Washingtonpost.com: Live Online

Do Americans pay too much in taxes? Does the IRS need to be overhauled? What are the pros and cons to some of the alternative tax ideas being debated?

Rep. John Linder (R-Ga.) will be online to discuss taxes, the IRS and his proposal to do away with the current system and replace it with his "FairTax" legislation.

Submit your questions and comments before or during today's discussion.

The FairTax, sponsored by Rep. Linder and Rep. Collin Peterson (D-Minn.), would abolish the federal income tax, the payroll tax, the self-employment tax, the capital gains tax, and the estate and gift tax. These taxes would be replaced with a revenue-neutral sales tax of 23 percent.

Editor's Note: Washingtonpost.com moderators retain editorial control over Live Online discussions and choose the most relevant questions for guests and hosts; guests and hosts can decline to answer questions.

Lilburn, Ga.: Why doesn't FairTax advertise?

I can't find anyone apposed to a consumption tax (vs. a productivity tax) when I propose it; buy a few ads on Friends, Jeopardy, or Frazier and you'll have a grass-roots ground-swell that will insist this plan becomes the law of the land. I know FairTax has money, I sent you some (and as tight as I am, I can't be the only one).

Rep. John Linder: There are very few opponents and we realize that ultimately this will be moved by ads which will move the grass roots which will move Washington. We have already spent $22 million on market and economic research and are hoping the president will address this soon. We then believe that we can raise "real money" to buy ads. Thanks for yours. John

Commerce, Ga.: I am fully in favor of the national sales tax. It is the ONLY tax that is fair and makes sense. However, can you design such a system that insures that there is some limit regarding how the tax rate can be increased. The last thing we need is to be the frog in a frying pan, slowly chipped away until we look around one day and find ourselves paying 45 percent, 50 percent, 75 percent sales tax.

Rep. John Linder: Keeping the limit on increases is YOUR job. In a free society the voters ultimately decide. The benefit of this tax is that everyone making a retail purchase will see how much their government costs and we hope they will be more careful regarding who they choose to represent them. John

Lilburn, Ga.: What would the IRS people do if the income tax were eliminated? I have a suggestion: Assign them to the General Accounting Office; government waste is a much bigger problem than income tax fraud!

Rep. John Linder: There are about 100,000 people working for the IRS and it is not unusual for this economy to create that many jobs a month. Many will retire through attrition. They will do fine. I once suggested that we line them up on the Mexican border holding hands to stop illegal immigration. I WAS JOKING! John

Plano, Tex.: Would your sale tax apply to food and housing purchases, and thus create a massive increase in taxation of the poor. The U.S. already taxes the poor much more relatively than other countries we consider our peers, so it vital that we know exactly what will be taxed.

Rep. John Linder: We would tax everything! But the poor are already paying this. 22% of what you pay for at retail is the imbedded costs of the current system. The consumer pays the tax and compliance costs of every company that touches a loaf of bread. In fact, in a $1.14 loaf of bread 35 cents is taxes. By getting rid of the IRS those costs are driven out of the price system. In addition, we provide every household with a check at the beginning of every month to tatally rebate the tax consequences of spending up to poverty level spending thus totally untaxing rich and poor alike for paying for essentials.

Loganville, Ga.: Mr. Linder, you are my Congressman, I love what you are doing to try and change our tax system. What can the everyday person like myself do to help in promoting "The Fair Tax?" I have signed your petition. I have sent the fairtax.org to my coworkers. What more can I do? I would normaly vote Libriterian, but this fall I will vote for you so you can contiue this work.

Rep. John Linder: You are very kind. You can take this message to your neighbors in this election. This Sat. we will have a rally at my headquarters on Peachtree Ind. just north of Pleasant Hill Rd. I EXPECT TO MEET YOU THERE!

Lawrenceville, Ga.: I think this plan sounds incredible! It's sensible, fair and simple. For that reason, it seems impossible to think it would actually pass our House, much less the Senate. What kind of political support do you have, is it bipartisan, and what chances of success do you think you have? In addition, wouldn't the IRS be a big opponent to this bill?
Thank you

Rep. John Linder: I have 4 Rep and 4 Dem sponsors. I have many more Republicans who want to sign the bill and I have told them to bring me a Democrat. Change this large must be bipartisan. It will pass one day because we will come to our senses and realize that it is crazy to sell into a global economy with a 20% tax component in our tax system. I also have IRS empoloyees cheering me on, including my most dependable volunteer. I pointed out on the floor this morning that for a small business to comply with the code, collect and remit $100 in income taxes, it costs them $724. This is NUTS!

Gaithersburg, Md.: I worked one year (1979) as a tax auditor for the IRS. At the time people were talking about a flat tax and we all thought that would be great. Really, we could stop bothering W-2 people for $100-200 and start looking for the people not filing. There will be plenty to do even with a sales tax. Don't delude yourself that any change in the tax laws will eliminate the IRS. There will still be people who cheat and audits to do, the good news is it will be a smaller base of tax fillers to audit.

Oh, and Congressman you and the rest of Congress and at fault for the tax law problems not the IRS. As a fedral employee I am sick of you guys passing vague laws and whren thay work taking the credit and when they fail blaiming federal workers.

Rep. John Linder: You did not hear me blame the IRS for the code. They are merely enforcing what congress imposes on them. Under the current system you can cheat by just lying on your return or not even filing one. Under the FairTax you will have to get someone conspire with you to cheat. That will be tougher. Also, 80% of the money will be collected from 20% of the businesses. It is not in Penny's financial interest to help you cheat.

Atlanta, Ga.: Congressman, the main problem I see with your proposal is that is will depress overall consumer spending, thereby producing a drag on the economy. With goods and services costing more, spending will decrease. Although wage-earners will have more money in their pocket, the psychological affect of higher prices will decrease consumption. If I take home home $35,000 in net income under your plan, but only $27,000 under our current tax system, I therefore set my own "tax rate" based on the products and services that I purchase. This will no doubt give me a real cash incentive to spend LESS than I currently do, because the less I spend, the less taxes I pay. And although I'll have more take-home pay than before, this comes at the expense of higher prices.

Rep. John Linder: Our studies suggest that there will be a downturn in spending for the first couple of years. Then Americans will realize that they have a dramatic increase in money in their pockets. Additionally, market forces will drive the tax component out of the price system so that the cost of living will about equal today's. Spending will then exceed projections under the current system. Even those least excited about this proposal (the Retail Federation) have studies agreeing to this theory.

Dacula, Ga.: Rep. Linder,
What possible logic do the detractors of the Fair Tax bill bring to the table?
Thank you.

Rep. John Linder: There are those who make large incomes helping corporate America navigate this code. They don't like it. The retailers do not want to be the tax collectors. Busybody politicians enjoy the control we have over your behavior. these comprise very few Americans. The real opponent is inertia. This is a large step and timid souls dislike large change. It is your job - as well as mine - to convince them otherwise.

Washington, D.C.: The proposal would significantly increase prices across the board in the US. Are you concerned that this could reduce consumer spending in the US? And would the proposal put US companies at a disadvantage in terms of competing with foreign companies (since the components of the US products would be taxed at a higher rate than those manufactured overseas)?

Rep. John Linder: Today US companies sell into a global economy with a 20% tax component in our price sytem. This proposal would eliminate that (we could sell Caterpillar tracters for 20% less and make the same profit.) This proposal is TOTALLY border neutral so that exports would go overseas with no tax component in the price system and imports would be taxed at the cash register just as our domestic goods.

Reston, Va.: Skipping to the chase, Congressman -- give us the bottom line. What are the chances for success? What do you need from the grassroots to make it happen? What is the core argument to counter your opponents? If the House and Senate get on the same page, what's the lever to convince the White House staff to give it a thumbs-up? Thanks.

Rep. John Linder: All of the president's economic advisors have met with me on this proposal and we will not have opposition there. Most politicians are followers not leaders. They need to see that the nation is ready for this. Get more info from my web site (http://linder.house.gov/fairtax.htm). Sell your neighbor and then the two of you sell your political representation. The core argument is that we are already paying this tax it is just hidden. Second, this tax makes every American a voluntary taxpayer. You will pay taxes when you choose and as much as you choose by how you choose to spend. Last, don't you agree that everyone in a free society deserves the privilege of anonymity? No one should know how much we earn or how we earn it or how we spend it!

Boston, Mass.: The major drawback to any "flat" tax (be it sales, income, or other) is that it is not progessive. Are you of the opinion that all people, rich and poor and everyone in between, should effectively be in the same tax bracket? Is that a "Fair Tax"?

Rep. John Linder: YES! After we totally untax every household up to poverty level spending we should all decide how much we want to give the government. If Bill Gates wants to move to a farm and grow his groceries and make money off the rebate why should we care? We will borrow his money and create jobs. The desire to punish success is a pathology that ill suits a free society.

Washington, D.C.: Tax wonks tend to agree with the general concept of a consumption tax - although opinions differ on how best to execute it. The real problem from a policy perspective is the transition and treatment of capital. To give just one example, the value of homes would fall significantly because buyers would no longer be able to count on the tax savings on mortgage interest. How would you deal with this and similar issues?

Rep. John Linder: Your home sales argument falls on deaf ears with me. If you truly believe that the deductibility of mortgage interest "sells" homes we should double the interest rate and we would sell twice as many homes. Of course it doesn't work that way. 75% of us file the short form and get no benefit from the interest deduction anyway. What sells homes is cash left over after neccessities to make the payment. The average income earner (28% withholding plus their share of the payroll tax) will get a 56% increase in take home pay the next day. They can afford a mortgage payment.

Oakville, Ontario: Congressman Linder,

What does this bill due to the IRS? Don't you think it is inappropriate that the IRS knows more about most people than their own children or spouse?

Rep. John Linder: Yes the IRS knows more about us than we are willing to tell our children. IT WILL GO AWAY!

Arlington, Va.: You politicians promise too much! How can you say that this "FairTax" will lower costs for everybody? The government still needs the same amount of revenue, so somebody still has to pay taxes. How in the world can "everybody be a winner" under the "FairTax"?

Rep. John Linder: The proposed rate (23% inclusive of what you spend) was "revenue neutral" when last calculated. That is to say it would produce the same revenue as the taxes it replaces.

Gaithersburg, Md.: Would services be taxed?

Rep. John Linder: Yes services would be taxed. I spent years as a dentist and never understood why I was privileged to earn income without taxing my patients when my neighbors could not.

Lilburn, Ga.: Since this takes a lot of the coercive power out of Washington (through the current tax code), what is the support for FairTax amongst your peers? Craig

Rep. John Linder: The support is building in the general public. We must move them and they will move my peers. There is a growing sense that the current system is broken and must be replaced with a sytem that is more easily understood and fairer. There is also a growing awareness among liberals that the payroll tax is going to destroy younger people in the years they are saving to pay for a home or college.

Harrisburg, Pa.: In general, people with lower incomes have higher consumption rates. Thus, wouldn't your tax plan provide tax breaks for wealthier people? Further, since your plan would reward savings, might this inducement to save (because of your tax plan) decrease consumption and thus slow down our economic growth?

Rep. John Linder: Lower income people do not have higher consumption rates. Rich people spend more. Lower income people to spend a higher percentage of their income and by totally untaxing everyone up to poverty level spending we will increase their purchasing power by at least 20%.

Tallahasee, Fla.: How important is your re-election to prospects for Fair Tax?

Rep. John Linder: Since I am the author, and since I am making it the centerpiece of my campaign, I would guess that a loss would send more timid politicians heading for the tall grass. On the other hand, a victory on this issue would have politicians of every stripe deciding that this is a winning issue.

Washington, D.C.: You are forgetting about all of the loss of revenue for accountants.

Rep. John Linder: This may surprize you. Accountants are among my most ardent supporters. They know that this system in not working and that it is inefficient. They also make more money helping their clients plan the future (revenue growth, financing, cash flow) than recording the past.

Washington, D.C.: "The desire to punish success is a pathology that ill suits a free society. "

So instead, we shold punish the poor, who will suddenly be paying a much higher percentage of their income than the rich. Those living paycheck to paycheck could see 25 percent of their income gone to taxes (in effect making them poorer), while the rich may be paying only 5 percent or something? What is the definition of fair? Everyone pays the same AMMOUNT of tax, or everyone pays the same PERCETAGE of tax?

Rep. John Linder: You're not reading are you? The poor presently pay a hidden tax of 22%. This removes that tax and untaxes them up to the poverty level. That, in any economics class, is a 22% increase in purchasing power. I think class envy tends to close minds.

Washington, D.C.: Would your tax system work like the Value-Added-Tax (VAT) that some European countries use? Would corporations and individuals be taxed at the same rate? Would this "FairTax" eliminate all deductions, exemptions, the 1040, and filing taxes every April 15?

Rep. John Linder: This would not be a VAT tax. It would be a tax on personal consumption taxed at the check out counter. There would be no tax on businesses. The only mechanism for a business to pay a bill is through price and the only taxpayers ultimately are consumers who consume the product and all imbedded costs. There would be no deductions because there would be no income record to deduct from. April 15 would be another nice spring day.

Thank you all. I must go vote.

John Linder

| |



	<img SRC="washingtonpost.com/wp-srv/liveonline/redesign/adv_discusssion.htm" width=125 height=110 border=0>