A Comparison of FairTax, Income Tax, and Flat Tax

<td>
No change.
</td>
<td>
No change.
</td>

<td>
Un-taxes wages, savings,
and investment. Increases productivity. Produces significant economic
growth.
</td>
<td>
Taxes savings, labor,
investment, and productivity multiple times.
</td>
<td>
Imposes a tax burden
some of which is still hidden in the price of goods and services.

</td>

<td>
Current tax code
requires massive files, dossiers, audits, and collection activities.
</td>
<td>
A flat tax still
requires personal files, dossiers, audits, and collection activities.
</td>

<td>
Pushes rates up. Biased against savings and investment.
</td>
<td>
Reduces rates 25-35
percent. Neutral toward savings and investment.
</td>

<td>
Retained.
</td>
<td>
Retained. Reduced
role.
</td>

<td>
Over 5.4 billion
hours per year.
</td>
<td>
Reduced.
</td>

<td>
Decreases savings.
</td>
<td>
Increases savings.
</td>

Current Law

FairTax, H.R. 25
Linder-Peterson

Federal Income Tax
Pre-2001 Law

Armey Flat Tax
H.R. 1040

16th Amendment

Proposes repeal.

Complexity

</td>
<td>
Individuals do not
file. Businesses need only to deal with sales tax returns.
</td>
<td>
Very complex; 20,000
pages of regulations; I.R.S. incorrect over half of the time.
</td>
<td>
Withholding continues.
Individuals and businesses must still track income and file income tax
forms.

</td>

Home Business

</td>
<td>
Must record all business expenses and is subject to IRS audit?

NO!

</td>
<td>
Must record all business expenses and is subject to IRS audit?

YES!

Must record all business expenses and is subject to IRS audit?

YES!

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.
</td>
<td>
Used by lobbyists
and the wealthy for tax-breaks and loopholes. Used by bureaucrats for
social engineering.
</td>
<td>
Rep. Armeyís H.R. 1040 has some problems, but is superior to current law.
</td>

Cost of Filing

</td>
<td>
No personal forms are filed. Significant cost savings.
</td>
<td>
$225 billion in annual
compliance costs.¹

</td>
<td>
Simplified.
≠ costs are somewhat reduced.
</td>

Economy

Equality

</td>
<td>
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.
</td>

<td>
Current tax code
violates principle of equality. Special rates for special circumstances
violate original Constitution and are unfair.
</td>
<td>
The flat tax is an
improvement over the current income tax, but it is still open to manipulation by special interests.
</td>

Foreign Companies

</td>
<td>
Foreign companies
are forced to compete on even terms with U.S. companies for the first
time in over 80 years.
</td>
<td>
Current tax code
places unfair tax burden on U.S. exports and fails to neutralize tax advantages
for imports.
</td>
<td>
Taxes U.S.
exported goods, but not foreign imports to the U.S., creating
unfair competition for U.S. manufacturers and businesses.

</td>

Government Intrusion

As the Founding Fathers intended, the FairTax does not directly tax individuals.

History

</td>
<td>
45 states now use
a retail sales tax.
</td>
<td>
The 1913 income tax
has evolved into an antiquated, unenforceable morass, with annual tax
returns long enough to circle Earth 28 times.
</td>
<td>
A flat tax just wonít
<i>stay flat.</i> Starting out nearly flat in 1913, the income tax grew
out of control with top rates over 90% until Kennedy administration.

</td>

Interest Rates

Reduces rates by an estimated 25-35 percent. Savings and investment increase.

Investment

</td>
<td>
Increases investment
by U.S. citizens, attracts foreign investment.
</td>
<td>
Biased against savings and investment.
</td>
<td>
Neutral toward savings
and investment.

</td>

IRS

Abolished!

Jobs

</td>
<td>
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.
</td>
<td>
Hurts U.S. companies and decreases available jobs. Payroll tax a direct tax on labor.
</td>
<td>
Positive impact on jobs. Does not repeal payroll tax on jobs.

</td>

Man-hours required for compliance

Zero hours for individuals. Greatly reduced hours for businesses.

Non-filers

</td>
<td>
Reduced tax rates
and fewer filers will increase compliance.
</td>
<td>
High tax rates, unfairness
and high complexity harm compliance
</td>
<td>
Reduced tax rates
and improved simplicity will improve compliance.

</td>

Personal and Corporate Income Taxes

Both are abolished.

</td>

<td>
Retained.
</td>
<td width=251>
Retained in a different
form.
</td>

Productivity

</td>
<td>
Increases.
</td>
<td>
Inhibits productivity.
</td>
<td>
Increases.

</td>

Savings

Increases savings.

Visibility

</td>
<td>
The FairTax is highly visible and easy to understand. No tax is withheld from paychecks.
</td>
<td>
The current tax code
is hidden, embedded in prices, complex, and incomprehensible. Taxes are
withheld from paychecks.
</td>
<td>
Business component
of flat tax and payroll taxes are hidden. Would be embedded in
prices. Taxes withheld from paychecks.

</td>

[1] Testimony by the Arthur Hall, Tax Foundation and before the House Ways and Means Committee, 1998.