Two competing Presidential campaigns are always going to cover a wide swath of current topics. The candidates will meet with politically active groups from several of the states and speak to issues held dearly by each of them. However, if the tenor of this campaign year is to be summed up in just one word, it would be jobs. The reason that jobs have become the focal point of this election season is not because it polls well, it is not because people respond in a certain way in focus groups, it is because it is the issue that Americans have been pleading to be answered since 2008. While the Congress has tackled issues such as highly divisive healthcare reform that has so far failed to meet any of its promised outcomes, the issue of homosexuals serving in the military, and making sure that we are unable to drill oil off of our own coasts while ensuring that other countries can off of theirs. In fact, the most aggressive jobs plan that we have seen in the past four years, apart from a stimulus plan that failed to stimulate, involved funneling hundreds of billions of dollars to green energy companies owned by political allies that have already gone under. And it is in this national discussion on jobs that the issue of taxes will inevitably pop up.
The importance of tax reform is directly tied to the severity of this particular economic crisis. Our corporations, who do the hiring, are suffering under the highest tax in the industrialized world. A crippling 35% rate has pushed them off American shores and as a result, they have taken badly needed jobs with them. A reduction of that rate will go a long way to bringing those jobs back and keeping jobs here at home. But it will only go so far. These past four years will be long remembered by the business world. They have watched an entire political party castigate them as a greedy lot who deserve to be penalized even more than they already are merely for partaking in and succeeding in our capitalist system. A reduction of that corporate rate will have a direct positive impact but may not be enough to allay the fears felt by many that this antagonistic atmosphere could easily return. Our current political climate has become one of drastic swings toward one ideology and then back again. There is no security in cutting the rate against raising it again in the future. Of course it is easy to imagine, down the road, of an ever watchful group of voters who will keep guard of this newly created tax rate but that does not match historical reality. If we are to send a clear message to our job producers of both large corporations and small businesses, we must make it a big one. The FairTax eliminates the corporate tax. It does not just cut the rate for now; it eliminates the government’s ability to tax income directly and repeals the current tax outright. That is the kind of message that will bring jobs home, create them here at home, repatriate our money, and change the minds of other nation’s job creators. How many successful aeronautics companies in France would love to escape the upcoming possibility of a 75% tax rate and come to America which is offering an income tax rate of zero? We have the opportunity with the FairTax to not only shift the discussion of tax reform but to shift the paradigm of where we see ourselves within the world. There is one way to stop the bleeding of jobs overseas for sure, pass the FairTax.
The issue of jobs is also critically important because we are still a country that prides itself on its representation of the people. And there is no issue that is weighing heavier on the hearts of Americans right now. Much ballyhoo is made of the unemployment number every month. But we know that the number itself is only telling part of the story. The more depressing tale consists of the new lows our labor force participation is reaching on a regular basis. It is important to note that these people are not just out of work and are looking for jobs, for far too many Americans they have simply given up. Earlier this year Congress actually extended the time you could collect up to 99 weeks. Two years is 104 weeks. If the “land of opportunity” has to provide two years of unemployment then it is not working as it was formed. The fault does not rest in those that are utilizing it; the fault rests with those in leadership positions who continue to defer to an election instead of solving this problem. Tax reform is brought up as a major possible solution and there are two leading and very different ideas. One is to use the system we have now but change the rates up, and tax the rich more. This does not seem to create anything but government jobs, which fail to add as much to the economy as private sector jobs do. The other is a dramatic simplification of our current system. But it is nothing we have not seen before. In fact, the 1986 Tax Reform Act is very similar to this proposal. It is very important for a few reasons, it was possibly the last time that taxes played such a dominant role in the political discourse and it was a very large reform package. The 1986 law actually created only two tax rates, which were compiled together from the existing brackets. It is widely considered to be a success but it was as temporary as it was successful. The tax brackets could not stay simplified and in six years one was added by a member of the same party of the President that signed the original reform and an additional six years saw the inclusion of three more. Twenty years after sweeping and successful tax reform and we have returned complexity and morass back into the tax code against the will of the people along the way. Tax reform under such a complicated system will always be temporary and party designation is no guarantee of permanence. Luckily the FairTax answers these concerns simply and with a lethal efficiency. The era of class warfare tax arguments will be dead under the FairTax. Since the government no longer has the ability to peek into your pocket it can no longer use that information against you. Instead, it will have to focus on the larger problems that arise. The FairTax does not operate on a bracketed system that does nothing but separate the people and pit them against themselves. Any change made to the FairTax is a change made to everyone and everyone instantly. If Congress raises the tax they are also raising the tax on themselves, there are no shelters or loopholes to escape to. But more importantly, the FairTax helps the jobless of today’s society. Below is a graphed chart estimating the impact the FairTax will have on our future up to ten years down the line. If you can find a tax plan that can credibly claim similar benefits then by all means support it, and also pinch yourself, because you would be dreaming. The FairTax eliminates so much that is wrong with our current code to give us the tax code we deserve and need right now. Your Congressmen are still on recess, which means that they should be in your district. Call their office; get your friends to do the same. Find their town halls and ask them why they refuse to back the only tax proposal that is serious about tackling the key issue of our time. This is our time and the most exquisite of golden opportunities, do not waste it. We can wake up tomorrow with a malleable tax code that guarantees us only that it will change. Or we could wake up with the FairTax in a United States of America that respects its job producers, that recognizes the proper role of government, and reveres the individual citizen.
|FairTax simulation model results|
|Cumulative growth over current system||Year 1||Year 2||Year 3||Year 4||Year 5||Year 10|
|Gross domestic product||2.4%||5.2%||7.0%||8.2%||9.0%||11.3%|
|Income from employment (wages)||27.4%||31.8%||34.5%||36.4%||37.7%||41.2%|
|Disposable personal income (adjusted for changes in the price level)||1.7%||4.5%||6.4%||7.7%||8.7%||11.8%|
|Units scaled 2004 GDP = 1.00. Capital and labor set to equal constant shares of 0.3 and 0.7, respectively.
Source: Arduin, Laffer & Moore Econometrics, “A Macroeconomic Analysis of the FairTax Proposal”, February, 2006.