537
Couple + 3 children
$31,600
$7,268
$606
(Poverty level determined by the Dept. of Health and Human Services)

21. FAIR TAX EFFECTIVE TAX RATE
-11.5% % % % % %

22. Tax Inclusive vs. Tax Exclusive Rates
Income Tax Rate of 23% is Tax Inclusive
Income includes the tax that is paid
Fair Tax Rate of 23% is Tax Inclusive
Equivalent to an exclusive rate of 29.9% added to a purchase
$100 purchase % = $129.9 gross purchase
$29.9 tax divided by $129.9 = 23%
No American can pay more than 23% of his gross purchases for Federal Taxes

23. The Fair Tax Stimulates Economic Growth
Through encouragement of:
Reinvestment of tax free earnings
Reinvestment of tax free dividends
Reinvestment of untaxed capital gains
Increased personal savings and investment
Foreign capital investment
Lower interest rates

24. Compliance/Tax Evasion
Easier tax enforcement
90% reduction in tax filers
Only audits of customer shipments from manufacturers needed
Cash register records of retails
Relative simplicity of Fair Tax will encourage compliance

25. The Fair Tax Accomplishes:
It lets every worker keep their entire paycheck—NO income or payroll taxes
It lets retirees keep their pensions and social security checks—Untaxed
It lets everyone keep capital gains and investment income—Untaxed
It encourages savings and investments

26. The Fair Tax Accomplishes:
It eliminates gift and inheritance taxes
It taxes spending of inherited/gifted wealth more fairly
It ends personal and corporate income tax filings
It eliminates the $225 billion cost of the income tax industry

27. The Fair Tax Accomplishes:
It eliminates the need for the $8 billion IRS
It encourages repatriation of wealth from tax havens
It encourages foreign capital investment
It stimulates exports
It stimulates economic growth and job formation

28. The Fair Tax Accomplishes:
It eliminates all tax loopholes
It has a significantly lower cost of enforcement
It eliminates a significant percent of congressional lobbyists
It makes the real federal tax rate visible to voters—every time the cash register rings

29. Flat Tax vs. Fair Tax Fair Tax Flat Tax Is still an income tax No Yes
Eliminates $250 mil. Income tax industry
Simplifies business accounting and reporting
Stimulates exports
Encourages capital repatriation from tax havens
Encourages investment
Eliminates product tax build up in product cycle
Result in lower interest rates
Eliminates double taxation of business profits
Facilitates home ownership
Taxes inherited and gifted wealth more fairly

30. Probable Fair Tax Effect on State Tax Policy
Repeal State Income Tax
Enforcement too expensive without IRS
Eliminate Exemptions to State Sales Tax
Necessary to become Fed tax collector
Too confusing to have different rates
Become Fed Tax Collector
Collect 1/4% from Feds

31. The Fair Tax Is: Deceptively Simple Extraordinarily Efficient
Fair to all Tax Payers

32. What do we want from you? Join Five for FairTax Participate in
text “fairtax” to 95495, or
Participate in
Tea Parties and special events
Community Meetings
State Organization
Let elected officials at State and Federal know you want the FairTax

33. Americans for Fair Taxation
Texas FairTax:
FairTax Nation: fairtaxnation.ning.com
AFFT: