Proposed Fair Tax replaces national revenue with sales tax
June 4, 2012 at 11 p.m.
Supporters of a national movement to eliminate all but sales taxes - and jack those up to 23 percent atop state and local sales levies - made their case to a conservative audience in Longview Tuesday night.
"How would you like to receive 100 percent of that paycheck or your retirement check," a spokesman for Americans for Fair Taxation told about 60 members of We The People-Longview. "The Fair Tax Act is having 100 percent of your paycheck coming to you."
The trade-off for elimination of payroll taxes, capital gains taxes and annual checks to the IRS, Gene Cushion said, is paying 23 percent on all goods and services bought.
That mark is offset by two elements in House Resolution 25, or the Fair Tax Act - second-hand items, including cars and homes, would not be taxed; and the government would cut monthly checks to everyone with a Social Security number.
Those "prebates," he said, would be based on income so that a family of four with an income of $22,000 - the U.S. poverty level - would receive a $564 monthly prebate from Uncle Sam.
Cushion's presentation to the local tea party group drew applause once.
"I think all of you will like this," he said. "The abolishment of the IRS."
Unlike the flat tax and the valued added tax, he said, the fair tax treats everyone equally.
As a percentage of income, though, it doesn't.
Someone living paycheck to paycheck, that is, spending all their income each month, will pay a dramatically higher percentage of that income than someone who earns more than they spend.
"Oh, I see what you mean," Cushion said before giving his speech. "Not as a percentage. You're right."
Cushion, of Van Alstyne north of Dallas, said the fair tax also would eliminate many so-called embedded taxes. Those chiefly are the taxes businesses and manufacturers pay now that would be eliminated.
"Twenty-two percent of the cost of that shirt is embedded tax," he said. "Taking the price out of the embedded tax and replacing that tax with a national sales tax, essentially, would make the cost of that shirt the same."
Shirtmakers and retailers would cut prices to reflect the elimination of their own tax to compete with each other, he said.
"All the corporations have to do now (under the Fair Tax) is concentrate on their business and not pay corporate taxes," he said.
Noting that some very wealthy people escape federal income taxes through fraud or illegal trade, Cushion said everyone who buys things would be taxed under the Fair Tax.
"The Fair Tax is a voluntary tax," he said. "It's a voluntary tax because you choose to pay the tax when you purchase something."
Corporations also would lose the incentive for moving off shore, he added.
In addition to zeroing out the IRS, the Fair Tax would allow Washington, D.C., to shred a mountainous tax code now topping 70,000 pages.
That's threatening to national politicians, Cushion added.
"Our politicians don't want to relinquish the power that they have over us," he said, describing the nebulous tax code as giving Washington "huge leverage."
"You need to touch the shoulder of (Northeast Congressman) Louie Gohmert to get on board with this bill," he said. "He currently is not a supporter of it."
The Republican congressman did not respond to a Monday morning request for comment on the House Resolution.