Pennsylvanians in Support of the FairTax Act

October 14, 2005
Honorable John Breaux
Honorable Connie Mack

Dear Senators Breaux and Mack:

As Chairman and CEO of Americans for Fair Taxation, I write on behalf
of its 600 thousand plus members regarding your comments at the Panel's
October 11, 2005 Hearing. The Members of FairTax and I cannot
adequately articulate our disappointment regarding the Panel's dismissal
of a National Retail Sales Tax from consideration as it concludes
deliberations on the Panel's Report.

The Panel's outright rejection of a consumption tax as a possible
alternative to the current system is distressing for several reasons.
First, I am troubled by Senator Mark's remarks suggesting that your
conclusion was reached before the "study" began. His observation that a
consumption tax was never viewed as a viable option at the outset of the
Panel's deliberations calls into question the creditability and
objectivity of the entire Panel's deliberations. Moreover, it mocks the
efforts of those who the Panel as honest deliberators.

Second, not only did you admit to prejudging such a consumption tax, but
the purported analysis conducted by the Panel was wrought with error.
To begin with, consider the rate. AFFT has conducted more empirical
research on the Fair Tax than proponents of any other tax reform
proposal. These studies addressed concerns about rate and the impact on
the poor. The data provided to the Panel by AFFT demonstrate that given
its broad and base, the FairTax Plan has a rate of 23% and through its
prebate, is the only plan to untax the poor. Your own staff found the
rate to be 25 percent with a 15 percent noncompliance rate.

Critics of the FairTax, when confronted with the empirical evidence of
the FairTax must resort to the disingenuous scare tactic of shrinking
the base to drive up the rate. The most practiced and artful proponent
of this deceitful practice is the Brookings Institution While the Panel
could fall prey to such a tactic might have been expected, the decision
to adopt it as it own is difficult to comprehend in light of the
analysis provided by the Panel's own staff. Put more plainly, the plan
as discussed and rejected was not even the Fair Tax - it was a different
plan altogether, and a plan formed by the faulty assumption that the
Congress would never resist the temptation to narrow the base. In fact,
a single, visible rate and a system where everyone is a taxpayer is the
best assurance against narrowing a base. True tax reform can only be
accomplished through a system that is fair and transparent: tax reform
proposals that "hide" taxes and the true cost of government and which
are prone to manipulation through legislative loopholes that pick
economic winners and losers will not last.

Third, the Panel's own members seem to be in conflict about the
operation of the FairTax. Senator Breaux stated his concerns about the
impact of consumption taxes upon the poor. By contrast, Dr. Lazear
observed that the plan is too generous to the poor. We hope that Senator
Breaux understands that, unlike Dr. Lazear, we do not feel that is too
beneficial to the poor to allow them to meet their own sustenance in
life before the government becomes their partner. The Panel staff's
own measurement of distribution showed the plan nearly approximating the
distribution of current law. The Fair Tax was specifically designed to
benefit poor and lower income Americans. These two groups benefit the
most under the Fair Tax's objective of rewarding work and encouraging
saving and investments.

Since the rate of 23% is an essential element of the FairTax, and given
your concerns about rate, I request a meeting with you and the Panel's
economists to discuss the rate and the methodologies undertaken to
determine a rate. It is a plan that is far less complex and materially
fairer than the current system. Dr. Lazear's less than rigorous analysis
of the rates needed for a revenue neutral consumption tax and the
intellectual dishonesty of the approach taken, as explained by Dr.
Lazear himself, brings the integrity of the process and the Panel's work
product into question.

Why would the Panel have dismissed analyzing revenue neutral rates on
the basis of dynamic scoring, when that is the only true way in which
the benefits of positive reform can be measured and built into the
political process? I have attached a letter to President Bush on this
subject signed by groups supporting tax reform.

The American people deserve a system devoid of loopholes that only
benefit special interests and their lobbyists. I saw Senator Breaux'
presentation Monday on Health Care Reform at the Annual Conference of
the American Pediatrics Association. I would hope that you place the
interests of the American people foremost and that you have as open a
mind on reformation of the Tax Code as you urged the parties involved in
healthcare reform to maintain.

Given the importance of the issues and the misinformation disseminated
at the Panel's meeting, I look forward to meeting with you and the
appropriate representatives of the Panel at your earliest convenience.
We are fast reaching a crisis situation that calls for bold and not
incremental reform, and that crisis is not simply the Alternative
Minimum Tax or the enlarging tax gap. It is a crisis borne by reliance
on a tax regime that is outmoded, outdated and wrongheaded. The FairTax
offers such a plan that is fairer and simpler to all the American
people. The popular acceptance of this idea as demonstrated by the best
seller status of THE FAIRTAX BOOK has swelled our grassroots base, and
demonstrates the willingness of the American public to reform the
federal tax system.

Very truly yours,

Leo E. Linbeck, Jr.
[National Charman of Americans for Fair Taxation]