[Cover Sheet]{.smallcaps}

Comment to

The President\'s Advisory Panel on Federal Tax Reform

June 10, 2005

## Fair Tax vs. HR 25: Seven Suggestions to Improve HR 25 

[A Comment submitted by Gregg Hoover, Individual]{.smallcaps}

FairTax vs. HR 25: Seven Suggestions to Improve HR 25

> The FairTax, or retail sales tax, offers the only real alternative tax
> reform to replace the present income tax. House Bill HR 25, and the
> identical Senate Bill S 25 comprise the current Congressional proposal
> of the FairTax.
>
> The primary concerns of the President's Panel include the adequacy of
> the tax rate percentage, ease of collection, and fear of creation of a
> tax-avoidance black market. These are addressed in clear and
> straightforward well-supported testimony of Tom Wright of the
> Americans for Fair Taxation.
>
> The Panel does not, however, address several shortcomings of HR 25
> that will result in an Internal Revenue Title less than what the
> FairTax principle intends. The following provisions of HR 25 should be
> added or modified:
>
> **1. Add specific language linking the effective dates of the new
> Internal Revenue Title to passage and forwarding of a resolution to
> the states repealing 16^th^ Amendment.** Without this linkage, the
> public will be rightly skeptical that Congress is keeping the present
> income tax in place, ready for revival after simply adding the
> FairTax. The finding in HR 25 the 16^th^ Amendment should be repealed
> is not sufficient. Language must be added in the enacting clauses
> making the effective dates for the new Title conditional upon the
> passage of a resolution repealing the 16^th^ Amendment, and the
> submission of it to the states for ratification.
>
> **2. Remove the Income Tax Included in HR 25.**
>
> Proposed Section 905 of the Internal Revenue Title in HR 25 is a 23%
> flat income tax on non-resident aliens and foreign corporations. Its
> inclusion is contrary to the Congressional finding in HR 25 calling
> for the repeal of the 16^th^ Amendment, because income taxes require
> the retention of the 16^th^ Amendment. Any income, even a flat tax on
> aliens, is repugnant to the principle of the FairTax system.
>
> **3. Add specific language enacting the new Title into law, move all
> effective dates of applicability of the new Title, dates of repeal of
> previous title sections, [to the enacting clauses]{.underline} of HR
> 25.** Section 104 of HR 25 contains language that can only have
> rational significance if it is in the enacting clauses of the Act. The
> present code suffers from the non sequitur inclusion of these
> provisions in the Title itself in section 7851. Thus the present Title
> contains no *language* enacting it into law, or repealing any part of
> the Internal Revenue title of 1939. Congress wasted much time and
> effort amending sections of the 1939 Title whose provisions were
> specifically saved and transferred to parallel sections of the new
> Title.
>
> Also, it is necessary to add the specific phrase "The Internal Revenue
> Code of 1986, as heretofore, hereby, or hereafter amended, **[and
> hereby enacted into law]{.underline}**, may be cited as the ''Internal
> Revenue Code of 2005'' and is as follows"
>
> **4. Remove Discriminatory Demand for Social Security Number for
> Family Allowance Eligibility.** HR 25 abandons unnecessarily the
> principle of religious freedom and tolerance of the previous tax title
> by demanding a Social Security Number for eligibility for the Family
> Consumption Allowance. Without exempting such individuals from paying
> the Social Security portions of the FairTax, HR 25 can instead require
> the primary documentation that would otherwise qualify the individual
> for a Social Security Number.
>
> **5. Change liability for collection [and payment]{.underline} of tax
> from purchaser to seller.** The retailer of taxed goods or services is
> compensated for the tax, but the buyer is ultimately liable for the
> payment of the tax.
>
> **6. Treat all savings equally.**
>
> HR 25 exempts held savings unequally compared to other held property,
> which will not be taxed under the FairTax. Never-taxed IRS and other
> tax deferred savings will effectively be taxed only when spent. Roth
> and other regular savings from money once taxed will effectively be
> taxed a second time when spent under the FairTax. The issuance of
> Treasury tax credits, [good for tax only]{.underline}, transferable on
> a time limited basis once to sellers of used goods purchases, for
> already-taxed savings less untaxed interest, will correct this
> transition inequity.
>
> **7. Eliminate taxation of Social Security benefits for the Social
> Security trust.**
>
> Social Security benefit payments will be taxed for Social Security
> trust funding unless HR 25 exempts them from taxation, as does the
> present tax system. Issuance of Treasury tax [credits for the Social
> Security portion of the FairTax only]{.underline}, and [good for tax
> only]{.underline}, transferable on a time limited basis once to
> sellers of used goods purchases will correct this inequity.
>
> Thank you for allowing my comments.
>
> Respectfully submitted,
>
> Gregg Hoover, Individual
>
> gregghoover@yahoo.com