The FairTax is a proposed change to the federal tax laws of the United States that would replace all federal income taxes with a single national retail sales tax. The plan has been introduced into the United States Congress as the Fair Tax Act (/). The tax would be levied once at the point of purchase on all new goods and services for personal consumption. The proposal also calls for a monthly payment to all family households of lawful U.S. residents as an advance rebate, or 'prebate', of tax on purchases up to the poverty level. The sales tax rate, as defined in the legislation, is 23 percent of the total price including the tax ($23 of every $100 spent—calculated similar to income taxes). This is equivalent to a 30 percent traditional U.S. sales tax ($23 on top of every $77 spent).
With the rebate taken into consideration, the FairTax would be progressive on consumption, but would also be regressive on income at higher income levels (as consumption falls as a percentage of income). Opponents argue this would accordingly decrease the tax burden on high income earners and increase it on the middle class. Supporters contend that the plan would decrease tax burdens by broadening the tax base, effectively taxing wealth, and increasing purchasing power. The plan's supporters also argue that a consumption tax would have a positive effect on savings and investment, that it would ease tax compliance, and that the tax would result in increased economic growth, incentives for international business to locate in the U.S., and increased U.S. competitiveness in international trade. Opponents contend that a consumption tax of this size would be extremely difficult to collect, and would lead to pervasive tax evasion. They also argue that the proposed sales tax rate would raise less revenue than the current tax system, leading to an increased budget deficit.
In recent years, a tax reform movement has formed behind the FairTax proposal. Increased support was created after talk radio personality Neal Boortz and Georgia Congressman John Linder published The FairTax Book in 2005 and additional visibility was gained in the 2008 presidential campaign. A number of congressional committees have heard testimony on the bill; however, it has not moved from committee since its introduction in 1999 and has yet to have any effect on the tax system. The plan is expected to increase cost transparency for funding the federal government, and supporters believe it would have positive effects on civil liberties, the environment, and advantages with taxing illegal activity and illegal immigrants. There are concerns regarding the proposed repeal of the Sixteenth Amendment, removal of tax deduction incentives, transition effects on after-tax savings, effect to the income tax industry, incentives on credit use, and the loss of tax advantages to state and local bonds.
The Fair Tax Act is designed to replace all federal income taxes (including corporate income taxes and capital gains taxes), payroll taxes (including Social Security and Medicare taxes), gift taxes, and estate taxes with a national retail sales tax. The legislation would remove the Internal Revenue Service (after three years), and establish an Excise Tax Bureau and a Sales Tax Bureau in the Department of the Treasury. The states are granted the primary authority for the collection of sales tax revenues and the remittance of such revenues to the Treasury. The plan was created by Americans For Fair Taxation, an advocacy group formed to change the tax system. The group states that, together with economists, it developed the plan and the name "Fair Tax", based on interviews, polls, and focus groups of the general public. Since the term "fair" is subjective, the name of the plan has been criticized as deceptive marketing by some, while being touted as true to its name by others. The FairTax legislation has been introduced by Georgia Republican John Linder in the House and by Georgia Republican Senator Saxby Chambliss in the Senate.
Linder first introduced the Fair Tax Act on July 14, 1999 to the 106th United States Congress and has reintroduced substantially the same bill in each subsequent session of Congress. The bill attracted a total of 56 House and Senate cosponsors in the 108th Congress (/), 61 in the 109th Congress (/), and 76 in the 110th United States Congress (/). Former Speaker of the House Dennis Hastert (Republican) has cosponsored the bill but it has not received support from the Democratic leadership, which now controls Congress. Democratic Representative Collin Peterson of Minnesota and Democratic Senator Zell Miller of Georgia cosponsored and introduced the bill in the 108th Congress, but Peterson is no longer cosponsoring the bill and Miller has left the Senate. In the 109th and 110th Congress, Representative Dan Boren has been the only Democrat to cosponsor the bill. A number of congressional committees have heard testimony on the FairTax, but it has not moved from committee since its introduction in 1999. The legislation has also been discussed with President George W. Bush and Secretary of the Treasury Henry M. Paulson.
To become law, the bill will need to be included in a final version of tax legislation from the U.S. House Committee on Ways and Means, pass both the House and the Senate, and finally be signed by the President. In 2005, President Bush established an advisory panel on tax reform, chaired by former senators Connie Mack III and John Breaux. As part of its task, the panel examined several national sales tax variants including aspects of the FairTax and noted several concerns. These included uncertainties as to the revenue that would be generated, and difficulties of enforcement and administration, which made this type of tax undesirable to recommend in their final report. The 2008 presidential nominees of the two major parties, Republican John McCain and Democrat Barack Obama, do not support the bill, but McCain has stated that if passed by Congress, he would sign it. Libertarian nominee Bob Barr has endorsed the plan.
|One adult household||Two adult household|
| Family |
| Annual |
| Annual |
| Monthly |
| Family |
| Annual |
| Annual |
| Monthly |
|and 1 child||$14,000||$3,200||$268||and 1 child||$24,400||$5,612||$468|
|and 2 children||$17,600||$4,048||$337||and 2 children||$28,000||$6,440||$537|
|and 3 children||$21,200||$4,876||$406||and 3 children||$31,600||$7,268||$606|
|and 4 children||$24,800||$5,704||$475||and 4 children||$35,200||$8,096||$675|
|and 5 children||$28,400||$6,532||$544||and 5 children||$38,800||$8,924||$744|
|and 6 children||$32,000||$7,360||$613||and 6 children||$42,400||$9,752||$813|
|Note: Alaska and Hawaii have different poverty levels and would have different FairTax prebates.|
Opponents of the plan criticize this tax rebate due to its costs. Economists at the Beacon Hill Institute estimated the overall rebate cost to be $489 billion (assuming 100 percent participation). In addition, economist Bruce Bartlett has argued that the rebate would create a large opportunity for fraud, treats children disparately, and would constitute a welfare payment regardless of need.
The President's Advisory Panel for Federal Tax Reform cited the rebate as one of their chief concerns when analyzing their national sales tax, stating that it would be the largest entitlement program in American history, and contending that it would "make most American families dependent on monthly checks from the federal government". Estimated by the advisory panel at approximately $600 billion, "the Prebate program would cost more than all budgeted spending in 2006 on the Departments of Agriculture, Commerce, Defense, Education, Energy, Homeland Security, Housing and Urban Development, and Interior combined." Proponents point out that income tax deductions, tax preferences, loopholes, credits, etc. under the current system was estimated at $945 billion by the Joint Committee on Taxation. They argue this is $456 billion more than the FairTax "entitlement" (tax refund) would spend to cover each person's tax expenses up to the poverty level. In addition, it was estimated for 2005 that the Internal Revenue Service was already sending out $270 billion in refund checks.
The FairTax statutory rate, unlike most U.S. state-level sales taxes, is calculated on a tax base that includes the amount of FairTax paid. A final price of $100 includes $23 of taxes. Congressman John Linder has stated that the FairTax would be implemented as an inclusive tax, which would include the tax in the retail price, not added on at checkout—an item on the shelf for five dollars would be five dollars total. The receipt would display the tax as 23 percent of the total. Linder states the FairTax is presented as a 23 percent tax rate for easy comparison to income tax rates (the taxes it would be replacing). Proponents believe it is both inaccurate and misleading to say that an income tax is 23 percent and the FairTax is 30 percent as it implies that the sales tax burden is higher, when in fact the burden of the two taxes is precisely the same. The plan's opponents call the semantics deceptive. FactCheck called the presentation misleading, saying that it hides the real truth of the tax rate. Bruce Bartlett stated that polls show tax reform support is extremely sensitive to the proposed rate, and called the presentation confusing and deceptive based on the conventional method of calculating sales taxes.
A 2006 study published in Tax Notes by the Beacon Hill Institute at Suffolk University and Dr. Laurence Kotlikoff estimated the FairTax would be revenue-neutral for the tax year 2007 at a rate of 23.82 percent (31.27 percent tax-exclusive) assuming full taxpayer compliance. The study states that purchasing power is transferred to state and local taxpayers from state and local governments. To recapture the lost revenue, state and local governments would have to raise taxes in order to continue collecting the same real revenues from their taxpayers. The Argus Group and Arduin, Laffer & Moore Econometrics each published an analysis that defended the 23 percent rate. While proponents of the FairTax concede that the above studies did not explicitly account for tax evasion, they also claim that the studies did not altogether ignore tax evasion under the FairTax. These studies presumably incorporated some degree of tax evasion in their calculations by using National Income and Product Account based figures, which is argued to understate total household consumption. The studies also did not account for capital gains that may be realized by the U.S. government if the value of the dollar were to decrease following implementation, which would in turn reduce the real value of nominal U.S. government debt. Nor did these studies account for any increased economic growth that many economists researching the plan believe would occur.
In contrast to the above studies, William Gale of the Brookings Institution published a study in Tax Notes that estimated a rate of 28.2 percent (39.3 percent tax-exclusive) for 2007 assuming full taxpayer compliance and an average rate of 31 percent (44 percent tax-exclusive) from 2006-2015 (assumes that the Bush tax-cuts expire on schedule and accounts for the replacement of an additional $3 trillion collected through the Alternative Minimum Tax). The study also concluded that if the tax base were eroded by 10 percent due to tax evasion, tax avoidance, and/or legislative adjustments, the average rate would be 34 percent (53 percent tax-exclusive) for the 10 year period. A dynamic analysis in 2008 by the Baker Institute For Public Policy concluded that a 28 percent (38.9 percent tax-exclusive) rate would be revenue neutral for 2006. The President's Advisory Panel for Federal Tax Reform performed a 2006 analysis to replace the individual and corporate income tax with a retail sales tax and found the rate to be 25 percent (34 percent tax-exclusive) assuming 15 percent tax evasion, and 33 percent (49 percent tax-exclusive) with 30 percent tax evasion. The rate would need to be substantially higher to replace the additional taxes replaced by the FairTax (payroll, estate, and gift taxes). Some proponents of the FairTax have criticized the President's Advisory Panel's study as having allegedly altered the terms of the FairTax, using unsound methodology, and/or failing to fully explain their calculations.
The FairTax's effect on the distribution of taxation or tax incidence (the effect on the distribution of economic welfare) is a point of dispute. The plan's supporters argue that the tax would broaden the tax base, that it would be progressive, and that it would decrease tax burdens and start taxing wealth. Opponents argue that a national sales tax would be inherently regressive and would decrease tax burdens paid by high-income individuals. Households at the lower end of the income scale spend almost all their income, while households at the higher end are more likely to devote a portion of income to saving; households at the extreme high end of consumption often finance their purchases out of savings, not income. Income earned and saved would not be taxed immediately under the proposal. In other words, savings would be spent at some point in the future and taxed according to that consumption.
A family of four (a couple with two children) earning $25,000 and spending this on taxable goods and services, would consume 100 percent of their income. A higher income family of four making $100,000, spending $75,000 and saving $25,000, would devote 75 percent of their income for the year on taxable goods and services. According to economist William G. Gale, the percentage of income taxed is regressive. When presented with an estimated effective tax rate, the low-income family above would pay a tax rate of 0 percent on the 100 percent of consumption. The higher income family would pay a tax rate of 15 percent on the 75 percent of consumption (with the other 25 percent taxed at a later point in time, as savings is tax-deferred). According to economist Laurence Kotlikoff, the effective tax rate is progressive on consumption. A person spending at the poverty level would have an effective tax rate of 0 percent, whereas someone spending at four times the poverty level would have an effective tax rate of 17.2 percent.
Kotlikoff states that the FairTax could make the tax system much more progressive and generationally equitable, and argues that taxing consumption is effectively the same as taxing wages plus taxing wealth. Studies by Kotlikoff and Daivd Rapson state that the FairTax would significantly reduce marginal taxes on work and saving, lowering overall average remaining lifetime tax burdens on current and future workers. A study by Kotlikoff and Sabine Jokisch concluded that the long term effects of the FairTax would reward low-income households with 26.3 percent more purchasing power, middle-income households with 12.4 percent more purchasing power, and high-income households with 5 percent more purchasing power. The Beacon Hill Institute reported that the FairTax would make the federal tax system more progressive and would benefit the average individual in almost all expenditures deciles. In another study, they state the FairTax would offer the broadest tax base (an increase of over 2 trillion), which allows the FairTax to have a lower tax rate than current tax law.
Gale analyzed a national sales tax (though different from the FairTax in several aspects) and reported that the overall tax burden on middle-income Americans would increase while the tax burden on the top 1 percent would drop. A study by the Beacon Hill Institute reported that the FairTax may have a negative effect on the well-being of mid-income earners for several years after implementation. According to the President's Advisory Panel for Federal Tax Reform report, which compared the individual and corporate income tax (excluding other taxes the FairTax replaces) to a sales tax with rebate, the percentage of federal taxes paid by those earning from $15,000–$50,000 would rise from 3.6 percent to 6.7 percent, while the burden on those earning more than $200,000 would fall from 53.5 percent to 45.9 percent. The report states that the top 5 percent of earners would see their burden decrease from 58.6 percent to 37.4 percent. FairTax supporters argue that replacing the regressive payroll tax (a 15.3 percent total tax—not included in the Tax Panel study) greatly changes the tax distribution, and that the FairTax would relieve the tax burden on middle-class workers.
The predicted effects of the FairTax are a source of disagreement among economists and other analysts. According to Money magazine, while many economists and tax experts support the idea of a consumption tax, many of them view the FairTax proposal as having serious problems with evasion and revenue neutrality. Some economists argue that a consumption tax (the FairTax is one such tax) would have a positive effect on economic growth, incentives for international business to locate in the U.S., and increased U.S. international competitiveness (border tax adjustment in global trade). The FairTax would be tax-free on mortgage interest (up to a basic interest rate) and donations, but some economists and law makers have concerns about losing tax incentives on home ownership and charitable contributions. There is also concern about the effect on the income tax industry and the difficulty of repealing the Sixteenth Amendment (to prevent Congress from re-introducing an income tax).
FairTax proponents argue that the proposal would provide tax burden visibility and reduce compliance and efficiency costs by 90%, returning a large share of money to the productive economy. The Beacon Hill Institute concluded that the FairTax would save $346.51 billion in administrative costs and would be a much more efficient taxation system. Bill Archer, former head of the House Ways and Means Committee, asked Princeton University Econometrics to survey 500 European and Asian companies regarding the effect on their business decisions if the United States enacted the FairTax. 400 of those companies stated they would build their next plant in the United States, and 100 companies said they would move their corporate headquarters to the United States. Supporters argue that the U.S. has the highest combined statutory corporate income tax rate among OECD countries along with being the only country with no border adjustment element in its tax system. Proponents state that because the FairTax eliminates corporate income taxes and is automatically border adjustable, the competitive tax advantage of foreign producers would be eliminated, immediately boosting U.S. competitiveness overseas and at home.
Opponents offer a study commissioned by the National Retail Federation in 2000 that found a national sales tax bill filed by Billy Tauzin, the Individual Tax Freedom Act would bring a three-year decline in the economy, a four-year decline in employment and an eight-year decline in consumer spending. Wall Street Journal columnist James Taranto states the FairTax is unsuited to take advantage of supply-side effects and would create a powerful disincentive to spend money. John Linder states an estimated $11 trillion is held in foreign accounts (largely for tax purposes), which he states would be repatriated back to U.S. banks if the FairTax were enacted, becoming available to U.S. capital markets, bringing down interest rates, and otherwise promoting economic growth in the United States. Attorney Allen Buckley states that a tremendous amount of wealth was already repatriated under law changes in 2004 and 2005. Buckley also argues that if the tax rate was significantly higher, the FairTax would discourage the consumption of new goods and hurt economic growth.
During the transition, many or most of the employees of the IRS (105,978 in 2005) would face loss of employment. The Beacon Hill Institute estimate is that the federal government would be able to cut $8 billion from the IRS budget of $11.01 billion (in 2007), reducing the size of federal tax administration by 73%. In addition, income tax preparers (many seasonal), tax lawyers, tax compliance staff in medium-to-large businesses, and software companies which sell tax preparation software could face significant drops, changes, or loss of employment. The bill would maintain the IRS for three years after implementation before completely decommissioning the agency, providing employees time to find other employment.
In the period before the FairTax is implemented, there could be a strong incentive for individuals to buy goods without the sales tax using credit. After the FairTax is in effect, the credit could be paid off using untaxed payroll. If credit incentives do not change, opponents of the FairTax worry it could exacerbate an existing consumer debt problem. Proponents of the FairTax state that this effect could also allow individuals to pay off their existing (pre-FairTax) debt more quickly, and studies suggest lower interest rates after FairTax passage.
Individuals under the current system who accumulated savings from ordinary income (by choosing not to spend their money when the income was earned) paid taxes on that income before it was placed in savings (such as a Roth IRA or CD). When individuals spend above the poverty level with money saved under the current system, that spending would be subject to the FairTax. People living through the transition may find both their earnings and their spending taxed. Critics have stated that the FairTax would result in unfair double taxation for savers and suggest it does not address the transition effect on some taxpayers who have accumulated significant savings from after-tax dollars, especially retirees who have finished their careers and switched to spending down their life savings. Supporters of the plan argue that the current system is no different, since compliance costs and "hidden taxes" embedded in the prices of goods and services cause savings to be "taxed" a second time already when spent. The rebates would supplement accrued savings, covering taxes up to the poverty level. The income taxes on capital gains, estates, social security and pension benefits would be eliminated under FairTax. In addition, the FairTax legislation adjusts Social Security benefits for changes in the price level, so a percentage increase in prices would result in an equal percentage increase to Social Security income. Supporters suggest these changes would offset paying the FairTax under transition conditions.
If the FairTax bill were passed, permanent elimination of income taxation would not be guaranteed; the FairTax bill would repeal much of the existing tax code, but the Sixteenth Amendment would remain in place. The elimination of the possibility that income taxation would return requires a repeal of the Sixteenth Amendment to the United States Constitution along with expressly prohibiting a federal income tax. This is referred to as an "aggressive repeal". Separate income taxes enforced by individual states would be unaffected by the federal repeal. Since passing the FairTax would only require a simple majority in each house of the United States Congress along with the signature of the President, whereas enactment of a constitutional amendment must be approved by two thirds of each house of the Congress, and three-quarters of the individual U.S. states, it is possible that passage of the FairTax bill would simply add another taxation system. If a new income tax bill was passed after the FairTax passage, a hybrid system could develop; albeit, there is nothing preventing a bill for a hybrid system today. John Linder plans to include a sunset provision in H.R. 25 during the 111th Congress that would require the repeal of the Sixteenth Amendment within 5 years after the implementation of the FairTax or the FairTax goes away. Critics have also argued that a tax on state government consumption could be unconstitutional.
Since the FairTax would not tax used goods, the value would be determined by the supply and demand in relation to new goods. The price differential/margins between used and new goods would stay consistent, as the cost and value of used goods are in direct relationship to the cost and value of the new goods. Because the U.S. tax system has a hidden effect on prices, it is expected that moving to the FairTax would decrease production costs from the removal of business taxes and compliance costs, which is predicted to offset a portion of the FairTax effect on prices.
If businesses provided employees with gross pay (including income tax withholding and the employee share of payroll taxes), Arduin, Laffer & Moore Econometrics estimated production costs could decrease by a minimum of 11.55% (partial accommodation). This reduction would be from the removal of the remaining embedded costs, including corporate taxes, compliance costs, and the employer share of payroll taxes. This decrease would offset a portion of the FairTax amount reflected in retail prices, which proponents suggest as the most likely scenario. Bruce Bartlett states that it is unlikely that nominal wages would be reduced, which he believes would result in a recession, but that the Federal Reserve would likely increase the money supply to accommodate price increases. David Tuerck states "The monetary authorities would have to consider how the degree of accommodation, varying from none to full, would affect the overall economy and how it would affect the well-being of various groups such as retirees."
Social Security benefits would be adjusted for any price changes due to FairTax implementation. The Beacon Hill Institute states that it would not matter, apart from transition issues, whether prices fall or rise—the relative tax burden and tax rate remains the same. Decreases in production cost would not fully apply to imported products; so according to proponents, it would provide tax advantages for domestic production and increase U.S. competitiveness in global trade (see Border adjustability). To ease the transition, U.S. retailers will receive a tax credit equal to the FairTax on their inventory to allow for quick cost reduction. Retailers would also receive an administrative fee equal to the greater of $200 or 0.25 percent of the remitted tax as compensation for compliance costs, which amounts to around $5 billion.
Other economists and analysts have argued that the underground economy would continue to bear the same tax burden as before. They state that replacing the current tax system with a consumption tax would not change the tax revenue generated from the underground economy—while illicit income is not taxed directly, spending of income from illicit activity results in business income and wages that are taxed. This raises the price of goods bought using illicit income, and indirectly taxes the underground economy.
Proponents state the FairTax would reduce the number of tax filers by about 86 percent (from 100 million to 14 million) and reduce the filing complexity to a simplified state sales tax form. The Economist reported on empirical research that supports the claim that simplified tax systems lead to greater compliance. The Government Accountability Office (GAO), among others, have specifically identified the negative relationship between compliance costs and the number of focal points for collection. Under the FairTax, the federal government would be able to concentrate tax enforcement efforts on a single tax: the FairTax. Retailers would receive an administrative fee equal to the greater of $200 or 0.25 percent of the remitted tax as compensation for compliance costs. In addition, supporters state that the overwhelming majority of purchases occur in major retail outlets, which are very unlikely to evade the FairTax and risk losing their business licenses. Economic Census figures for 2002 show that 48.5 percent of merchandise sales are made by just 688 businesses ("Big-Box" retailers). 85.7 percent of all sales are made by 92,334 businesses, which is 3.6 percent of American companies. In the service sector, approximately 80 percent of sales are made by 1.2 percent of U.S. businesses.
The FairTax is a national tax, but can be administered by the states rather than a federal agency, which may have a bearing on compliance as the states' own agencies could monitor and audit businesses within that state. The 0.25 percent retained by the states amounts to $5 billion the states would have available for enforcement and administration. For example, California should receive over $500 million for enforcement and administration, which is more than the $327 million budget for the state's sales and excise taxes. Because the federal money paid to the states would be a percentage of the total revenue collected, John Linder claims the states would have an incentive to maximize collections. Proponents believe that states that choose to conform to the federal tax base would have advantages in enforcement, information sharing, and clear interstate revenue allocation rules. A study by the Beacon Hill Institute concluded that, on average, states could more than halve their sales tax rates and that state economies would benefit greatly from adopting a state-level FairTax.
FairTax opponents state that compliance decreases when taxes are not automatically withheld from citizens, and that massive tax evasion could result by collecting at just one point in the economic system. Compliance rates can also fall when taxed entities, rather than a third party, self-report their tax liability. For example, ordinary personal income taxes can be automatically withheld and are reported to the government by a third party. Taxes without withholding and with self-reporting, such as the FairTax, can see higher evasion rates. In other countries, similar VAT taxes have an average evasion rate of 20%. Economist Jane Gravelle of the Congressional Research Service found studies showing that evasion rates of sales taxes are often above 10%, even when the sales tax rate is in the single digits. Tax publications by the Organisation for Economic Co-operation and Development (OECD), IMF, and Brookings Institution have suggested that the upper limit for a sales tax is about 10% before incentives for evasion become too great to control. According to the GAO, 80% of state tax officials opposed a national sales tax as an intrusion on their tax base. Opponents also raise concerns of legal tax avoidance by spending and consuming outside of the U.S. (imported goods would be subject to collection by the U.S. Customs Service).
Economists from the University of Tennessee concluded that while there would be many desirable macroeconomic effects, adoption of a national retail sales tax would also have serious effects on state and local government finances. Economist Bruce Bartlett stated that if the states did not conform to the FairTax, they would have massive confusion and complication as to what is taxed by the state and what is taxed by the federal government. In addition, sales taxes have long exempted all but a few services because of the enormous difficulty in taxing intangibles—Bartlett suggests that the state may not have sufficient incentive to enforce the tax. University of Michigan economist Joel Slemrod argues that states would face significant issues in enforcing the tax. "Even at an average rate of around five percent, state sales taxes are difficult to administer." University of Virginia School of Law professor George Yin states that the FairTax could have evasion issues with export and import transactions. The President's Advisory Panel for Federal Tax Reform reported that if the federal government were to cease taxing income, states might choose to shift their revenue-raising to income. Absent the Internal Revenue Service, it would be more difficult for the states to maintain viable income tax systems.
While many economists and tax experts support a consumption tax, problems could arise with using a retail sales tax rather than a value added tax (VAT). A VAT imposes a tax at every intermediate step of production, so the goods reach the final consumer with much of the tax already in the price, along with some extra overhead. The retail seller has little incentive to conceal retail sales, since he has already paid much of the good's tax. Retailers are unlikely to subsidize the consumer's tax evasion by concealing sales. In contrast, a retailer has paid no tax on goods under a sales tax system. This provides an incentive for retailers to conceal sales and engage in "tax arbitrage" by sharing some of the illicit tax savings with the final consumer. Laurence Kotlikoff has stated that the government could compel firms to report, via 1099-type forms, their sales to other firms, which would provide the same records that arise under a VAT. In the United States, a general sales tax is imposed in 45 states plus the District of Columbia (accounting for over 97 percent of both population and economic output), which proponents argue provides a large infrastructure for taxing sales that many countries do not have.
Much support has been achieved by talk radio personality Neal Boortz. Boortz's book (co-authored by Georgia Congressman John Linder) entitled The FairTax Book, explains the proposal and spent time atop the New York Times Best Seller list. Boortz stated that he donates his share of the proceeds to charity to promote the book. In addition, Boortz and Linder have organized several FairTax rallies to publicize support for the plan. Other media personalities have also assisted in growing grassroots support including radio and former TV talk show host Larry Elder, radio host and former Senatorial candidate Herman Cain, Fox News and radio host Sean Hannity, and ABC News co-anchor John Stossel. The FairTax has received additional visibility as one of the issues in the 2008 presidential election on the issue of taxes and the IRS. At a debate on June 30, 2007, several Republican candidates were asked about their position on the FairTax and many responded that they would sign the bill into law if elected. The most vocal promoters of the FairTax in the election are former Republican candidate Mike Huckabee and former Democratic candidate Mike Gravel. The Internet, blogosphere, and electronic mailing lists like Yahoo! Groups have contributed to informing, organizing, and gaining support for the FairTax.