Joining in a tax day rally yesterday in Washington were Senators Johnny Isakson and Saxby Chambliss, Congressmen Tom Price and Phil Gingrey of Georgia and several other supporters of the “FairTax,” notably the presidents of the National Small Business Association and the National Taxpayers Union.
Isakson said “tax simplification is long overdue,” terming the current tax code “burdensome to families” and “a large drain on America’s small businesses.” He cited statistics from the National Federation of Independent Business showing that “small businesses spend between 1.7 billion and 1.8 billion hours a year on tax compliance with a total estimated cost of between $15 billion and $16 billion annually.” That’s a whale of a lot of time used up on complying with the hodge-podge tax code that usually requires a CPA for the smallest business.
Isakson also said the existing tax code “punishes productivity instead of taxing discretionary spending.” He said the FairTax is the way to simplify and clean up the tax code “and create a more simple way to pay your fair share.”
No doubt, it is simpler than the morass of provisions rolled into the current tax code. But to be candid, the method of figuring the “FairTax Act,” Senate Bill 13 or S.13 in the Senate terminology, does not appear to be so simple.
To start with, it would be a 23 percent tax on “the use or consumption in the United States of taxable property or services,” according to S.13. That would be for the first year, 2013 (assuming enactment, a huge assumption). Thereafter, the bill says, “the rate of tax is the combined federal tax rate percentage (as defined in paragraph (3)) of the gross payments for the taxable property or service.” That paragraph says “The combined federal tax rate percentage is the sum of (A) the general revenue rate (14.91 percent, according to paragraph 4), (B) the old-age, survivors and disability insurance rate, and (C) the hospital insurance rate.
It’s just a tad confusing to your columnist, trying to figure out what the general revenue rate (whatever that is) and the old-age, survivors and disability insurance and hospital insurance rates have to do with the sales tax. However, the president of the National Small Business Association, Todd McCracken, flatly said in his tax day remarks that the “FairTax would replace the current system with a national 23 percent sales tax.” Further, he said a survey by his association showed a majority of small businesses support the tax plan.
McCracken said neither job creation nor deficit reduction can “be optimized without some kind of meaningful tax reform.” Granted, but the “FairTax” is a long way from gaining congressional approval. Meanwhile, why can’t Congress just close some loopholes and make existing tax cuts permanent?