FairTax Overview
The FairTax: The Key to Restoring America’s International Competitiveness3
By
Dan R. Mastromarco, LLM, Taxation
The United States tax regime influences business from the cradle to the grave: whether or not to start a
business, what business to start, how to organize it, where to locate it (here or abroad), how to fund and
run the business, when and how to expand it, when to hire, when to terminate it and how to unwind it.
Over the course of the last 25 years, I have seen how tax policy affects business from many angles: as a
practitioner, an advocate, a federal prosecutor, an adjunct professor, an author of treatises and a book on
the policy process, and as a Congressional counsel. And from these differing perspectives, I cannot help
but see the discouragement of many economists whose voices of reason are ignored; not so much
because they are discordant, but because they are drowned out by the deafening din of lobbyists. Our
tax system has in a nutshell devolved into an unholy trinity of lobbyists, industry seeking relative
advantage and Members who seek campaign contributions, all of whom would sacrifice at the altar of a
public auction our national prosperity for relative advantage.
The good news is that Tax reform is coming. It is a tide that if resisted by this Congress will be passed
by their replacement. But the bad news is that the direction of tax reform remains to this day uncertain.
What will reform look like? What are the criteria by which reform will be adjudged? Will reform be
accomplished in name only, to leave to another generation the ultimate fix when the economy has
worsened?
Understanding how we have gone astray is as easy as hearing the central chorus of economists. They
will tell you that the critical maladies of our current system are three-fold:
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its complexity, prolixity and crushing compliance costs;
its high marginal rates which trample productive income, stifle growth, job creation and wages;
an anachronistic international tax system that is self-flagellating.
This paper addresses our anachronistic international tax system. And many will tell you, that the
solution to this crisis is a consumption tax that makes the taxes we pay visible, ensures all Americans are
stakeholders, is neutral as to savings and investment, lowers marginal rates, reduces compliance costs
and removes the anti-competitive nature of our non-border adjustable extraterritorial tax system. The
best of these is the FairTax, which stands in such stark contrast to the causus male of our current system
that it illuminates the path this Nation must take to regain the trajectory of our prosperity.
A High Corporate Tax Rate Makes the U.S. Noncompetitive in the Global Economy.-- When the
media, pundits and politicians use the term “tax rate,” they often neglect to explain what they mean.
When economists refer to the national statutory rate they always mean the government’s tax rate
imposed by law and assessed on income/profits, and they typically me [