Transcripts For CSPAN National Sales Tax 20141122

Moving away. D i think the u. N. Conference in new york indicated significant part of thishe countrys Largest Companies to saying, weren factoring the cost of carbon into our decisions. Why arent governments . So there is a changing dynamic here, which gives us a better of what we might be able to achieve by 2025 on the Climate Action plan efforts and beyond. And no one rule is going to be linchpin here. Its going to have to be a combination of efforts between sector,nt, the business states, local communities, and to step up tod the plate and help contribute to this. Ive got about three minutes left. Thanks for being here today. Past, depending on which data you look at, theres orn a slowdown or a pause hiatus in Global Warming for the last 15, 18 years. The epandering if factors that at all into its policies and more recent studies saying climate is more sensitive thought in maybe we the 90s. Is this something you take into account with the current rules . With thetainly work rest of the u. S. Government to take a look at these factors. But i dont want to take a lot that. E on that is a shortlived issue that doesnt represent climate, which at on a longerterm basis. And it represents one factor, so many others, most of which are looking like theyre accelerating at levels didnt anticipate as opposed to being more moderate. So if you look at the entire science record, we are looking at all of those issues, but wereg tells us that being overly aggressive in understanding the actions we or the impacts of doing nothing on climate. For doing this. Kin we appreciate it. Hope you come back. Welcome. Hope youll get a bit of breakfast. That. Ogize for it was delicious. Occupational hazard, huh . Well hear more about policy monday when the center for American Progress hears from todd stern, who state Department Special envoy for climate change. Global effortst to curb climate change, including the recent agreement china tohe u. S. And reduce carbon emissions. Thats live monday at noon eastern on cspan 2. This thanksgiving week, cspan is featuring interviews from congress. Embers of watch the interviews monday through thursday at 8 00 p. M. Eastern. That to some of the people involved in congress 1860s the 1830s to period. Certainly steven a. Douglas. Strugglinge were desperately to try to work out compromises to keep the union avoid itat and splitting up. I think we have a lot of members. Younger and its not just, by the way, mrs. Pelosi. Been a great leader and she is really good at raising money. My fortes. One of i was never good at that. Have to start training younger people and bring younger into the caucus to become leaders. The future one of the things that i certainly believe, with all my to knowd soul, you have when to leave. And also on thursday, thanksgiving day, well take an American History tour of various native american tribes. Eastern, 10 a. M. Following washington journal. Then at 1 30, attend the groundbreaking ceremony of the new Diplomacy Center in former secretary of states. And Supreme Court justices at p. M. Eastern. Thats this thanksgiving week on cspan. Schedule, go to cspan. Org. Georgia congressman rob woodall spoke recently at the Heritage Foundation about a sales tax proposal that would replace the current income tax. Currentlytive woodall chairs the republican study committee. From the Heritage Foundation, hour. S just over an we, of course, welcome those on our heritage. Org and via cspan. I would ask that everyone in the house check that cell phones off, as weurned prepare to begin. And we do remind our internet viewers that questions can be at any time, simply speaker heritage. Org. And we will post it on the home page following todays airing. Hosting is david burton. Tax matters, securities law, entitlements, andregulatory Administrative Law issues. Before joining us at heritage, and career,onal including serving as general the National Small Business Association and chief Financial Officer and general of the alliance for retirement prosperity. Theas also a partner in argus group of virginiabased Public Policy and Government Relations firm. In welcominge david burton. David . Welcome conservative principals lead to conclusions about tax policy. First, conservative tax system necessary the revenue to fund limited government with the least negative economic toact that is practical achieve. This is accomplished by structuring a tax system to interference with free markets, to minimize the caused by taxpayers and to minimize Tax Administration costs. This, in turn, will lead to the highest level of economic output, Economic Growth, innovation, opportunity, job creation, real wages and whenerity thats possible raising a given amount of revenue. Second, a conservative tax limit theuld seek to tax systems adverse impact on the core institutions of civil family, including the and voluntary associations, such as religious and Educational Charities and community organizations. Third, a conservative tax system be just, because a just political order protects individual right to life, liberty and property. Minimizes thetem minimizing of those rights by in application with special privileges for none taxpayers rights to due process. Lastly, a conservative tax visible andd be understandable so as to accurately convey the true cost of government to the public. This analysis leads to a number of specific policy recommendations. A conservative tax system would impose one flat or proportional be neutral towards savings and investment, or taxed differently, consumption. It would exempt the poor but only the poor from tax. Would not impose a marriage penalty. And it would provide tax relief with children and would not impose taxes on the core voluntary associations that constitute civil society. Principle, four ways to satisfy these criterion. E economic a flat tax, a consume income or, a business transfer tax, a National Sales tax. Today were examining the case a National Sales tax. The first National Sales tax was introduced by congressman dan shafer and billy koza in 1996. 1999, representative john linder introduced the fair tax. The primary difference between the two plans is that the fair tax repeals payroll taxes and accordingly, has a somewhat higher tax rate, statutory tax rate to raise the same amount of revenue. John linder has retired. Successor in congress is our speaker today. Is todayan rob woodall the lead sponsor of the fair tax. 75 cosponsorsas and it is, in terms of cosponsorship, by far the leading tax reform proposal in congress. Today representative woodall is going to speak to us and answer audience questions, and then get congress. S work in then well have two excellent todd mccracken, president of the National Small Business Association, and karen wallaby, who is Research Director of americans for taxation. After their remarks, well have an additional questionandanswer session. One final note. The Heritage Foundation is doing series of events on fundamental tax reform i and the raised by tax reform and various tax reform plans. Events coming up. A. M. , there3, at 11 will be a speech on tax reform and Economic Growth. Former cbo 10, director and Tax Foundation president will discuss how we might improve the tax policymaking process. Today iser representative rob woodall. He represents the seventh of georgia and serves on the house rules committee, the budget committee, the oversight and government reform. He also serves as chairman of the republican study committee. Born and raised in georgia. He received an undergraduate furman university. That you not hold it against him that hes a lawyer. Lindersngressman john chief of staff and was elected to congress in 2010. Ive known the congressman for a long time. I can say with conviction that theres no better friend to the taxpayer in congress. Hes the tip of the spear in the reform. To achieve tax hes a tireless, articulate and effective spokesman for tax reform and i very much look forward to what he has to say today. Welcomingn me in congressman woodall. David, i appreciate that. I can tell you that the night i elected, four years ago, my mother looked at me and said, being myve gone from favorite to a lawyer to being a congressman. Go to jail. Dont sliding down that scale. There is nothing i could do to rainy, cold and dreary day in washington, d. C. Excite me more than to talk about the fair tax. It was amazing to me that the big dreamsdream the seems not to be present in this anymore. Its hard to get something past it that just nibbles around the edges. You get something passed that actually changes the way we think about our tax system, about our relationship with the american Tax Collector . Well, the fair tax. Folks ought to know that the fair tax didnt come from washington, d. C. The fair tax came from a group in texas whoers had had some success dealing tort reform issues. As you know now, doctors are flocking into the state of texas to practice because they were able to receive in making medicine work for doctors and patients. These Civic Leaders got together and said, if we can do that for couldate of texas, what we do for america as it retl res system . Lets start with a blank sheet of paper and see what happens next. And that makes all the difference. Not some of the difference. All of the difference. I put a chart up that shows the rates oforporate tax oecd countries and graphed that compared to the american tax rate, going back to the 1980s, going through 2010. Every tax reform proposal to deal with this tremendous disadvantage that an international marketplace. But i put this up because its to me that in these past two years, weve had a the ways and Means Committee that has done more for tax reform than any other chairman in my memory. Going back 20 years. I can never think of a chairman that has worked harder to make the tax code make more sense for American Consumer and for the American Family and for the has davebusiness than camp from michigan. Hes retiring at the end of this year, as you all know, and were a tremendous talent in dave camp. But when he got together to take ambitious reform of the tax code that i have seen in said, lets see if we can get the corporate kind ofax rate down to that country average, kind of international average. Thats striking to me the best effort, again, that i have seen in my was an effortit to see if we can be right there in the middle. Mediocre. Be i dont know when it became true in america that when we set our on doing something, our goal is to be kind of like everybody else. They do its the way in europe. How it came to be that in america, when we decide that we difference, we look around at what everybody else is doing and say lets be the same. I dont want to be the same i want to lead. I want to lead. And what we do with the andorate income tax rate the fair tax is take it to zero for one reason and one reason only. A businessres not on this planet that pays taxes. As you all know, businesses collect taxes. Consumers, final consumers, pay taxes. Walmart doesnt pay taxes. From mecollects the tax when i go buy and shop at walmart. Fair tax is the that it is the only tax being things. D that does two number one, the only tax being discussed that completely eliminates hidden taxes in the of everything that we buy. I mean, you know how easy it is to congress if your Campaign Promises im gonna take personal income tax rates im just gonnad make all those big bad corporations pay the bill. Is to know how easy that run as a Campaign Slogan . Were going to let you all off the hook, were just going to tax walmart. Thats nonsense. This is the only tax that makes transparent what the burden is American Consumer. What is the cost of government today . That. You to think about fair tax rate is set at 23 . Big number. Scares me sometimes when i think it. T and im not entirely proud about telling people that im supporting a tax bill that is going to create a 23 consumption tax. But the reason we do that is because thats what it costs to fund the United States today. Ent as it exists fair tax is not a bill about shrinking the size of government. Bill about shrinking our tax code so we can grow the size of the economy. Were the only ones who are honest with folks about what that inment is. Its about what that number is. If its too low, lets be honest. Too high, lets lower it. But we can be honest with folks the size of government is. Absolutely no other tax proposal do is eliminate the payroll tax. The payroll tax. You know, when i go into high with seniortalk classes, theyll talk about their parttime jobs. Now. Know all about taxes they didnt know about taxes before they took on that parttime job, but they know all about taxes now. And the one they want to know about is that one called fica. World are they getting for that . I dont know if youve looked at is numbers, but payroll tax the largest tax that 80 of American Families pay. That. You to think about how many thanksgiving and christmas difference are going next interrupted over the 60 days with talk dare i say taxes . Ts about income griping about income taxes. Frustration about income taxes. Tell you how many there will be, but there will not be theconversation about payroll tax, even though thats the largest tax that 80 of pay. Cans if you want to get the tax man off of the american of theeneurs back, off American Families back, if you thirst forate that production that i think is the american psyche, youve got to eliminate the largest tax that 80 of thatcans pay, and that is payroll tax. People often think about sales regressive. Ng its the only proposal in all of d. C. That proposes to eliminate that tax burden that tax burden for 80 of American Families. Route. D the income tax this goes back to the kennedy administration. Cutter. He original tax he cut that rate from 91 down to 70 . My moreidnt bring in money. Across the top, ive graphed the rate. Al tax across the top, ive graphed receipts. I need to give credit where credit is due. The Heritage Foundation put out this chart. Out a tremendous group of economic charts to help impact oferstand the washingtons decisions on our economies, families and businesses. From their collection. What you see here is that it does not matter how high or how low the income tax rate is. America is only willing to give you so much. Largest change in individual income tax receipts claim during the clinton administration, not tax rate changed at all during the clinton thenistration but because economy was on fire during the 90s. Turns out if folks are making money, theyre spending more money, paying more taxes. In moreet to bringing revenue is a bigger economy, not a higher tax rate. Defines that, ways so manyhat in other programs miss. I take you back to 1997. Giant midst of this economic explosion, the joint had a symposium on how do you model a consumption tax. Me to get the fair tax scored, because its not edges. Bbling around the its something completely different from what we have ever done before. In economic analysts from the left and eight different macroeconomics groups and said, all us how you would model switch in america to a consumption tax like the fair tax. Well, they all went out and came back months later. They all came back with you wouldnumbers, as imagine. But the one thing these eight different macroeconomic analytical groups agreed on is wouldhe American Economy grow faster under a consumption the current tax system. The liberals thought it would grow a little bit faster. The conservatives thought it grow a whole lot faster. But the area of agreement is we can do better, and that has to do with getting us out of the rate. Ss of marginal tax it also has to do with getting us out of the business of tax expenditures. The biggest problem we have in the fair tax passed is all the people who are really smart in washington, d. C. Out if youre really smart, youve got an idea about how we can use the tax code to make somebody elses life better. You do. You look deep into your heart. In this room has an idea about how if only we in thisted the tax code way or that way, we could affect the behavior of america and that would make america better. Top tax expenditures, employerprovided health care, for dividendsates and capital gains, and the earned income tax credit. Tax goes to zero tax expenditures. Exceptions. Zero exemptions. Whole dont turn the system on its head, its hard to change the association that taxe folks have with these expenditures and their quality of life. Whenn friedman was asked he was testifying, they said, what would be the easiest way to make sure we dont have a new tax code littered with all these deductions and exemptions . He said start out with a tax none. Hat has absolutely start out with a tax code that has absolutely no exceptions, deductions, exemptions, because if theres a good reason to put one in there, i can probably make a good case to put in two and then three and then four and then five. And isnt that the way we arrived at the income tax that we have today . I dont dispute that there is these taxach one of expenditures. What i dispute is that the tax code is the best place to social policy. Socialle policy is the best social policy is the best place to implement social policy. Tax policy is the best place to collect taxes. No deductions, no exemptions. Absolutely every new good or service that they buy. Eliminating those distortions from the economy, huge. Difference in terms of utilization of capital. Titled america, the selfdestructive. Put together by the Tax Foundation. Tax foundation annually ranks folks by tax competitiveness. Friends in estonia are at number one on the list. United states is down at number 32. I dont believe theres a worker in the world that works harder worker. American i dont believe theres an infrastructure in the world thats better than the american infrastructure. I dont think there is a people the planet that is more committed to economic success, family, drive that one one worker, one entrepreneur at a time. I dont think theres anyone that does that better than we do. But we have handicapped ourselves. Aims to wipetax that slate clean. If youve been in this town for watched while, youve all of the machinations of trying to get a rebatable tax border. The american its hard to do. Many folks in the Currency Business would say, but we sort that out in the bryc price of currency. Its not that big a deal. A big enough deal that most folks are focused on it. Eeding at how do we keep our tax consequences from burdening the shippinggoods were overseas . Those goods come here taxfree. No suchwe have alternative. The fair tax solves that issue. Doesnt just remove income taxes price of production but removes payroll taxes from the of production as well. Again, having an honest conversation about what the size and scope of government is and how much that costs the American Consumer. Back to that chart that we marginal on the top tax rates, individual income tax receipts. Volatile, at its most volatile, that period of 1990 and 2,000, because the economy grew so 3 to ourdded individual tax receipts. 3 . The best Case Scenario of the added 3 . Ars, we not because of different rates economy. Se of a better our economy is out of whack way that 3 wont do. Our revenues and our expenses are out of whack in a way that 3 wont do it. The best solution we have is a economy. And, again, everyone agrees that a consumption tax moves us a that direction. Ill close with this. Interesting to watch what happens across the street in the the members voting card in your hand. I shouldens and have what happens is when all ofare going well, those smart people i told you about have lots of places they would like to spend all the thats coming in. Good places. Spend it on children and day care. Spend it on children and education. Spend it on children and higher education. Spend it on workers and retraining. On,list goes on and on and things that you and i will contribute to out of our own pocket, because they are worthy causes. So when the economy is going the onlybusters, people who pay taxes are people who have a job and a paycheck. Paychecks get bigger and federal receipts get bigger. Receipts shrink because paychecks shrink and weve now become accustomed to a brandnew level of spending. The spread. W until we get back into another where our amplitude of tax receipts goes even higher. Begin to spend even more money. The amplitude of volatility, of taxes, compared to sales taxes is night and day. The enemy of the federal that weg process isnt dont have enough money one year. Much, much toove much the next. That volatility, having a more predictable revenue stream makes all the difference in federal budgeting policy. Fair tax, consumption taxes, certainty in ways that income taxes never can. My day, youre making better by letting me come here and talk about federal tax policy, particularly fair tax policy. If we had had been talking im here with three of the finest minds you could have on this topic. Was one of the very first folks i met when i came to capitol hill. Forgotten more about the machinations of the tax know. Ons than i will ever todd has been leading a group change that you you make big changes from the grassroots up and has been involving folks back home and around the country in making decisions and making a difference for as long as i have known him. Doing thewallaby, predictive work, the i dare say not the glamorous work of the fair tax grinding through afters after numbers numbers and putting it in terms that the rest of us can understand, makes all the for thece in the world cause. And im grateful to her for it. Guy to be clear, im the who introduces the fair tax on capitol hill. Newthe guy who adds the cosponsors to the fair tax on capitol hill. But its the grassroots organizations around the country that is going to pass the fair tax on capitol hillment and see a new member of congress who has added their name as a cosponsor, you know it of my power or persuasion, not my charisma, but of constituents back home said, you know what, congressman, senator . Way. s a better and its called the fair tax. Let me work with you to get it done. Said, we now have more courageous cosponsors of the fair tax than any other fundamental tax reform bill on capitol hill. And it matters. Anybodys mind . Any questions that people would like to ask . Generally please state your name and institutional affiliation. Laura truman with the foundation. I wanted to ask about the impact security. So one of the things, maybe the average joe on the street doesnt know that Social Security is in trouble, but watch numbers by having a decembers naited trust designated trust Fund Designated task, we can see the imbalance. If you get rid of the payroll a generalnd it out as tax, then some of that sense of gobbling up all the tax income or having a shortfall away. So how do you handle that . Laura, youll remember that bush chose in his second term, was he going to reform or Social Security reform. He chose Social Security. It was so difficult, not many made tell you the progress in those four years. We didnt want to have to take on both at the same time. Both are critical and both need be taken on. We tried to just take on tax policy and leave the social policy of Social Security for another day. To do that, then, we locked in, on payroll as it exists and as it changes, we locked in that says the Social Security trust fund will continue to receive exactly the that it would have received had we continued to under a payroll formula. But, again, payroll has proven to fund the Social Security system. Rather than tying the fitness of fund to Security Trust the payroll base, i want to tie it to the size of the economy, fair is what we do in a tax world. Wecan grow the receipts that have, preventing bankruptcy would not be the right terminology. Are we have options for dealing with stoacial Social Securitys fiscal future will be better if we have a wider in. Nue stream coming if i could choose one of the easy things, the little hanging fruit that we could do it in the next two years, passing tax reform requires a president that in tax reform. I hope we can have that. But we all know what it takes to solve the Social Security problem. Either have to do something with benefits or do something with revenue. We will hope is that take some of the early steps to in these nextue two years, which makes then the twoe fair tax into even easier. Most folks dont understand the of sociale nature security payments. And if young people today are saying theyre more likely to see a ufo in their lifetime than a Social Security check, as we they are, the time to have aboutoneste honest conversation folks is now. Next question. Sir . Nick harver. Retired citizen. About the fair tax being revenueneutral. Distributionally neutral . How does it change the taxes . Ution of when dave camp set about doing fundamental tax reform, he keeping themself to same distributional analysis that we have today. Constraining. Bly when the top 1 of income paying the bulk of the taxes today, they wont be doing the bulk of the consuming tomorrow. Trying ton target keep the entire distributional table the same, we tried to target improving the distributional table for the americans. Me when i think about who needs code, it from the tax is often not those folks who are being brought down by the tax code. Its the folks the tax code get up. Tting when im a highincome earner, i my income and bring it in the lowest rates possible, which is why even when the top tax rate is 90 , americans whent paying anymore than the top tax rate was 80 . Lowincome earners dont have any choices. Eliminating the payroll tax the distributional analysis for them in ways that no other proposal does. Bushs Advisory Panel was looking, they released preliminary july 2005 report. And they found that no proposal examining did more for lowincome americans than did fair tax. I cant guarantee what taxes in the fair tax. What i can guarantee is youll taxes. Ntrol over those by taxes you on what you consume produce,an on what you it brings your relationship as a the American Government enterprise into a more control. Were going to discourage but weren perhaps not going to discourage production. It will absolutely change the distributional tables but it thoseut the outcome of into individual consumers hands. Ms. Jones . Will the tax how deal with lotteries . Favorite partst of the fair tax. But its called the prebait. I want you to think about what happens at the taxwriting committees. Well, i dont want to tax people buyingpers that theyre for children, because thats kind of important. I dont want to tax folks on buying. Yre i really hate to tax people on prescription drugs. Lair calculator for school. And on and on. N if we let ourselves get into that cycle, as so many states worthy to bes taxed and what is not if you twelve donuts, you do get taxed, but if you buy 13, thats you dont geto taxed. We dont want to be in that business. Prebate. Ated the its based on family size. Nobody shouldten, have to pay taxes on the purchase of those essential in the poverty line. Well just give folks a rebate and give it to them early, of they would pay on all of those goods up to the Poverty Level. We do that for every american, we dont have to find out how much money you make. We dont have to track you down. The only thing about this the you will havehip as an individual american citizen with the federal government as it pertains to taxes is filing your postcard that says this is my name and children i have and here are our Social Security numbers. Thats it. Thats it the involvement of the american taxman in the American Consumers life is over forever. And you can only do that if you find numbers. Thats it. Thats it the involvement of the american a onesizefitsall kind of a process to deal with exceptions, exemptions, reductions. For us, thats called the prebate. Size. s based on family questions . R hearing none. Ill take that as an thersement from everyone in room for the fair tax. I will carry that back to the capitol now. Youve made my monday a little bit better by coming over and news. G about good thank you very much for coming. Appreciate you coming. All righty. Thanks once again to the congressman. Well now have our two panel guests. Quickly introduce them. And then ill hand it over to them. Our first reason tom, president the National Small Business Association, which is the oldest largest Small Business Advocacy Group in the United States. Previously, he joined the in 19 he previously served as Vice President of government affairs. Testified before congress occasions, appeared on a wide variety of Television Shows and published in most of the leading newspapers in the country. Is a native of new mexico and he received his b. A. In economics from Trinity University in san antonio, texas. Dr. Karen wallaby is the Research Director for americans taxation. They sometimes go by the name of fairtax. Org. Capacityrked in that for three florida governors, two democrats and one republican. Has also worked for the taxation and Budget Reform Commission of the Florida Legislature and worked in the private sector and as Director Research for florida taxwatch. Served as an professor at Florida State university. Please join me in welcoming todd mccracken. You can either stay there or come up here. Well, im using slides so ill have to go over there. You, david. Its very good to be here today. I really appreciate the opportunity to talk about the tax. Its a topic that we need to talk about a little bit more, is the bestlearly system of taxation, we believe, for not just americans overall but specifically for the Small Businesses that we represent. We have been advocates of the ofr tax now for a number years. I think we were one of the very first groups to endorse the tax. Businessuse the Small Community is faces virtually our tax system. I think we have been so committed to it. Stop to think about it. If you own a business, youre one of the few people in the country that faces that pay personalto income taxes, business taxes, taxes. Axes, payroll you dont have to pay all those taxes. Administer that whole tax system on the federal government. You have to withhold from your employees, deal with sales taxes. Small businesses are the only ones facing essentially brunt of everything our tax system has to offer. I would also like to point out, much as our members hate paying taxes and think they pay too much in taxes, when you ask biggest burden of the tax system is, they tell you it is actually the of the taxes, the complexity, the burden, and the week int it requires, requires. Ut, that it when you think about it from a the Current System we have, the income tax, but also the payroll tax, it discourages entrepreneurs and entrepreneurship at virtually every level. Most every entrepreneur that they sell tax shelters see our system as punishing entrepreneurship and the American Dream at every stage of a businesss life. It faces significant tax obstacles. At the startup level, startup costs are not deductible. Multiple times. When the income is earned and when the underlying assets that income they sell tax shelters see our system as punishing entrepreneurship and the American Dream at every stage of a stream is sold. The government takes an f of income, as oaf more money is made. Taxed when they add jobs, because our extraordinarily high payroll increase the cost of hiring. Family businesses are discouraged because they are when sold. Finally, the owner gets to meet the undertaker and the irs on the same day. Of payroll tax burden is one the things that really attracts us to the fair tax. That smallden businesses face is enormous. Greatly to the cost of employment. Most workers, while they see the the congressman alluded to in his tax, on their paycheck, they dont see the other half of that bill that employers have to pay. Essentially works to both depress their wages but extent it doesnt, increases the became that the employers have to pay for those. Other thing that we have to think about from the small theness perspective is payroll tax system is one of the of fines thats they have to pay, because they have to remit those payroll taxes on behalf of their employees and themselves. Anytime theres a mistake or an they, which happens when have to do this every two weeks, they wind up with a letter, a the irs thate from they have to deal with. Its those money out to have also an they have to remit those payroll taxes on behalf of their employees and themselves. Anytime theres a mistake enorms amount of time they have to deal with. The other, of course, aspect of the whole system is the that weary complexity deal with in our system. Small Business Community pays the lion share of the overall compliance cost of our tax system, which is in the hundreds of billions of dollars, every paid in order to just administer the tax system, the cpas, to have work not getting done in the business. Essentiallyabout removing those hundreds of extremelyf dollars is to the Small Business community. With theseo deal problems, the fair tax clearly is the best system. Enormous simplicity. When you boil it all down, the businesses are the only entities who have to deal with the fair tax on a administrative basis. And the only question they would have, at the end of the year, you sell to consumers . Calculate the tax. Send it in. Done. Thats all there is to it, compared to all the layers i for you herecribed today. And for most of those companies that are administering that sales tax, theyre already administering a sales tax in states. So the type of administration wouldnt be fundamentally theyret from what already having to do right now. The other one of main benefits is the visibility thatderstanding congressman woodall described. The cost of the government will be right there in front of everyone to see on every purchase they make, every day. And so i actually think thats one of the ways that actually would point out the evergrowing of ourreasing cost entitlement system, is that every time those costs went up, the sales tax would go up incrementally and people would ultimately know why. Economic growth, of course. Companies would be unshackled from this system. It would be easier to start a easier to grow a company. There will be greater rewards for growing a company. Would inevitably lead to greater Economic Growth. And the need for less of a a higher tax rate. It would, as the congressman would, it would improve or International Trade position. And the other issues i would like to raise, before it comes up, people often ask me, as an advocate for small companies, why are you for the fair tax . Because Small Businesses would thatme of the only people would actually have to deal with the tax system. Ers . Is this good for retail i point out that every retailer, retailer in the country right now, has to deal with the sales tax today. To deal with have income taxes, payroll taxes and all the rest of the plethora of mentioned. Already we have the fair tax if we have the fair tax, all of that away. The only thing they have to deal with is that sales tax. They may be more burdened by administration of tax codes than the typical consumer, they would be vastly withburdened than they are the system we have today. For all those reasons, and many more, we have been strong tax. Ates of the fair and we hope that the congressman has good efforts, good luck today in his efforts to convince his colleagues to get on board. With that, ill end. And ill take your questions. Thank you. Congressman woodall has done a good job of laying down the basis for the fair tax. What im going to focus on is the economics of it. That withto do lot ofs rather than a dull economics terminology. That. Lly you will think so the first thing that we need tax is,at with the fair what is the base of the fair tax . Consumption tax, destination principal. Neutral between savings and consumption. Its neutral among types of investment. Neutral between capital and labor. Slides. Rgot to do my where is the oh. Neutral between foreign produced u. S. Produced goods. And it has a broader base than the Current System. Thats significant, because broader base or a allows for lower rates. Lower rates allow for less economicn in the system and promote higher growth. Talkingongressman woodall was about the consumption base and stable base than the income tax base. What this graph shows is agi,parison between the adjusted gross income, and pce, consumption expenditures. Its not exactly the same as the tax base, because it has the fairgs in it that valueesnt tax, like the of the value to you of your be if yout would it collected rent on your own house. Thats included in personal consumption expenditures. Tax also includes government consumption. But anyway, its a good parallel. And the adjusted gross income is the basic base of the income tax. And you can see over time, since started with that because of the big recession in that time. And consumption, personal consumption expenditures had a every year since the base always growing. Estimate for 2012 of the fair base, the pce there is about 11 trillion, an actual estimate base is 12 tax trillion. Okay. The next graph addresses the about stability. The problem with the income tax and booms. Bust when youre coming out of a used ton, at least it be that way. Its not that way this time. Normally you have a burst of Economic Growth. Then the income goes way up. A big growthhave in tax revenues. And, oh, lets see how we can fund all these things with that. And then when you hit the next level of, you have a spending that you cant sustain. Get into, well, where we are now, borrowing what of us are spending or close close toement the thing that range. Observeg i want you to is that the red line is the frome tax base changed year to year. And you can see that the ups and more variable personal are for the consumption expenditures curve. Incomey, adjusted gross goes as low as negative 7 in 2009. And in that year, it was a bad year. Year, consumption went 2 . Less than whyhat is another reason the consumption would be a better tax base. So how does the fair tax boost Economic Growth . Whybroader base the allows for lower marginal rates and lower marginal rates result in greater and investment. And those, in turn, result in productivity and lower costs, which then result in jobs and wages. Does benefit the benefit does go to the worker. The international playing field. Andreats u. S. Businesses foreign Business Activity the same. It would bring corporate u. S. Or keepto the that e, the ones weve all heard recently about Corporate Headquarters leaving of the very high Corporate Tax rate in the u. S. But also, it would attract systemion, because the is borderadjusted. Taxes from the producing country are taken out. So all in all, it will result in the most attractive Investment Climate in the world, if we implemented this system with a a zerox base i mean territorialte and a system. Equal treatment between foreignproduced goods and u. S. Produced goods. Table that a summarizes how strongly disadvantaged the u. S. Production is. Red, you see that for goods sold in the u. S. Market, pay both the income and taxes, in the cost of American Goods sold in the u. S. Foreign goods sold in the u. S. Have that burden in their costs. Them a definite price advantage. As much asstimated around 18 . Goods sold in foreign markets, dont have whats called a soderadjustable tax system, when u. S. Goods are sold in foreign countries, they still the burden of the income payroll tax included in good, and ithe makes them noncompetitiveofseas. Noncompetitive overseas. Tax, it go to the fair levels the playing field. You can see in American Goods u. S. , they pay the fair tax. Foreign goods sold in the u. S. , they pay the fair tax. American goods sold in a foreign country, they pay that countrys the foreign production when they sell goods a foreign country, they pay the fair tax. Foreign pay the foreign vat. Equivalent. Tly it totally removes the disadvantage to american producers. All right. Now were going to quantify a little bit. You some examples of Research Studies that have estimated just how much will the fair tax affect Economic Growth. This first study here was done beacon hill. There youre seeing the way economic models work is they estimate the current then they introduce change into the model that reflects whatever the tax law change is. Then they estimate what the the economic variables under those assumptions. Wouldre comparing what happen under the fair tax to what would happen under the base which is what is expected existing system remains in place. And you can see here, this study looked at the impact of the fair real gdp, jobs, investment and wages. And so we have year one, year five and year ten. Can see, in absolutely every variable there, the fair tax has an immediate affect in year one. Year five. Going in and it continues even by the tenth year to have a pronounced effect. What is especially important is the investment. How huge the increase in investment would be. From removing the economic distortions in the tax and not discriminating against savings and investment. This is a similar study, a different model. It also looks at the impact on Economic Growth in year one, year five, and your tan. And i have to point out a missing decimal point. Year 10. Be 11 in withows similar results all the variables, getting an immediate Economic Impact in the first year and persisting well beyond 10 years. Went out 25, but i figured this would give you the idea. In thensumption goes up fourth column. When people have no income tax and more payroll tax, they have more money in their pockets and more ability to spend. Dpi, disposable personal income, shows that even when you take , theax into account spendable income is still higher than what it would be under the existing system. This study measures a concept we call welfare gain over the long run. Could think of it similar to an increase in economic wellbeing, increase in power. It shows that for all three income groups, low, middle, and , that the welfare gains reach all groups. Greateste has the improvement, middle income getting the secondbest and blue, high , being least improved, so it is a very progressive result. Getting into the topic of progress in the surtax on the poor, the Current System pounds the working poor. The benefit of the tax loophole goes to the wealthy. It justifies that you need a whole mortgage deduction for people at the lower income level to buy a house. That is baloney, basically. I will show you something that proves it. Tax is highly regressive. Income tax, you get a standard deduction and personal exemption. Tax, they dont apply. So you may not pay income tax on say, first 10,000 or 20,000 depending on your family size, but on payroll tax, you pay that tax on the first dollar. You pay it on every dollar up , and think it is. The system also harms the poor in that the higher rates of the income tax reduce investment which reduces productivity, which reduces wages. End, it impacts the worker. There are very high marginal tax rates on the working poor, which puts their mobility there is , atly a disincentive to certain levels in the system where the earned income tax phases out, that it doesnt really pay them to work any harder anymore. Congresswoman woodall was talking about the payroll taxes. Example across all the various income groups showing what the proportion is of each income group that pays more payroll taxes than income taxes. This is kind of the hidden secret of the tax system, very regressive. That all of the tax expenditures that congressman , we shouldt through have an incentive for this. We should do that. The mortgage, therest you see in blue, people making less than 50,000 only get 2 of the benefit of the tax deduction. 82 percent goes to those making more than 100 80,000. Likewise, oh, we need a charitable contribution deduction. That benefits the poor because charities do things for the poor. Well, i wont get into that, but a lot of charity goes to places that never flow any money to the poor. 1. 6 nyway, they only get benefit of the charitable 87 of a goes and 8 to the welloff. Even if you take all of those expenditures and deductions and combine it together, the low income only get 14 compared to 61 for the welloff. People say you cannot get rid of , theyese exemptions benefit the poor, they do not. The fair tax is progressive. This label ont the tax because it is a sales tax. It is a broadbased consumption tax that exempts the poor completely. They take the Poverty Level spending, which is based on family size, and that amount of spending is taxfree. So, this shows the effect of the te. Bai i took a particular family here,. O adult, to child household. He Poverty Level is 31,450 they would pay zero tax under the fair tax. Income, which is somewhere in the 50s to 60s, they would only pay about 10 11 . While the fair tax rate is the same for everybody, the actual tax rate they pay is much lower. Ats is a study that looks the effective tax burden over an individuals lifetime. Its an effective approach. Dr. Look hot took families the doctor looked at these gave them a real the World History with expenses going up and down, higher when you have kids, higher when they go to college and all of that. Incomered out what the taxes would be for somebody with that Income History and spending history, and then he figured out what the fair tax would be. The current