Pickens County citizens came out last week to hear about taxes, a timely topic as the deadline for filing income taxes approaches on April fifteenth.
Representing Georgia for Fair Tax, Stephen Hall Jr. presented a case for the Fair Tax Act as a replacement to the current tax code. Speaking before the Pickens County Tea Party Tuesday night, Hall reminded the audience the current tax code is approximately 72,000 pages long, while the Fair Tax Act is 97 pages long, front and back.
Currently Fair Tax is in the form of two bills, House Bill 25 and Senate Bill thirteen.
“(Fair Tax) is a grassroots movement that will replace the federal tax code with a revenue neutral retail sales tax,”
Hall read, as he stood before the crowd. Simply put, Fair Tax is a consumption tax, meaning citizens are only taxed once on goods and services purchased. The first part is fairly simple; consumers are only taxed once on the goods they purchase. Here, Hall gave the example of purchasing a car, saying new car purchases are taxed, while used cars are not, because the car has been taxed already when it was new, paid for by its first owner. The latter part, though, caused some confusion in the audience. Services are also only taxed once. But, to what extent? One citizen asked about hospital visits, wanting to know if repeat doctor or hospital visits are taxed following the taxation of the initial visit. Hall said if return-visits pertain to the same issue, the visits are not taxed.
Hall also explained that businesses-to-business transactions are not taxed. He gave an example of the home building process, saying the wood, supplies and goods used in the process are not taxed.
Fair Tax legislation also includes something called a prebate, a play on the rebate concept. This addresses concern that the reform would have a negative effect on low income earners and those below the poverty level, since these groups have fewer dollars to purchase goods with. The prebate is a way to subsidize lower incomes. According to The Fair Tax Book by Neal Boortz and John Linder, prebate amounts are based on the government’s published poverty levels for various-sized households. All income earners are assessed with an annual consumption allowance, an estimate of the amount households would spend in one year to buy the basic necessities of life. The government calculates taxes that will be paid on these necessities and then administers checks for this allowance.
But, how much is the tax? During his presentation, Hall explained in the 1990s a group of private business professionals conducted research to establish a rate needed to eliminate copious imbedded taxes. The number was 23 percent. One citizen, though, disputed this number, saying it was misleading. He told Hall that the tax exclusive rate is 30 percent, where every citizen would pay 30 percent on the dollar.
“If you take the dollar you spend,”
“and add the 30 cents to the tax and you divide the 30 cents of the tax by $1.30 then you get 23 percent.”
According to Fairtax.org, both percentages are correct, 23 and 30. The two percentages are simply two different ways of calculating or measuring the same percentage, which is actually 23 percent. Twenty three percent represents the inclusive tax, while 30 represents the exclusive rate. The explanation of the two percentages is as follows. 1) Inclusive Rate. If a consumer spends a dollar, he will be charged 23 percent tax. 2) Exclusive Rate. If a consumer purchases an item that costs one dollar it will be multiplied by .3 or 30 percent and the consumer will pay $1.30. As such, 30 cents of $1.30 is still 23 percent. The website explains that the reason it uses a 23 percent inclusive tax, rather than a 30 percent exclusive tax, is because the Fair Tax legislation seeks to compare it with the income tax, an inclusive tax, where sales tax is exclusive.
Another citizen, Bob Smith, asked who the champion was of the bill in Washington. Exasperated with the legislative process, Smith said the Fair Tax concept has been around for 30 years with little or no movement towards passage.
“So, who’s our champion?”
“It’s got to be you,”
“And everyone else in this room.”
Hall encouraged the audience and all in ear shot to call their representatives and get involved, both at the federal and state level.
On March 28th, as the state legislature came to a close, Representative Tom Kirby (R- Loganville) announced that he will introduce the Georgia Fair Taxation Act of 2014, which will be brought up next session. The legislation will remove the state income tax.
“By removing the income tax,”
“we can increase the number of tax payers and reduce the amount everyone pays,”
“The public is ready for serious tax reform and bold solutions to solve our economic problems.”
Nine states currently do not have an income tax, including Tennessee and Florida.