Congressman Graves position on the Fair Tax

Posted: February 23, 2010 in Uncategorized
Tags: , , , , , ,

Below is a response I received from Congressman Graves about the Fair Tax. I agree with the Congressman completely. It’s time to scrap the code and start anew.

Dear Andrew:

Thank you for contacting me regarding the Fair Tax Act.  I appreciate hearing from you.

Former Treasury Secretary William Simon once said: “the United States should have a tax system which looks like someone designed it for a purpose.” The only thing our current tax code seems to accomplish is to confuse people.

The Fair Tax proposal is one response to our nation’s overly complex and burdensome tax code.  According to most studies, Americans spend more than $200 billion a year complying with the current tax code and our economy looses nearly $1 trillion in economic activity because the tax code distorts behavioral and economic decision making.  To make matters worse, according the Internal Revenue Service (IRS), more than $300 billion owed the federal government goes uncollected each year.  The tax code’s complexity provides the means to those with the motive to cheat the system.  Simply closing loopholes in the code has not been enough, since these efforts usually create additional complexity and new opportunities to cheat.

As you know, the Fair Tax Act would completely replace our nation’s current tax code – including payroll taxes for Social Security and Medicare — and substitute it with a consumption-based national sales tax.  The Fair Tax Act has the virtue of simplicity.  Taxes would be collected from retailers and remitted to the government.  Individuals and businesses would not be required to file costly and time-consuming paperwork and tax returns.  According to the bill’s sponsor, the only paperwork an individual would need to file with the government would be a simple form to determine the amount of the tax prebate, to ensure that lower-income households are not unduly harmed by the regressive nature of consumption taxes.

The Fair Tax also promises to be more conductive to our nation’s long-term economic growth.  The current tax code provides hundreds of well-meaning provisions that have the ultimate effect of distorting the proper allocation of capital and investment in the economy.  In addition, these provisions contribute to complexity.  Many individuals that qualify for certain deductions and credits don’t even know they qualify, which means they pay more tax than others in similar circumstances.

The time to reform our nation’s tax code has come.  Earlier this year, I cosponsored legislation, the Tax Code Termination Act, that calls for the complete sunset of the current tax code by the end of 2010 and replaces it with something that is simpler, fairer and more conductive to our nation’s long-term economic growth.  During this process, advocates of the Fair Tax and other tax reform proposals will have the opportunity to present their plans to better educate the public and Members of Congress about their proposals.  This is a debate worth having.

Once again, thank you for contacting me.  If you have any further questions regarding this or any other matter, please do not hesitate to contact me or visit my website at www.house.gov/graves.

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