# Date of submission: June 1, 2005

Contact Information: Telephone: 913.661.2991

Fax: 913.661.2686

E-mail: <sunnyet@kc.rr.com>

Cover Sheet

Summary;

The so-called "Family Friendly Tax Reform" is complicated, invasive and,
overall, the poorest of all the proposals so far put before the panel.

Proponents claim the FairTax is unfair because a family making \$50,000
a year would pay the same amount in taxes for food, housing clothing,
etc. as a family making \$500,000 annually. This is not so simply
because the wealthy family buys more expensive goods and services
(mansions instead of houses, limousines instead of Toyotas, Versace
dresses instead of Lane Bryant) than the middle class family. Therefore,
they would pay more taxes.

In this piece I take each of the arguments presented by a proponent of
the "Family Friendly Tax Reform" and compare them to the FairTax.

The estimate of necessary sales tax rate of about 60 percent to fund the
federal government at its current levels because taxable retail sales
account for less than one-third of all U.S. economic activity fails to
consider the fact that the FairTax will tap the \$350 Billion a year
that the IRS says tax evaders do not pay every year as well as assure
that drug dealers, porn pushers, and illegal immigrants all pay into the
system along with 40 million foreign tourists annually,

I explain why refundable tax credits, replacing old tax breaks with new
ones and exchanging old exemptions and incentives for new and broader
ones do not meet the requirement for fairness and, in fact, penalize the
elderly, the poor and people who don't own homes.

In conclusion, a tax that gives everyone 100% of their paycheck or
pension and still funds the government, provides a rebate so no one pays
tax on necessities up to the poverty level, broadens the tax base by
assuring that present tax evaders have to pay taxes, repeals the income
tax and other regressive taxation and makes US companies the only ones
in the world that do not tax production is the best, most profitable way
to go for the country and for its citizens. The FairTax is a win/win tax
-- taxpayers win, government wins and the economy wins.

+------------------------------------------------+---------+---+---+--------+
| Family Friendly Tax Reform vs the FairTax      |         | > |   |        |
|                                                |         |   |   |        |
| A new proposal for tax reform called "Family   |         | ! |   |        |
| Friendly Tax Reform" should be compared to the |         | [ |   |        |
| FairTax to see which best meets the            |         | ] |   |        |
| President's directive.                         |         | ( |   |        |
|                                                |         | m |   |        |
| Daniel Weinstein, a major proponent of the     |         | e |   |        |
| "Family Friendly Tax Reform" asks, "How would  |         | d |   |        |
| a national sales tax actually make matters     |         | i |   |        |
| worse? Its advocates have long argued that by  |         | a |   |        |
| taxing the things we buy instead of the        |         | / |   |        |
| salaries we earn, such a tax would both        |         | i |   |        |
| simplify the tax code and promote personal     |         | m |   |        |
| savings over material consumption. But the     |         | a |   |        |
| reality would be far different. Consider this: |         | g |   |        |
| A family making \$50,000 would pay the same    |         | e |   |        |
| amount in taxes as a family earning \$500,000  |         | 1 |   |        |
| for such basic items as food and clothing. For |         | . |   |        |
| the lower-income family, sales taxes would add |         | p |   |        |
| up to a big chunk of the family budget. For    |         | n |   |        |
| the wealthier family, taxes would barely be a  |         | g |   |        |
| consideration. That\'s hardly fair." Weinstein |         | ) |   |        |
| chooses not to recognize that the wealthy      |         | { |   |        |
| spend differently..                            |         | w |   |        |
|                                                |         | i |   |        |
| If wealthy families spent money the way        |         | d |   |        |
| lower-income families did, they would all pay  |         | t |   |        |
| the same tax. However, lower-income families   |         | h |   |        |
| don't buy two or three mansions -- one in      |         | = |   |        |
| town, one in Aspen, another on the shore --    |         | " |   |        |
| and they don't drive around in limousines and  |         | 0 |   |        |
| Jaguars. They wear clothing from Walmart and   |         | . |   |        |
| Penney's instead of Versace, Chanel, Vera      |         | 1 |   |        |
| Wang, etc. Their weddings are in church halls  |         | 0 |   |        |
| instead of country clubs; they eat out at Red  |         | 4 |   |        |
| Lobster or Olive Garden instead of Daniel's,   |         | 1 |   |        |
| La Cirque or Babbo's in NYC or The Dorchester  |         | 6 |   |        |
| Terrace in London. That's why higher income    |         | 6 |   |        |
| families will pay more tax -- they buy more    |         | 6 |   |        |
| expensive things.                              |         | 6 |   |        |
|                                                |         | 6 |   |        |
| Weinstein continues, "Some proponents say that |         | 6 |   |        |
| food and clothing could be taxed at lower      |         | 6 |   |        |
| rates \-- or exempted altogether \-- while     |         | 6 |   |        |
| luxury goods could be taxed at higher rates. . |         | 6 |   |        |
| . And while some have argued that a national   |         | 6 |   |        |
| sales tax would eliminate the need for the     |         | 6 |   |        |
| Internal Revenue Service, they overlook the    |         | 6 |   |        |
| fact that we would need a new agency to        |         | 7 |   |        |
| collect tax revenues from businesses." Instead |         | i |   |        |
| of exemptions, FairTax provides a rebate for   |         | n |   |        |
| all taxpayers. That's fair. It would be        |         | " |   |        |
| nonsense to tax luxury goods at higher rates   |         | > |   |        |
| since they are more expensive in the first     |         |   |   |        |
| place. Elimination of the IRS is elimination   |         | h |   |        |
| of the 60,000 page tax code that no one        |         | e |   |        |
| understands and that the IRS enforces unfairly |         | i |   |        |
| and unevenly. The collection system for a      |         | g |   |        |
| sales tax would be smaller and non-invasive.   |         | h |   |        |
|                                                |         | t |   |        |
| "Worst of all, a national sales tax would have |         | = |   |        |
| to be much higher than its proponents admit.   |         | " |   |        |
| In fact, the Brookings Institution\'s William  |         | 1 |   |        |
| Gale estimates that it would take a sales tax  |         | . |   |        |
| rate of about 60 percent to fund the federal   |         | 0 |   |        |
| government at its current levels, because      |         | 4 |   |        |
| taxable retail sales account for less than     |         | 1 |   |        |
| one-third of all U.S. economic activity." Mr.  |         | 6 |   |        |
| Gale's figures did not include consideration   |         | 6 |   |        |
| of the \$350 Billion a year that the IRS says  |         | 6 |   |        |
| tax evaders do not pay every year, which would |         | 6 |   |        |
| necessarily be tapped by a consumption tax. He |         | 6 |   |        |
| also left out the money that will be paid into |         | 6 |   |        |
| the system by drug dealers, porn promoters,    |         | 6 |   |        |
| and illegal immigrants who now pay no income   |         | 6 |   |        |
| tax at all. Add to that income from            |         | 6 |   |        |
| consumption taxes paid by 40 million foreign   |         | 6 |   |        |
| tourists annually and you begin to see where   |         | 6 |   |        |
| Mr. Gale's estimates are totally incorrect.    |         | 6 |   |        |
|                                                |         | 6 |   |        |
| Also, the FairTax was developed by some of the |         | e |   |        |
| finest economic minds in America, not as a     |         | - |   |        |
| superficial intellectual exercise or as a      |         | 2 |   |        |
| weighted response to make the figures prove a  |         | i |   |        |
| foregone conclusion, but over a 10-year period |         | n |   |        |
| with careful research into all phases of the   |         | " |   |        |
| US economic system. Economists from a wide     |         | } |   |        |
| political spectrum (Harvard, Rice, MIT,        |         |   |   |        |
| Stanford, and more) came up with a politically |         |   |   |        |
| unbiased system when they developed the        |         |   |   |        |
| FairTax.                                       |         |   |   |        |
|                                                |         |   |   |        |
| Weinstein again: "There is another hearty      |         |   |   |        |
| perennial tax reform idea: the flat tax \--    |         |   |   |        |
| one theoretically low income-tax rate for      |         |   |   |        |
| everyone. But that, too, would be a raw deal.  |         |   |   |        |
| As former Undersecretary of Commerce Robert    |         |   |   |        |
| Shapiro has calculated, maintaining current    |         |   |   |        |
| federal revenues would require a 21 percent    |         |   |   |        |
| flat tax. . . A flat tax would thus represent  |         |   |   |        |
| a substantial tax increase for a large         |         |   |   |        |
| majority of taxpayers." I have to agree with   |         |   |   |        |
| him here -- because the flat tax does not get  |         |   |   |        |
| rid of the current income tax. We do not need  |         |   |   |        |
| any tax that is simply added to the system     |         |   |   |        |
| already in place, including the "Family        |         |   |   |        |
| Friendly Tax". THAT would be regressive.       |         |   |   |        |
|                                                |         |   |   |        |
| Weinstein continues, "Family friendly tax      |         |   |   |        |
| reform\" would bring \$436 billion in net new  |         |   |   |        |
| tax relief to American families. It calls for  |         |   |   |        |
| eliminating 68 tax breaks that are redundant.  |         |   |   |        |
| . . replaced by four generous new tax          |         |   |   |        |
| incentives that would be easily                |         |   |   |        |
| understandable, available to the vast majority |         |   |   |        |
| of taxpayers, and consistent with the          |         |   |   |        |
| progressive values of work and family."        |         |   |   |        |
|                                                |         |   |   |        |
| That's exchanging tit for tat and therein lies |         |   |   |        |
| the first major problem with this plan. First, |         |   |   |        |
| It keeps the income tax and the IRS. The IRS   |         |   |   |        |
| is the only group in this country with search  |         |   |   |        |
| and seizure rights -- you are guilty until     |         |   |   |        |
| proven innocent and the cards are stacked      |         |   |   |        |
| against you. Under this so-called              |         |   |   |        |
| family-friendly reform" those rules still      |         |   |   |        |
| hold.                                          |         |   |   |        |
|                                                |         |   |   |        |
| "The first new incentive would be a refundable |         |   |   |        |
| college tax credit that would substitute for   |         |   |   |        |
| five existing education tax breaks and provide |         |   |   |        |
| a \$3,000-a-year incentive to students for     |         |   |   |        |
| four years of college and two years of         |         |   |   |        |
| graduate school. . . The second major          |         |   |   |        |
| incentive would be a home mortgage deduction   |         |   |   |        |
| that would be available to all homeowners, not |         |   |   |        |
| just those who itemize. By allowing            |         |   |   |        |
| non-itemizers to claim the deduction, we can   |         |   |   |        |
| increase homeownership while reducing the      |         |   |   |        |
| number of Americans who must file the more     |         |   |   |        |
| complicated 1040 tax form. Third, a new family |         |   |   |        |
| tax credit would replace three existing tax    |         |   |   |        |
| incentives \-- the Earned Income Tax Credit,   |         |   |   |        |
| the Child Credit, and the Dependent Care       |         |   |   |        |
| Credit \-- and provide more benefits to more   |         |   |   |        |
| families than all of them combined."           |         |   |   |        |
|                                                |         |   |   |        |
| What about renters? People don't buy houses to |         |   |   |        |
| get tax credits; they buy homes that remind    |         |   |   |        |
| them of their idea of "home," or because they  |         |   |   |        |
| like the schools or they want privacy. Or      |         |   |   |        |
| maybe they're just tired of living with white  |         |   |   |        |
| walls and generic light fixtures in a rental   |         |   |   |        |
| that they can't personalize.                   |         |   |   |        |
|                                                |         |   |   |        |
| Incentives, as we have learned with the income |         |   |   |        |
| tax, most often turn out to be dis-incentives. |         |   |   |        |
| With Weinstein's plan you are still paying for |         |   |   |        |
| education and homes with after-tax dollars.    |         |   |   |        |
| How much better -- and what better incentive   |         |   |   |        |
| -- to pay with before-tax dollars. Under the   |         |   |   |        |
| FairTax plan, everyone gets to keep 100% of    |         |   |   |        |
| their income to spend, save or invest however  |         |   |   |        |
| they see fit.                                  |         |   |   |        |
|                                                |         |   |   |        |
| "Finally, a universal pension (UP) would       |         |   |   |        |
| replace 16 existing IRA-type accounts with a   |         |   |   |        |
| single portable retirement account for all     |         |   |   |        |
| workers. . . . Universal pensions could also   |         |   |   |        |
| offer a progressive alternative to Bush\'s     |         |   |   |        |
| plan to divert Social Security payroll taxes   |         |   |   |        |
| into private accounts." The FairTax leaves it  |         |   |   |        |
| up to the individual to choose how to save and |         |   |   |        |
| invest money. Tuition, house payments, all     |         |   |   |        |
| purchases -- all paid with                     |         |   |   |        |
| [before]{.underline} tax dollars. It's cynical |         |   |   |        |
| for government to treat citizens like          |         |   |   |        |
| incompetent children, trying to guide them     |         |   |   |        |
| with "incentives."                             |         |   |   |        |
|                                                |         |   |   |        |
| Other things are missing in this tax plan that |         |   |   |        |
| are simply and neatly handled by the FairTax.  |         |   |   |        |
| This plan neglects the elderly and the         |         |   |   |        |
| disadvantaged -- the FairTax takes care of     |         |   |   |        |
| them nicely by providing a prebate -- a        |         |   |   |        |
| monthly stipend so that no one pays tax at all |         |   |   |        |
| up to the poverty level.                       |         |   |   |        |
|                                                |         |   |   |        |
| The FairTax does not tax productivity. The     |         |   |   |        |
| Family Friendly plan does. To be the only      |         |   |   |        |
| country in the world that doesn't tax          |         |   |   |        |
| production gives the US a HUGE international   |         |   |   |        |
| trade advantage. The progressive tax system    |         |   |   |        |
| doesn't even address those issues nor does it  |         |   |   |        |
| promise to expand the tax base like the        |         |   |   |        |
| FairTax does. Under this progressive system,   |         |   |   |        |
|                                                |         |   |   |        |
| Weinstein again: "This approach would also     |         |   |   |        |
| restore basic fairness to the system by        |         |   |   |        |
| treating everyone the same. Millions of        |         |   |   |        |
| middleclass and low-income families are not    |         |   |   |        |
| able to take advantage of the existing         |         |   |   |        |
| mortgage deduction because they don\'t         |         |   |   |        |
| itemize, and millions more don\'t contribute   |         |   |   |        |
| to an IRA or 401(k) because they can\'t afford |         |   |   |        |
| it. By making all four of these broad new tax  |         |   |   |        |
| incentives available to non-itemizers and      |         |   |   |        |
| making the incentives for college and          |         |   |   |        |
| retirement refundable, everyone will get a tax |         |   |   |        |
| break."                                        |         |   |   |        |
|                                                |         |   |   |        |
| But this system doesn't treat everyone the     |         |   |   |        |
| same: What about families who don't own homes? |         |   |   |        |
| There's no help here for renters -- many of    |         |   |   |        |
| the elderly don't WANT to struggle with the    |         |   |   |        |
| upkeep of homes and yards. Giving them all of  |         |   |   |        |
| their pension funds, like FairTax does, is     |         |   |   |        |
| fair.                                          |         |   |   |        |
|                                                |         |   |   |        |
| The President charged the panel with the       |         |   |   |        |
| direction to simplify tax laws, to make the    |         |   |   |        |
| tax law fair while encouraging home ownership  |         |   |   |        |
| and charity giving, to promote economic growth |         |   |   |        |
| and strengthen US competitiveness in global    |         |   |   |        |
| markets. There is only one proposal before the |         |   |   |        |
| panel that meets all those criteria and that,  |         |   |   |        |
| ladies and gentlemen, is the FairTax.          |         |   |   |        |
|                                                |         |   |   |        |
| End                                            |         |   |   |        |
+------------------------------------------------+---------+---+---+--------+
| ![](m                                          |         |   | ! |        |
| edia/image1.png){width="0.20833333333333334in" |         |   | [ |        |
| height="1.0416666666666666e-2in"}              |         |   | ] |        |
|                                                |         |   | ( |        |
|                                                |         |   | m |        |
|                                                |         |   | e |        |
|                                                |         |   | d |        |
|                                                |         |   | i |        |
|                                                |         |   | a |        |
|                                                |         |   | / |        |
|                                                |         |   | i |        |
|                                                |         |   | m |        |
|                                                |         |   | a |        |
|                                                |         |   | g |        |
|                                                |         |   | e |        |
|                                                |         |   | 1 |        |
|                                                |         |   | . |        |
|                                                |         |   | p |        |
|                                                |         |   | n |        |
|                                                |         |   | g |        |
|                                                |         |   | ) |        |
|                                                |         |   | { |        |
|                                                |         |   | w |        |
|                                                |         |   | i |        |
|                                                |         |   | d |        |
|                                                |         |   | t |        |
|                                                |         |   | h |        |
|                                                |         |   | = |        |
|                                                |         |   | " |        |
|                                                |         |   | 0 |        |
|                                                |         |   | . |        |
|                                                |         |   | 1 |        |
|                                                |         |   | 0 |        |
|                                                |         |   | 4 |        |
|                                                |         |   | 1 |        |
|                                                |         |   | 6 |        |
|                                                |         |   | 6 |        |
|                                                |         |   | 6 |        |
|                                                |         |   | 6 |        |
|                                                |         |   | 6 |        |
|                                                |         |   | 6 |        |
|                                                |         |   | 6 |        |
|                                                |         |   | 6 |        |
|                                                |         |   | 6 |        |
|                                                |         |   | 6 |        |
|                                                |         |   | 6 |        |
|                                                |         |   | 6 |        |
|                                                |         |   | 7 |        |
|                                                |         |   | i |        |
|                                                |         |   | n |        |
|                                                |         |   | " |        |
|                                                |         |   | h |        |
|                                                |         |   | e |        |
|                                                |         |   | i |        |
|                                                |         |   | g |        |
|                                                |         |   | h |        |
|                                                |         |   | t |        |
|                                                |         |   | = |        |
|                                                |         |   | " |        |
|                                                |         |   | 1 |        |
|                                                |         |   | . |        |
|                                                |         |   | 0 |        |
|                                                |         |   | 4 |        |
|                                                |         |   | 1 |        |
|                                                |         |   | 6 |        |
|                                                |         |   | 6 |        |
|                                                |         |   | 6 |        |
|                                                |         |   | 6 |        |
|                                                |         |   | 6 |        |
|                                                |         |   | 6 |        |
|                                                |         |   | 6 |        |
|                                                |         |   | 6 |        |
|                                                |         |   | 6 |        |
|                                                |         |   | 6 |        |
|                                                |         |   | 6 |        |
|                                                |         |   | 6 |        |
|                                                |         |   | 6 |        |
|                                                |         |   | e |        |
|                                                |         |   | - |        |
|                                                |         |   | 2 |        |
|                                                |         |   | i |        |
|                                                |         |   | n |        |
|                                                |         |   | " |        |
|                                                |         |   | } |        |
+------------------------------------------------+---------+---+---+--------+
|                                                |         |   |   |        |
+------------------------------------------------+---------+---+---+--------+
|                                                |         |   |   |        |
+------------------------------------------------+---------+---+---+--------+