An Open Letter to the President, the Congress, and the American people
Concerning Reform of the Federal Tax Code


Dear Mr. President, Members of Congress, and Fellow Americans,

We, the undersigned business and university economists, welcome and applaud the ongoing initiative to reform the federal tax code.  We urge the President and the Congress to work together in good faith to pass and sign into federal law H.R. 25 and S. 296, which together call for:

  • Eliminating all federal income taxes for individuals and corporations, 
  • Eliminating all federal payroll withholding taxes,
  • Abolishing estate and capital gains taxes, and 
  • Repealing the 16th Amendment 

We are not calling for elimination of federal taxation, which would be irresponsible and undesirable. Nor does our endorsement call for reduced federal spending.  The tax reform plan we endorse is revenue neutral, collecting as much federal tax revenue as the current income tax code, including payroll withholding taxes. 

We are calling for elimination of federal income taxes and federal payroll withholding taxes.  We endorse replacing these costly, oppressively complex, and economically inefficient taxes with a progressive national retail sales tax, such as the tax plan offered by H.R. 25 and S. 296 which is also known as the FairTax Plan.  The FairTax Plan has been introduced in the 110th Congress and had 61 co-sponsors in the 109th Congress.

If passed and signed into law, the FairTax Plan would:

  • Enable workers and retirees to receive 100% of their paychecks and pension benefits, 
  • Replace all federal income and payroll taxes with a simple, progressive, visible, efficiently collected national retail sales tax, which would be levied on the final sale of newly produced goods and services, 
  • Rebate to all households each month the federal sales tax they pay on basic necessities, up to an independently determined level of spending (a.k.a., the poverty level, as determined by the Department of Health and Human Services), which removes the burden of federal taxation on the poor and makes the FairTax Plan as progressive as the current tax code, 
  • Collect the national sales tax at the retail cash register, just as 45 states already do, 
  • Set a federal sales tax rate that is revenue neutral, thereby raising the same amount of tax revenue as now raised by federal income taxes plus payroll withholding taxes, 
  • Continue Social Security and Medicare benefits as provided by law; only the means of tax collection changes, 
  • Eliminate all filing of individual federal tax returns, 
  • Eliminate the IRS and all audits of individual taxpayers; only audits of retailers would be needed, greatly reducing the cost of enforcing the federal tax code,
  • Allow states the option of collecting the national retail sales tax, in return for a fee, along with their state and local sales taxes, 
  • Collect federal sales tax from every retail consumer in the country, whether citizen or undocumented alien, which will enlarge the federal tax base,
  • Collect federal sales tax on all consumption spending on new final goods and services, whether the dollars used to finance the spending are generated legally, illegally, or in the huge “underground economy,” 
  • Dramatically reduce federal tax compliance costs paid by businesses, which are now embedded and hidden in retail prices, placing U.S. businesses at a disadvantage in world markets,
  • Bring greater accountability and visibility to federal tax collection, 
  • Attract foreign equity investment to the United States, as well as encourage U.S. firms to locate new capital projects in the United States that might otherwise go abroad, and 
  • Not tax spending for education, since H.R. 25 and S. 296 define expenditure on education to be investment, not consumption, which will make education about half as expensive for American families as it is now. 

The current U.S. income tax code is widely regarded by just about everyone as unfair, complex, wasteful, confusing, and costly.  Businesses and other organizations spend more than six billion hours each year complying with the federal tax code.  Estimated compliance costs conservatively top $225 billion annually costs that are ultimately embedded in retail prices paid by consumers.  

The Internal Revenue Code cannot simply be “fixed,” which is amply demonstrated by more than 35 years of attempted tax code reform, each round resulting in yet more complexity and unrelenting, page-after-page, mind-numbing verbiage (now exceeding 54,000 pages containing more than 2.8 million words).

Our nation’s current income tax alters business decisions in ways that limit growth in productivity.  The federal income tax also alters saving and investment decisions of households, which dramatically reduces the economy’s potential for growth and job creation.  

Payroll withholding taxes are regressive, hitting hardest those least able to pay.  Simply stated, the complexity and frequently changing rules of the federal income tax code make our country less competitive in the global economy and rob the nation of its full potential for growth and job creation. 

In summary, the economic benefits of the FairTax Plan are compelling. The FairTax Plan eliminates the tax bias against work, saving, and investment, which would lead to higher rates of economic growth, faster growth in productivity, more jobs, lower interest rates, and a higher standard of living for the American people. 

The America proposed by the FairTax Plan would feature:

  • no federal income taxes, 
  • no payroll taxes, 
  • no self-employment taxes, 
  • no capital gains taxes, 
  • no gift or estate taxes, 
  • no alternative minimum taxes, 
  • no corporate taxes, 
  • no payroll withholding, 
  • no taxes on Social Security benefits or pension benefits, 
  • no personal tax forms, 
  • no personal or business income tax record keeping, and 
  • no personal income tax filing whatsoever.  

No Internal Revenue Service; no April 15th; all gone, forever. 

We believe that many Americans will favor the FairTax Plan proposed by H.R. 25 and S. 296, although some may say, “it simply can’t be done.”  Many said the same thing to the grassroots progressives who won women the right to vote, to those who made collective bargaining a reality for union members, and to the Freedom Riders who made civil rights a reality in America.

We urge Congress not to abandon the FairTax Plan simply because it will be difficult to face the objections of entrenched special interest groups who now benefit from the complexity and tax preferences of the status quo.  The comparative advantage and benefits offered by the FairTax Plan to the vast majority of Americans is simply too high a cost to pay.

Therefore, we the undersigned professional and university economists, endorse a progressive national retail sales tax plan, as provided by the FairTax Plan.  We urge Congress to make H.R. 25 and S. 296 federal law, and then to work swiftly to repeal the 16th Amendment. 

Respectfully,

 

Donald L. Alexander
Professor of Economics
Western Michigan University
John Greenhut, Ph.D.
Associate Professor
Finance & Business Economics
School of Global Management and Leadership
Arizona State University
Ben Pierce
Central Missouri State University
Wayne Angell
Angell Economics
Darrin V. Gulla
Dept. of Economics
University of Georgia
Michael K. Pippenger, Ph.D.
Associate Professor of Economics
University of Alaska
Jim Araji
Professor of Agricultural Economics
University of Idaho
Jon Halvorson
Assistant Professor of Economics
Indiana University of Pennsylvania
Robert Piron
Professor of Economics
Oberlin College
Ray Ball
Graduate School of Business
University of Chicago
Reza G. Hamzaee, Ph.D.
Professor of Economics &
Applied Decision Sciences
Department of Economics
Missouri Western State College
Mattias Polborn
Department of Economics
University of Illinois
Roger J. Beck
Professor Emeritus
Southern Illinois University, Carbondale
James M. Hvidding
Professor of Economics
Kutztown University
Joseph S. Pomykala, Ph.D.
Department of Economics
Towson University
John J. Bethune
Kennedy Chair of Free Enterprise
Barton College
F. Jerry Ingram, Ph.D.
Professor of Economics and Finance
The University of Louisiana-Monroe
Barry Popkin
University of North Carolina
at Chapel Hill
David M. Brasington
Louisiana State University
Drew Johnson
Fellow
Davenport Institute for Public Policy
Pepperdine University
Steven W. Rick
Lecturer, University of Wisconsin
Senior Economist, Credit Union National Association
Jack A. Chambless
Professor of Economics
Valencia College
Steven J. Jordan
Visiting Assistant Professor
Virginia Tech
Department of Economics
Paul H. Rubin
Samuel Candler Dobbs
Professor of Economics & Law
Department of Economics
Emory University
Christopher K. Coombs
Louisiana State University
Richard E. Just
University of Maryland
John Ruggiero
University of Dayton
William J. Corcoran, Ph.D.
University of Nebraska
at Omaha
Dr. Michael S. Kaylen
Associate Professor
University of Missouri
Michael K. Salemi
Bowman and Gordon Gray
Professor of Economics
University of North Carolina
at Chapel Hill
Eleanor D. Craig
Economics Department
University of Delaware
David L. Kendall
Professor of Economics and Finance
University of Virginia's College at Wise
Dr. Carole E. Scott
Richards College of Business
State University of West Georgia
Susan Dadres, Ph.D.
Department of Economics
Southern Methodist University
Peter M. Kerr
Professor of Economics
Southeast Missouri State University
Carlos Seiglie
Dept. of Economics
Rutgers University
Henry Demmert
Santa Clara University
Miles Spencer Kimball
Professor of Economics
University of Michigan
John Semmens
Economist
Phoenix College
Arizona
Arthur De Vany
Professor Emeritus
Economics and Mathematical Behavioral Sciences
University of California, Irvine
James V. Koch
Department of Economics
Old Dominion University
Alan C. Shapiro
Ivadelle and Theodore Johnson
Professor of Banking and Finance
Marshall School of Business
University of Southern California
Pradeep Dubey
Leading Professor
Center for Game Theory
Dept. of Economics
SUNY at Stony Brook
Laurence J. Kotlikoff
Professor of Economics
Boston University
Dr. Stephen Shmanske
Professor of Economics
California State University,
Hayward
Demissew Diro Ejara
William Paterson University of New Jersey
Edward J. López
Assistant Professor
University of North Texas
James F. Smith
University of North Carolina
at Chapel Hill
Patricia J. Euzent
Department of Economics
University of Central Florida
Franklin Lopez
Tulane University
Vernon L. Smith
Economist
John A. Flanders
Professor of Business and Economics
Central Methodist University
Salvador Lopez
University of West Georgia
W. James Smith
Dean of Liberal Arts and Sciences and Professor of Economics
University of Colorado at Denver
Richard H. Fosberg, Ph.D.
William Paterson University
Yuri N. Maltsev, Ph.D.
Professor of Economics
Carthage College
John C. Soper
Boler School of Business
John Carroll University
Gary L. French, Ph.D.
Senior Vice President
Nathan Associates Inc.
Glenn MacDonald
John M. Olin Distinguished Professor of Economics and Strategy
Washington University in St. Louis
Roger Spencer
Professor of Economics
Trinity University
Professor James Frew
Economics Department
Willamette University
Dr. John Merrifield
Professor of Economics
University of Texas-San Antonio
Daniel A. Sumner, Director,
University of California
Agricultural Issues Center
and the Frank H. Buck, Jr.,
Chair Professor,
Department of Agricultural and Resource Economics,
University of California, Davis
K. K. Fung
University of Memphis
Dr. Matt Metzgar
Mount Union College
Curtis R. Taylor
Professor of Economics and Business
Duke University
Satya J. Gabriel, Ph.D.
Professor of Economics and Finance
Mount Holyoke College
Carlisle Moody
Department of Economics
College of William and Mary
Robert Vigil
Analysis Group, Inc.
Dave Garthoff
Summit College
The University of Akron
Andrew P. Morriss
Galen J. Roush Professor of Business Law & Regulation
Case Western Reserve University School of Law
John H. Wicks, Ph.D.
Professor Emeritus
Department of Economics
University of Montana
Ronald D. Gilbert
Associate Professor of Economics
Texas Tech University
Timothy Perri
Department of Economics
Appalachian State University
F. Scott Wilson, Ph.D.
Canisius College
Philip E. Graves
Department of Economics
University of Colorado
Mark J. Perry
School of Management and Department of Economics
University of Michigan-Flint
Mokhlis Y. Zaki
Professor of Economics Emeritus
Northern Michigan University
Bettina Bien Greaves, Retired
Foundation for Economic Education
Timothy Peterson
Assistant Professor
Economics and Management Department
Gustavus Adolphus College
 

 

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