|
Current Law |
FairTax, H.R. 25 Linder-Peterson |
Federal Income Tax Pre-2001 Law |
Armey Flat Tax H.R. 1040 |
| 16th Amendment | Proposes repeal. | No change. | No change. |
| Complexity | Individuals do not file. Businesses need only to deal with sales tax returns. | Very complex; 20,000 pages of regulations; I.R.S. incorrect over half of the time. | Withholding continues. Individuals and businesses must still track income and file income tax forms. |
| Home Business |
Must record all business expenses and is subject to IRS audit?
|
Must record all business expenses and is subject to IRS audit?
|
Must record all business expenses and is subject to IRS audit?
|
| Congressional Action | 23% Linder/Peterson Fair Tax Act of 2003 (H.R. 25). Employees receive 100% of pay. Social Security and Medicare funded from consumption tax revenue, not your paycheck. (H.J.Res61) - Will repeal the 16th Amendment. | Used by lobbyists and the wealthy for tax-breaks and loopholes. Used by bureaucrats for social engineering. | Rep. Armeyís H.R. 1040 has some problems, but is superior to current law. |
| Cost of Filing | No personal forms are filed. Significant cost savings. | $225 billion in annual compliance costs.1 | Simplified. ≠ costs are somewhat reduced. |
| Economy | Un-taxes wages, savings, and investment. Increases productivity. Produces significant economic growth. | Taxes savings, labor, investment, and productivity multiple times. | Imposes a tax burden some of which is still hidden in the price of goods and services. |
| Equality | Taxpayers pay the same rate and control their liability. Tax paid depends on life style. All taxes are rebated on spending up to the poverty level. | Current tax code violates principle of equality. Special rates for special circumstances violate original Constitution and are unfair. | The flat tax is an improvement over the current income tax, but it is still open to manipulation by special interests. |
| Foreign Companies | Foreign companies are forced to compete on even terms with U.S. companies for the first time in over 80 years. | Current tax code places unfair tax burden on U.S. exports and fails to neutralize tax advantages for imports. | Taxes U.S. exported goods, but not foreign imports to the U.S., creating unfair competition for U.S. manufacturers and businesses. |
| Government Intrusion | As the Founding Fathers intended, the FairTax does not directly tax individuals. | Current tax code requires massive files, dossiers, audits, and collection activities. | A flat tax still requires personal files, dossiers, audits, and collection activities. |
| History | 45 states now use a retail sales tax. | The 1913 income tax has evolved into an antiquated, unenforceable morass, with annual tax returns long enough to circle Earth 28 times. | A flat tax just wonít stay flat. Starting out nearly flat in 1913, the income tax grew out of control with top rates over 90% until Kennedy administration. |
| Interest Rates | Reduces rates by an estimated 25-35 percent. Savings and investment increase. | Pushes rates up. Biased against savings and investment. | Reduces rates 25-35 percent. Neutral toward savings and investment. |
| Investment | Increases investment by U.S. citizens, attracts foreign investment. | Biased against savings and investment. | Neutral toward savings and investment. |
| IRS | Abolished! | Retained. | Retained. Reduced role. |
| Jobs | Makes U.S. manufacturers more competitive against overseas companies. Escalates creation of jobs by attracting foreign investment and reducing tax bias against savings and investment. | Hurts U.S. companies and decreases available jobs. Payroll tax a direct tax on labor. | Positive impact on jobs. Does not repeal payroll tax on jobs. |
| Man-hours required for compliance | Zero hours for individuals. Greatly reduced hours for businesses. | Over 5.4 billion hours per year. | Reduced. |
| Non-filers | Reduced tax rates and fewer filers will increase compliance. | High tax rates, unfairness and high complexity harm compliance | Reduced tax rates and improved simplicity will improve compliance. |
| Personal and Corporate Income Taxes | Both are abolished. | Retained. | Retained in a different form. |
| Productivity | Increases. | Inhibits productivity. | Increases. |
| Savings | Increases savings. | Decreases savings. | Increases savings. |
| Visibility | The FairTax is highly visible and easy to understand. No tax is withheld from paychecks. | The current tax code is hidden, embedded in prices, complex, and incomprehensible. Taxes are withheld from paychecks. | Business component of flat tax and payroll taxes are hidden. Would be embedded in prices. Taxes withheld from paychecks. |
[1] Testimony by the Arthur Hall, Tax Foundation and before the House Ways and Means Committee, 1998.
