RFFM.org interview with Fair Tax Volunteer Midwest Regional Director Marilyn Rickert
Editor's note: In the race to see who will represent the Republican Party in this November's presidential election, the Fair Tax plan has been discussed on numerous occasions. RFFM.org feels it is important to delve into the nuts and bolts of this new tax initiative, so we decided to go to one of the leading proponents of the Fair Tax, Marilyn Rickert.
BIOGRAPHY -- MARILYN RICKERT
As the Volunteer Midwest Regional Director, Marilyn Rickert, became involved with Americans For Fair Taxation in the mid to late 1990's, two years before the FairTax bill was first introduced in Congress in 1999.
A long time community activist, Rickert co-founded Together We Cope, a non-profit social service agency with a mission to help families on the verge of becoming homeless. It was her experiences there which led Rickert to realize how our tax system had such a detrimental impact on American families. While surfing the Internet one day, Rickert happened upon the FairTax website and decided to become a volunteer.
Mrs. Rickert holds a bachelor's degree from Roosevelt University. She is a wife and mother of four sons.
Interview conducted by Daniel Zanoza
MARILYN RICKERT -- IN HER OWN WORDS
Q. The subject of the Fair Tax has come up a great deal during the current Republican presidential primary campaign. Can you give a thumbnail description of what the Fair Tax is?
A. The FairTax act of 2007, HR 25 / S1025 is a citizens bill which has a total of 74 co-sponsors in the U.S. House and Senate. The FairTax replaces the income tax, capital gains tax, social security tax, Medicare tax, corporate tax, estate (death) tax, self employment tax, and alternative minimum tax with a simple consumption tax collected at point of sale to the consumer, collected by the states. By adding a few lines to our current sales tax forms, the need for the IRS is eliminated. A prebate would allow all citizens and legal residents to consume up to the poverty level tax free. The FairTax frees individuals from ever filing complicated tax forms, record keeping, and the threat of an IRS audit. The FairTax also restores a taxpayer's Constitutional Rights, plus we will bring home our paychecks free of federal payroll withholding taxes.
Our Founding Fathers understood the role of taxation in the lives of a free people when they wrote: "It is a signal advantage of taxes on articles of consumption, that they contain in their own nature a security against excess. They prescribe their own limit; which cannot be exceeded without defeating the end proposed, that is, an extension of the revenue". Federalist Paper #21
Q. It sounds like the Fair Tax is basically a sales tax. What would not be included under a Fair Tax system? For example, would doctor bills be subject to a Fair Tax? What other services or goods would not be subject to the Fair Tax?
A. The important thing to remember is that the FairTax is a replacement -- not a new tax. The FairTax tax replaces the hidden (embedded) taxes already in the price of goods and services. The current income tax system acts like a Value Added Tax (VAT) in that taxes plus compliance costs paid by businesses are simply added to the price of goods and services as they are passed down the supply chain until the total cost is paid by the consumer. With the elimination of the income tax, the free market system will drive the hidden tax component out of prices which will be replaced by the FairTax, thus making the true cost of government visible to everyone.
Under the FairTax, capital is not taxed. Since no tax is owed until money is spent, your savings will grow 100% tax free--until you decide to spend it on a taxable good or service. The complicated tax shelters of IRAs, 401ks, etc. are simply not needed. You will be free to save and invest your money as you see fit without government rules and regulations.
Under the FairTax, new goods are taxed, used goods are not taxed. This prevents the FairTax from becoming a VAT. Once the FairTax is paid on an item, it is considered used and never taxed again.
Under the FairTax, services are taxed -- but not capital. For example, on your mortgage, car loan, credit card debt, etc. the FairTax will be charged on the fee the lender charges you to make the loan. The principal and the interest will be paid in tax free dollars.
Economic research indicates that your doctor bill is inflated by an average of 25% to cover current taxes and compliance costs. Most of that cost will be driven out by free market forces and replaced with the FairTax. Consider for a moment the cost of the "employer portion" of the Social Security tax paid by a major hospital. With his cost removed under the FairTax, the savings could be used to lower prices or to buy a new CAT scan machine, for example, resulting in better health care.
Education would benefit from the FairTax; both government and private schools.
*Government schools would operate free of federal taxes -- they would no longer be paying the hidden business taxes in the cost of goods and services they purchase nor would they pay taxes such as the employer portion of the Social Security taxes. The result is lower costs for government schools which would make the savings available for lower property taxes or improving education.
*Private schools would also operate free of federal taxes like government schools. Tuition would also be FairTax free. The result would be up to a 50% reduction in the true cost of (tuition plus taxes) private schools.
*Post-high school tuition would also be FairTax free.
Q. We often hear about our current system being progressive or regressive and that terminology often confuses the public. How is the Fair Tax indeed fair?
A. A regressive tax is one where the poor pay proportionally the heaviest burden of taxation. The current payroll tax deduction system is our most regressive tax. A progressive tax system is one where the rich pay proportionally a lighter burden of taxation. Most people think we have a progressive income tax system, but when you consider Warren Buffet, by his own admission, pays 15% Capital Gains rate plus 0% Social Security tax while a fire fighter is paying 33% tax rate plus an almost 20% Social Security tax burden, our tax system is anything but progressive. These terms are easily manipulated by which taxes and exemptions are included or excluded in the calculation. To decide if the FairTax is fair, we need to discuss direct versus indirect taxation.
There are only two types of taxes; direct and indirect. With a direct tax, the government holds the power. The government tells you what, when, where and the amount of taxes to pay. This power is coupled with serious punishment for failure to meet the demands of the government. The Income tax is an example of a direct tax. With indirect taxes, the taxpayer holds the power. You, the taxpayer, decide when, where and the amount of taxes to pay. Your decision is final -- as long as you follow the same rules as everyone else.
The FairTax is an indirect tax. You, the taxpayer, decide how much you are willing to give the government by your spending. If you are doing well -- buy the new car and pay the FairTax. If you are short on money -- buy a used car and pay no FairTax. The choice is always in the hands of the taxpayer. As a taxpayer, I think this is a fair system of taxation and is consistent with what our Founding Fathers said regarding taxation.
Q. It sounds like the more you buy, the more taxes you will pay. For instance, if I had the money to buy a yacht, the Fair Tax would apply to such a purchase. However, there is a great deal of concern regarding how the Fair Tax will impact the poor. Can you talk about this aspect of the Fair Tax?
A. As I sat in the D.C. office of Senator Obama talking taxes with his tax expert, we did come to agreement on one issue -- tax reform is the greatest anti-poverty weapon in our nation today. Our tax system is probably the greatest barrier to upward mobility in our nation. Think about it -- the longer and harder you work, the more you are punished in the form of higher taxes.
Traditionally, the greatest access to the middle class for our poor and immigrant population went through our manufacturing base. Not that long ago, a job at the steel mill could ensure a family a solid middle class life style. This manufacturing base has all but disappeared due, in part, to our current tax system.
The U.S. has the second highest corporate tax rate in the world at 35%. Our extremely complex tax code adds an additional burden in the form of very high compliance costs. Compliance costs are the costs required to pay your taxes -- like tax lawyers, accountants, etc. -- not including the actual taxes paid. These taxes and compliance costs are included in the price when our goods are shipped overseas. When our goods arrive overseas, they often carry additional taxes imposed by that government. Goods manufactured overseas do not carry the burden of foreign taxes included in the price of goods because their taxes stop at the water's edge. Goods manufactured overseas are shipped here virtually tax free and carry relatively little U.S. taxes. It is simply much more cost efficient to manufacture goods overseas and ship them here for sale.
Corporations will have a 0% tax rate under the FairTax. This will make America the tax haven of the world for business. It is expected that the economy will expand with good paying manufacturing jobs and other support jobs flocking to our country.
Education is also an important portal to the middle class. With federal taxation removed from our education system, access to private and higher education will become more affordable. We expect private schools to flourish under the FairTax, thus making school choice more of a reality. Government schools will be less expensive and taxes could be lowered at the local level or the savings used to improve their quality.
Q. This "prebate" you mentioned would benefit the poor taxpayer. Just exactly how would the prebate work? Can you get very specific?
A. All valid Social Security cardholders who are U.S. residents receive a monthly prebate equivalent to the FairTax paid on essential goods and services, also known as the poverty level expenditures. The prebate is paid in advance, in equal installments each month. The size of the prebate is determined by the Department of Health & Human Services’ poverty level guideline multiplied by the tax rate. This is a well-accepted, long-used poverty-level calculation that includes food, clothing, shelter, transportation, medical care, etc.
http://www.fairtax.org/site/PageServer?pagename=about_faq_answers#3
At the beginning of each year, you will fill out a postcard sized form giving the names and Social Security numbers for the members of your family. The exact method of paying the prebate is still under study. The most likely method of payment will be through electronic transfer into your bank account or into a debit card for you to use as you choose. The prebate is voluntary, so if you do not wish to receive the prebate that is your choice. In designing the FairTax, the maximum freedom for the taxpayer has been built into the system.
Q. It sounds like the Fair Tax is indeed fair, but anyone who would try to make the Fair Tax law would come up against some strong obstacles, including the need to repeal the income tax amendment of the Constitution. Do you see this as being a major obstacle, if a president wanted to install the Fair Tax as America's only system of taxation?
A. The passage of the FairTax will be the greatest transfer of power from the government to the people in the history of our Republic. This is why the FairTax has been called the "Second American Revolution".
The reluctance of those in power to relinquish their power to the people is the greatest obstacle to implementing the FairTax. We have progressed to the point where the economic research demonstrates that consumption taxes are better for the American people and the American economy. The debate has moved to one of what I would call "scare tactics" rather than debate over the provisions of the bill.
Some of the most common "scare tactics" are:
* The FairTax is a 30% tax on top of everything you buy -- never mentioning the repeal of the income tax, payroll taxes, etc. or of the prebate or any other advantages of the FairTax.
* The 16th Amendment must be repealed first -- without a tax plan already in place the "full faith and credit of the U.S." would be in danger. How would the U.S. pay her obligations, if we are without a tax system, the world would ask.
We agree the 16th Amendment must be repealed. We have the bill in Congress to repeal the 16th Amendment, House Joint Resolution 16. The last thing we want is both an income tax and a consumption tax. We urge all citizens and tax organizations to join us to actively support the repeal of the 16th Amendment H.J. Res. 16.
We feel that once the FairTax is signed into law, the people will be so happy the Income Tax is gone they will rise up and demand the repeal of the 16th Amendment.
Q. Under the Fair Tax, it seems there would be no need for the IRS. Is this true?
A. Think of all the taxes collected by the government without the IRS. The number of taxes seems limited only by the human imagination. It is clear that taxes can be collected without the intrusive and often heavy handed use of the IRS.
Most people do not realize the huge size of the IRS. The IRS does much more than processing forms, but has its own court system and police force -- all unelected and unaccountable to the American people. Under the FairTax, the IRS will be dismantled over a three year period. Simply firing everyone would be unfair to the employees and would be a burden on our economy. One of the requirements of the FairTax is that the IRS destroy all the records held by them on the American people. I believe we are the only tax reform plan that takes this position.
The FairTax would be collected by the states. The state would receive a small portion of every federal tax dollar collected. If a state decides not to collect the FairTax, a state could contract with another state to collect and process the FairTax on their behalf.
The small part of the IRS duties that would remain would be absorbed into the Treasury Department. Its role would be to collect the FairTax from the states and collect any FairTax owed from international shipments. There would be no contact with citizens.
Q. Most Americans would like to get rid of the IRS. But with such institutions come a dogmatic system which includes tax lawyers, prosecutors, tax preparation businesses, etc., etc. Wouldn't some of the greatest obstacles against the Fair Tax plan lie in the need for these institutions to defend themselves from obsolescence? They would make quite a formidable foe, don't you think? But can it be done?
A. Replacing our unfair and inefficient tax system has got to be easier that landing on the moon. Once Americans decide to get the job done -- it will get done.
You have touched on a good point about our tax system -- it has evolved to divide us as a people. Through class warfare, hidden taxes and bribing people with their own money, our tax system has grown into the complex code that no one understands. The FairTax is so simple, everyone can understand it. With the FairTax everyone plays by the same rules without any special exemptions. For the first time in my lifetime, everyone will see the true cost of government.
Yes, an entire industry has grown around our tax system. An estimated 53% of all paid lobbyists in Washington, D.C. are working to manipulate the tax code. I believe as the American people learn there is a better tax system, they will demand it.
Q. Let's say everything falls in place, we have elected a president who believes in the Fair Tax plan, and subsequently makes the Fair Tax initiative a priority of his or her administration. How long would it take to implement the Fair Tax, in your opinion?
A. Momentum is clearly on the side of the FairTax. It has been interesting for me to observe that candidates have announced their big tax reform plan to be followed shortly thereafter by their withdrawal from the Presidential race. Only the FairTax is growing in popularity and strength on a daily basis.
The FairTax bill needs to be passed by both Houses of Congress and signed by the President. Within 3 to 6 months after the FairTax bill is signed, the FairTax will go into effect. For example, if signed by the President in June of 2008, the income tax will end at midnight December 31, 2008 and the FairTax will begin at 12:00:01 on January 1, 2009. At that moment America will enjoy the greatest restoration of freedom that we have ever known in our lifetime.
Q. You have spent many years working on the Fair Tax plan. You may be closer today to realizing what many called a pipe dream just a few years ago. Personally, how do you feel about everything that's going on right now concerning the Fair Tax plan? In your heart, do you believe the Fair Tax will ever become America's only form of taxation? If yes, when?
A. Back in the early 1990's when we began our work on what was to become the FairTax, we knew one thing -- our tax system was a mess and needed to be fixed. We started with a blank sheet of paper. If we were going to design a tax system, what would it look like? We thought we were going to come up with some form of a flat income tax.
We began by asking average people what they wanted in a tax system. Using standard sampling techniques, we asked people from various parts of the country, age groups, income levels, etc. for input. The data collected was then given to the smartest people we could find from Harvard, Stanford, MIT, CATO and elsewhere. We used super computers, economic forecasting models and the latest in economic theory to come up with a tax plan that 80% of the American people liked. After raising and spending over $20 million in private funds over the course of several years -- our conclusion -- the Founding Fathers were right! Their ideas of freedom and taxation are still the ideals the American people hold today. Yes, I believe the FairTax will become law with the date only dependent on the time it takes to educate the American people on the issue.
Q. If people want to find out more information about the Fair Tax, where can they go? If people want to join the effort to bring about the Fair Tax system in America, how can they join your efforts?
To find more information about the FairTax bill, go to www.fairtax.org. Our homepage changes often, so keep checking often. We have state FairTax Yahoo groups which we use to communicate with volunteers within a state. To join a state FairTax yahoo group, send an e-mail to XXfairtax-subscribe@yahoogroups.com simply replace the XX with your state code. For example, to join the Illinois FairTax Yahoo group you would send an e-mail to: ilfairtax-subscribe@yahoogroups.com
Most states also have state FairTax web sites. The website for Illinois is www.ilfairtax.org
We are currently working at the state level on state FairTax bills. In Illinois we want to replace the state income and property tax with a state FairTax.
Volunteers needed! No experience necessary! Donations always appreciated!
IL Fair Tax
P.O. Box 808
Oak Forest, IL 60452
voice: 708-687-9412
fax: 708-687-4718
Captions for photographs (L to R): former Gov. Mike Huckabee, Sen. John McCain, Rep. Ron Paul, former Gov. Mitt Romney
Huckabee is the only Republican candidate to say he would work for passage of the Fair Tax initiative, if elected president.
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