A Letter To President Trump

President Trump, now is the time to consider the FairTax, and fully support the Fair Tax Act -John Linder (Retired Congressman, Georgia 7th District)

Dear President Trump,

Trump Derangement Syndrome is a direct result of your success in disrupting the established order. The single most powerful way to finish that job on the DC Establishment is to destroy its ability to reward and punish with the tax code. The FairTax does that!

The IRS was weaponized early in the Obama Administration, and no one ever paid a price. IRS emails were destroyed. Lois Lerner was found in contempt of Congress, and the issue just went away. The recent doubling of the IRS budget is an effort to make it the primary weapon against middle-class America.

History has shown us that once Democrats get another big spending program passed, Republicans never get it removed. Republicans have a sad history of accepting Democrat programs and only trying to reduce the cost. Let me give you an example of Republican failure. Immediately after the passage of Obamacare, Steve King placed at the desk a motion to discharge a bill to repeal Obamacare. If we got 218 signatures, the bill would go directly to the floor for a vote. I agreed and signed it. Our leaders urged Republicans not to sign it. They said that a lot of our constituents liked the provision that allows our children, up to the age of 26, to stay on our policies and we don’t want to anger them. That is why we fail. We cave.

The establishment fears you because they believe you will destroy what “is working.” (For them!) That disruption must be completed. The most final and complete disruption of the establishment and the deep state would be accomplished by passing the FairTax and abolishing the IRS. It has been estimated that more than half of K Street makes its living gaming the tax code. Get rid of the tax code, and half of K Street goes away!

Let me give you two examples that may not spring to mind. The realtors in my district loved the FairTax because, with no income taxes, the huge increase in take-home pay would make it easier to pay the mortgage. The National Association of Realtors hates the FairTax because they were organized to protect the mortgage interest deduction. If we eliminate the income tax and there is no deduction, what are they to do? The same can be said for the Farm Bureau. Their 5 million family members LOVE the FairTax because it eliminates the death tax. Their bureaucrats are not so sure. They were organized to get rid of the death tax, and if we do that what are they to do? That same argument obtains from one end of K Street to the other. AICPA, Retail Federation, and all across Washington DC.

We know that bold action is necessary to rebuild our economy and bring jobs back to the United States. The FairTax does that and more.

What else will happen?

1. The economy will explode. Trillions of dollars offshore will be repatriated because there will be no tax event in doing so. I once asked Allan Greenspan how long it would take for that money to be in our markets and banks if we passed the FairTax. He said, “Months.” A study shows that capital spending in the first year after passing the FairTax will increase 70%. That increases productivity and it is estimated that the GDP will grow in the first year by 10%. That begins to save Social Security and Medicare. Additionally, the ceiling on contributions to those programs disappears, and we include illegal immigrants and the underground economy.

2. Manufacturing will return to the US. Former Ways and Means Committee Chairman Bill Archer often quoted an informal study of a large number of international businesses that are headquartered overseas. When asked what they would do in their long-term planning if we eliminated all taxes on capital and labor and taxed only personal consumption, 80% said they would build their next plant in the US. 20% said they would relocate their headquarters to the US. I discussed this with GW Bush in the Oval Office, and he grasped it immediately. And it is totally border-neutral which will improve our exports as well as make us more competitive with imports whose taxes have been rebated.

3. With the prebate, the poor will be totally untaxed, and consumer prices will fall dramatically. A Harvard study determined that the embedded cost of the IRS at retail is 22% of the price. (Example: It takes hundreds of companies to bring a loaf of bread to your table. Oil companies get oil, and refineries refine it for the tractors and trucks. Ore companies get ore to sell to steel companies to sell to tractor and truck manufacturers who sell them to distributors. Farmers and grain companies and bakeries and plastic companies and distribution companies and retail stores are involved. Each of them has labor costs and operating costs and rent and TAX costs. The only mechanism available for any business to pay a bill is price. And the only taxpayer in the world is the consumer who consumes the product and all of the embedded costs.) Let’s quit lying to the public. Stop pretending that businesses pay taxes and tax the consumer honestly and openly. The prebate only goes to legal residents.

4. We will, for the first time ever, tax wealth instead of wages. (For those worried that the rich won’t pay their fair share I note that all wealth is ultimately consumed. If not by the earner, then by the heirs. Even money contributed to charities is ultimately consumed and will be taxed.) And if Elon wants to move to a farm and grow his groceries and never pay taxes we won’t care. We will borrow his money and create jobs with it.

5. Businesses will make business decisions based on what is best for their shareholders, employees, and customers, not what is best for their tax burden.

6. We will tax the underground economy which, 15 years ago, was estimated at 3 trillion dollars a year. Illegal immigrants will also pay their fair share.

7. We will save Americans nearly $1 trillion spent each year on IRS paperwork.

8. Churches will be able to conduct themselves as they see fit without IRS agents listening to their sermons. The Johnson Amendment will no longer mean anything.

9. And we will give the American people the greatest gift it is within our power to give. Anonymity. No government agency should know more about us than we are willing to tell our children.

In 2009, a poll concluded that, given a description of taxing income or consumption, the sales tax wins. In 2012, a study was done that concluded that if we were on the FairTax instead of the income tax during the financial crisis we would have collected 10% more in revenue.

If you begin to talk about the FairTax, you will energize millions of people who have been begging for the opportunity to support someone who supports the FairTax. All Republican candidates would have to get in line.

This is not a crazy idea. It has been carefully studied and it works. It is exactly the system in place in Monaco, for example. For all of the wailing from the Left about billionaires paying their “fair share,” this will make that happen. It is a fact that most billionaires pay a lower tax RATE than the average taxpayer. They have tax experts and lower their tax costs legally and fairly. But they spend more than most too, and they will pay more than the rest.

You will be told that the FairTax will discourage charitable giving. My parents never earned above the poverty line their entire lives, and yet my mother found a way to contribute to the church every week. She wasn’t concerned about deductions.

Neither were those who gave to real charity. The Fricks, the Mellons, and the Carnegies gave away their fortunes before there even was an income tax to deduct from, and they built schools and hospitals and libraries. Most of the recent large commitments to charity by today’s billionaires have been to set up personal foundations. Those foundations serve more as political organizations and tax-free public relations operations than solving the needs of the less fortunate. For example, the Gates' Foundation pushed hard for vaccinations across the world for years while Bill Gates is a major owner of vaccine companies. While Gates has become the largest owner of farmland in the country, his foundation is pushing a plant-based diet to solve global warming. There is very little real charity in these recent charitable foundations.

REAL charity is found in the FairTax. You will be told that this is very hard on the poor, but they are totally untaxed. We send a cash advance every month – the prebate - to every family, based on the size of the family, (Yes, you and Melania and Baron will get one.) It is to totally offset the tax cost of spending on necessities. That is defined each year by the government as poverty level spending. The following shows how much each family will receive this year.

Beyond that, we are all voluntary spenders and will be taxed the same. And there is no tax on used items.

The FairTax percentage rate is set as an “inclusive” tax, and the rate is 23% on the personal consumption of all new goods and services. That is to say it is included in the price as a percent of your spending. We chose to use an inclusive tax because we are replacing an inclusive income tax. Your income tax is included as a percent of your income.

Opponents will argue that it is a 30% tax when compared with a state sales tax which is on top of your spending or an exclusive tax. So, let’s compare it with the income tax when figured the same way. The FairTax is 30% on top of what you have to spend. The average income tax, of those who pay income tax, is 14.6% plus the payroll tax of 7.65%, or 22.25%. If you earn $100 you keep $77.75 to spend. That equals a tax on top of what you have left to spend of 29.6%. In other words, the burden is about the same, but with the FairTax, we get dramatically more purchasing power with lower prices, more take-home pay, and the prebate plus no IRS in our lives.

Opponents have also argued that the rate would have to be significantly higher than 23%. They presume the bill will not pass as written. They “assume” Congress will exempt items they would like to see exempted and – voila! – a higher rate is needed. We will argue that exempting anything will open the door to a tax code as complicated as the current one. Indeed, we should require a supermajority to exempt anything.

As to the politics of the bill, in my primary race in 2002 my view was that if the turnout was a record low – say 30,000 votes – I could lose. The average turnout in a primary in those precincts that comprised the new 7th district was 37,000 votes. The record number of votes was 41,700. On Election Day we had 88,500 voters, and I won by 30 points. We did a poll two days later to find out why so many voted. One fourth of the voters had never voted in a Republican primary before. They came to save the FairTax. 4% were Dems and they came for the same reason. I never ran a commercial on the issue. It is a winner.

In about September of 2004, the Democrats got nervous about the issue and Leader Nancy Pelosi and Budget Leader John Spratt had a one-hour press conference trashing the FairTax. A month later Roll Call did a 1500-word piece on the bill. They used all of the Democrat talking points against the bill and never called me, the author of the bill, for a comment. The last sentence of that story was a quote by a senior Democrat leadership aide who said, “If the American people catch on to how simple and fair this is we’re toast.”

Mr. President, this is a big idea. It is also simple and fair. This could change the world. I am available for a meeting with you or your economic advisors. Let’s end the deep state and change the world in just one bill.

My best,

John Linder (GA 7 – Retired)