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Tax Reform One persons trash is another
persons treasure
Robert Frenzel
Volunteer State Director
Virginia
9/1/2014 Americans For Fair Taxation (AFFT) 1
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Mirriam-Webster defines reform as
to put or change into an improved form or condition
to amend or improve by change of form or removal of faults or abuses
to put an end to (an evil) by enforcing or introducing a better method or course of action
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Tax Reform Proposals Amend Current System Flat Tax Camp Reform Proposal Value Added Tax FairTax
Lets see where each of these take us
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Amend Current System
This is how we got to this point
Used for manipulation by lobbyists and demagoguery by politicians
Award friends/punish enemies
IRS stays in place
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Flat Tax
Flattens individual and corporate rates
The rest of the code stays in place
This is how the current income tax started
The IRS stays in place
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Camp Reform Proposal Lower the rate and expand the base Tax deductions up to a maximum 25% offset Personal (10 and 25, 35) corporate taxes (25) Capital gains/dividends ordinary income (after
first 40%) No AMT International territorial system IRS Accountability But, the IRS stays in place
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Value Added Tax (VAT) European style consumption tax
Goods taxed at each point value is added
Consumer bears the brunt of the cost
Most proposals VAT would be added on top of income taxes
IRS stays in place
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FairTax H.R. 25/S. 122 Complete replacement of the current income tax
Personal and corporate income taxes, payroll taxes, capital gains, interest and dividends, estate taxes, gift taxes, alternative minimum tax (AMT)
National sales tax on new goods and services with a prebate that reimburses the tax up to the
DHHS published poverty level
IRS eliminated 87 Cosponsors in 113th Congress
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What Is The FairTax? Taxes all new goods and services (taxed only once)
$0.23 rate no exemptions
Revenue neutral rate
Eliminates embedded taxes (currently 18-26%)
Simple, transparent and progressive (prebate)
Implemented through current sales tax system
No taxes on investments (education = investment)
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The Impact of The FairTax on You Immediate take home pay increase (no federal deductions)
No tax returns ever again - No need for tax records, audits
Dramatically simplifies compliance costs for business
Taxes underground economy and minimizes tax gap
No estate planning based on tax implications
Businesses make decisions without tax consequences
Increase in demand for US goods new jobs
US becomes a tax haven reversion instead of inversion
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How is the FairTax Progressive? Mechanism called a Prebate
Based on the DHHS poverty level table
Eliminates all taxes for everyone up to the DHHS levels
DHHS levels are adjusted yearly
One yearly filing to identify members of household
Social Security Number and legal resident
Monthly payment representing 23% of the DHHS level
Cost of prebate is less than 1/2 the cost of current deductions
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2014 FairTax Prebate Schedule
One-adult household Two-adult household
Family Size Annual
Consumption
Allowance
Annual
Prebate
Monthly
Prebate
Family Size Annual
Consumption
Allowance
Annual
Prebate
Monthly
Prebate
1 person $11,670 $2,684 $224 couple $23,340 $5,368 $447
and 1 child $15,730 $3,618 $301 and 1 child $27,400 $6,302 $525
and 2 children $19,790 $4,552 $379 and 2 children $31,460 $7,236 $603
and 3 children $23,850 $5,486 $457 and 3 children $35,520 $8,170 $681
and 4 children $27,910 $6,419 $535 and 4 children $39,580 $9,103 $759
and 5 children $31,970 $7,353 $613 and 5 children $43,640 $10,037 $836
and 6 children $35,790 $8,232 $686 and 6 children $47,700 $10,971 $914
and 7 children $40,090 $9,221 $768 and 7 children $51,760 $11,905 $992
NOTE: For Families/households with more than 8 persons, add $4,060 to the annual consumption allowance for each additional
person. The annual consumption allowance is based on the DHHS 2014 HHS Poverty Guidelines as published in the Federal
Register, January 17, 2014. The annual prebate equals 23% of the annual consumption allowance.
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-23.0%
0.0%
7.7%
11.5%
17.2%20.1%
21.6% 22.3% 22.6%
-30.0%
-20.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
$15,730 $31,460 $47,190 $62,920 $125,840 $251,680 $503,360 $1,006,720 $2,013,440
Note: The Tax rate is calculated by subtracting the annual prebate from the FairTaxes on spending and dividing that result by annual spending. Annual spending has to reach over $14 million per year before the FairTax, as a percent of spending, reaches
FairTax Rate as a Percent of Spending: 2014Two Adult/Two Child Household
Annual Spending
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SoWhy The FairTax? SIMPLE
EFFICIENT
FAIR, FLAT and PROGRESSIVE
REVENUE NEUTRAL
TRANSPARENT
ENHANCES GLOBAL COMPETITIVENESS
ENSURES FUNDING OF SOCIAL SECURITY AND MEDICARE
ABOLISHES THE IRS
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Local Grassroots Efforts Typically organized along Congressional District lines
Smaller community groups based on geography
Currently three areas: Southeast (Norfolk, Virginia Bch.) Southwest (Roanoke) and Northern Virginia
Focus: to get Members of Congress to co-sponsor 2 Virginia House Members are co-sponsors ( Wittman, Rigell)
Work to expand our local grassroots network Approximately 10,000 people in the Virginia database
Need leadership in VA-07
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Local Events FairTax rallies
Local meet-ups (Paneras, Starbucks)
Membership signups (Walmart)
Auto shows
Gun shows
Tea Party events
Libertarian events
Political clubs
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How Can You Help? Sign up to support the FairTax!
Go to FairTax.org to learn more about the FairTaxFacebook.org/fairtax Twitter: @fairtaxofficial,com
Go to David Brats Facebook page and vote to support the FairTax https://davebrat.com/tax-code-poll/
Contact me at [email protected]
904-472-7195
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Questions?
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Back-up Slides and Topic Modules
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Non-Profit Entities Under the FairTax Current giving levels NOT tied to deductions
No FairTax on goods/services used in the provision of services.
For-profit exchanges/sales are taxed (i.e., gift shop)
No taxes on interest from endowments, etc.
501(c) goes away so there are no limitations on political activity.
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Impact of the FairTax on Business No corporate income tax
Reduction in compliance costs tax departments gone
No FairTax on imports or intermediate sales
American goods become 12 25% more competitive
Imported goods and American goods taxed the same
US economy becomes business friendly attracting jobs and investment in the US
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Why the FairTax Benefits Democrats The FairTax will tax accumulated wealth in the most
efficient way possible as it is spent.
The FairTax eliminates the highly regressive payroll taxes on wages of the working poor and middle class
The FairTax offers a progressive way to completely un-tax the poor through the use of the prebate
The FairTax rewards education and upward mobility by not taxing tuition
The FairTax is NOT a political slogan: it is NON-PARTISAN
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Impact of the FairTax on Seniors Ensures the solvency of the Social Security Fund
No taxation of Social Security benefits no limit on income
Ends Federal gift, estate taxes and capital gains taxes
The FairTax prebate zeroes out the taxes on necessities
No FairTax on the purchase of used items
Eliminates current hidden embedded taxes
Ensures your grandchildren have the same opportunity
