[Congressional Record Volume 157, Number 177 (Friday, November 18, 2011)]
[House]
[Pages H7885-H7888]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
THE FAIR TAX
The SPEAKER pro tempore. Under the Speaker's announced policy of
January 5, 2011, the gentleman from Georgia (Mr. Woodall) is recognized
for 30 minutes.
Mr. WOODALL. Mr. Speaker, this is my first time down here as a
freshman during Special Orders, my first time trying to coordinate
charts and talk the talk and walk the walk all at the same time.
But I'm excited about it because I'm down here to talk about the Fair
Tax. And if folks don't know what the Fair Tax is, it's H.R. 25. You
can find it at www.thomas.gov, that site that everybody should have
bookmarked if you care about what goes on here on the House floor.
Because if you don't know, everything that goes on here is available in
realtime at www.thomas.gov. It's done through the Library of Congress.
It's not a Republican thing or a Democrat thing. It's just the real
deal, what's actually happening down here.
And if you go and you look up H.R. 25, it's the Fair Tax. What the
Fair Tax is is a bill that repeals all income-based Federal taxes and
replaces them with consumption-based taxes.
Now, my friend from Texas (Mr. Gohmert) was just down here on the
House floor, Mr. Speaker. He was talking about our Founding Fathers and
those things that were happening between 1776 and 1787. And in that
time, we funded all the Federal Government with consumption taxes--it
was not income taxes; it was consumption taxes--under the theory that
if you had enough resources to go out and buy that silver tea set from
England, then you had enough resources to help fund the Republic. And
if you spent all your time working on your farm, and you just barely
had enough money to buy thread at the local five-and-dime, then we
weren't going to tax you as heavily.
{time} 1550
If you look at this poster, Mr. Speaker, in 1913, right before the
income tax began, we had 400 pages of Tax Code in America. Just the
last century, in the 1900s, 400 pages of Tax Code and regulations. By
World War II, that 400 pages had grown to 8,000 pages, 20 times as much
Tax Code by the end of World War II. By the time we were in Korea,
14,000 pages of code and regulation. By the 1970s, 19,000 pages of code
and regulation. And in the 1980s, 26,300 pages of Tax Code and
regulation.
Now, Mr. Speaker, I'm a reader. I love to sit down and educate myself
through the written word; but I have to tell you, 26,000 pages of Tax
Code and regulation is going to make a criminal out of all of us
because you can't possibly understand all of the ramifications of the
tax consequences of your decision.
Do you remember 1986? That was the last time we fundamentally
overhauled the Tax Code. 1986. In fact, if you go to www.Thomas.gov,
like I suggested, and you look at the laws and regulations, you'll see
the Tax Code of 1986. It was the Tax Code of 1954, updated Tax Code to
1986. That was the last time we flattened rates and broadened the
basis. Flattened the rates and broadened the base. And where did we end
up? Between 1984 when we had 26,000 pages of Tax Code and regulation,
we went through this process of simplifying the income tax, and 10
years later in 1995, we have 40,000 pages of Tax Code. By simplifying
the income tax, we grew it from 26,000 pages to 40,000 pages.
Now, Mr. Speaker, if you're like me, you go out and you shop around.
Are you going to use the H&R Block tax software? Are you going to use
the Microsoft tax software? What kind of tax software are you going to
use, because you hate paying accountants to do your taxes for you.
You know, I used to just sit down with a pen and paper and do it
myself. I used to go through with my calculator and do it myself, but
it has gotten too complicated. Why? Because since I have reached the
age of majority in 1988, here we have 1995 when I'm coming out of
college, between 1995 and 2004, we added another 20,000 pages to the
Tax Code, from 40,000 pages to 60,000 pages. In 2007, to 67,000 pages;
2008 kept it to just a little over 67,000 pages. And in 2009, it jumped
another 3,000 pages; 70,000 pages of tax legislation.
And to be clear, Mr. Speaker, when we talk about tax legislation,
we're talking about the ways in which the government separates you and
me and all of the American people from our paycheck. That's all there
is in the Tax Code. All the Tax Code is, is how do we separate the
American people from their productivity? It takes 70,000 pages in 2009
to sort that out. And 71,000 pages in 2010. And now, 72,000 pages of
Tax Code in 2011.
Folks, what the FAIR Tax does, H.R. 25, it asks the question that if
we could start from scratch--and by scratch I mean from the 72,000
pages that we do today, to just a blank sheet of paper--if you could
start from scratch and draft the Tax Code that America ought to have
instead of the one that has been forced upon us, what would you do?
What would you do?
Well, there's a lot of difference of opinion on what to do, but
simplification seems to be one of those things that we can all agree
on.
You know, I didn't come to this House to try to be a good Republican.
I came to this House to try to be a good American, and there are lots
of opportunities to do that. I like to think those things occur
simultaneously more often than not. But look at what folks are saying
about the United States Tax Code.
I'll quote House minority leader Nancy Pelosi: Any tax reform and
[[Page H7886]]
closing of loopholes, which is really important for us to do as a sense
of fairness, must also reduce the deficit.
Right, because if you close the loopholes, if you close all of the
lobbyist-funded loopholes, close all of the special exemptions and
exceptions and carve-outs, by definition it brings in more money.
Mr. Speaker, did you get the free golf cart in the 2009 tax bill?
Does anyone want to admit to having gotten the free golf cart?
In 2009, in the name of a good energy bill, in the name of green
energy, we in the wisdom here in the U.S. House and across the way in
the United States Senate, of course I wasn't here at that time, but in
our wisdom we created a tax credit, a $6,500 tax credit if you would go
out and buy an electric vehicle.
Well, Americans are smart, and I love that about America. We are
ingenious folks. And what folks figured out was that the $6,500 that
folks were giving them if they'd go out and buy an electric vehicle, if
you put brake lights, seat belts and side view mirrors on your golf
cart, you could get yourself a free golf cart.
Well, it turns out, because we produce golf carts in the great State
of Georgia, you couldn't actually get an American golf cart for $6,500.
But our friends in China were willing to import a golf cart to America
for $6,500, Mr. Speaker.
And so in the fall of 2009 and the spring of 2010, the IRS had to
release guidance--hear this, Mr. Speaker--the IRS had to release
guidance that said when we first crafted the free golf cart
regulations, we said you actually had to have delivery of the cart by
December 31. But so many Americans are trying to avail themselves of
the free golf cart provision that we're going to change the rules here
in late December and say really all you need is a VIN number from the
manufacturer, and that'll give them several more months to fill all the
orders.
Really, Mr. Speaker? Is that what we need in the Tax Code, a Tax Code
that distributes free golf carts to folks who likely didn't even want a
golf cart but it was free, and so they availed themselves of it?
Nancy Pelosi agrees with me that we need to get rid of those
loopholes.
Senate majority leader Harry Reid: Our tax system is broken and needs
to be fixed.
Let's take the poll, Mr. Speaker. Let's go to the most liberal
Democrat in the House, to the most conservative Republican in the
House, who doesn't agree with majority leader Harry Reid? Our tax
system is broken and needs to be fixed.
And we have the ability to start with a blank sheet of paper and make
it the way we want to make it. Listen to our President, Mr. Speaker.
This is President Barack Obama: You've got too many companies ending
up making decisions based on what their tax director says instead of
what their engineer designs or factories produce, and that puts our
entire economy at a disadvantage.
That's true. Talk to any small business owner, find anybody who's at
a CFO or CEO level in a business close to you and ask that question:
Are you making business decisions, or are you making tax decisions?
And every single time they make a tax decision instead of a business
decision, America loses. Their shareholders may win in the short term.
Profits may gain in the short term. But when we in America decide we're
going to do something to comply with these ridiculous 75,000 pages of
Tax Code, instead of doing what's best for business, instead of what's
best for customers, instead of what makes sense, America loses. And in
these challenging economic times, we cannot lose that productivity.
Let me go back to President Barack Obama. He says this: We need to
make America the best place on Earth to do business. The Tax Code is a
barrier government can remove, a burdensome corporate Tax Code with one
of the highest rates in the world.
Hear that. We talk so much about Republicans and Democrats. Here,
common sense coming from the President of the United States: We need to
make America the best place on Earth to do business. A barrier
government can remove is a burdensome corporate Tax Code with one of
the highest corporate tax rates in the world.
Folks, that's agreement. I will tell you, if I had to characterize
him, Mr. Speaker, I would tell you that the President sits a little
further to the left than I do. If I had to characterize my own voting
record, I'd say I sit a little further to the right than most folks
here in this House. But this is common is ground that we can all agree
on.
Let me just show you what that tax rate is.
{time} 1600
I hope the colors are showing up, Mr. Speaker, for folks back in
their offices watching on TV because the red line here is the U.S.
corporate tax rate. The blue line is the OECD average excluding the
U.S. Now the OECD is that group of developed nations around the world,
those folks that we would say have free economies and growing
economies.
This chart goes back to 1981. It goes back to the beginning of the
Reagan era. You see America's corporate tax rate higher than the
average tax rate in the rest of the world. This is that tax reform that
I talked about in 1986 where you see the tax rate dramatically drop--
dramatically drop--and for a short period of time, Mr. Speaker, we
became, on the red line, more productive and more competitive with the
rest of the world as the rest of the world was on the blue line.
And look at those years. Do you remember those years--1988, 1989,
1990? Do you remember those productive years? I think that's when the
yuppie label came around and folks were buying all their fancy
automobiles and the first of the big houses. I was just coming of age
in that time, but I remember the conspicuous consumption. And why?
Because America was creating wealth. And then what happened? Here's the
tax increase of the Clinton years, bumps right up there, and you see a
flat line of American corporate taxation at about 39 percent, that flat
red line of corporate taxation. Fair enough. I prefer predictability. I
think we ought to know the direction things are going, and I think we
ought to be able to plan to make business decisions.
Here is a very predictable line of corporate taxation. But what's the
rest of the world doing? While America has a very predictable 39
percent tax rate, what's the rest of the world doing? Getting lower and
lower and lower. Lower and lower and lower and lower. Folks, do you
know who can't leave America? The American worker. Folks in my
district. They can't leave. Capital can leave. A click of a mouse and
you can take a billion dollars and move it overseas. If you have a
business in America, you can pack up your bags and go. I talk to CEOs
every day who do exactly that. They say, Rob, it's just not worth it
doing business in America.
Why? Because we're not competitive. Do you want to talk about growing
jobs? Mr. Speaker, let's talk about keeping the jobs that we've already
got.
I see in the Chamber my friend from Iowa, Mr. Steve King, who has
struggled with these issues firsthand and who I know understands as a
small businessman before he came to this House what it means to be out
there trying to make payroll and trying to stay competitive.
And if the gentleman would indulge me, what do you think it would
mean for jobs in America if we got this U.S. corporate tax rate line
below that world average, if we, once again, made it competitive to
build jobs in America?
Mr. KING of Iowa. If the gentleman would yield.
Mr. WOODALL. I would be happy to yield.
Mr. KING of Iowa. I'd pose a question back. What do you think about
taking it to zero?
Mr. WOODALL. Taking it to zero?
Mr. KING of Iowa. Yes.
Mr. WOODALL. Why not take it to zero? Well, I'll tell you what I
might hear back home, I say to my friend. And what do you want to do?
Do you want to give business a free pass? Because my understanding is
there are only two places we can get taxes. We can either take them
from me or we can take them from McDonald's. And wouldn't I rather tax
McDonald's than tax me?
Mr. KING of Iowa. Of course we know if the gentlemen would yield----
[[Page H7887]]
Mr. WOODALL. I'd be happy to yield.
Mr. KING of Iowa. The folks that are buying food in McDonald's are
going to pay the tax if we try to get it from McDonald's. So we know
corporations don't pay taxes; they are aggregators of taxes that are
paid by individuals, by consumers on the last stop. And so they're
efficient aggregators of those taxes. They are actually the tax
collectors on behalf of the Federal Government. The corporations that
collect taxes don't pay them; they transfer it through them by the way
they charge us for the $152 billion a year that it costs to comply with
the Federal Tax Code.
And so I find it an act of frustration to seek to try to collect
taxes from corporations when what I'm really doing is adding to the
administrative costs for corporations so they add the taxes and the
administrative costs on to the cost of the goods that have to be
competitive in this marketplace, and that makes it that individuals pay
taxes. But it also means that jobs go overseas because corporations
that are taxed in America are at a disadvantage to the corporations
that are overseas who aren't very good aggregators of America's tax
dollars, and so they have to raise the taxes here more.
That's kind of the vision that I see that I would lay out here for
the gentleman from Georgia. And we've got a long ways to go before
America embraces the concept that I think will solve this problem.
Mr. WOODALL. But you ask the all important question, I say to my
friend. Why not take the rate to zero? Why are we arguing about whether
it ought to be 25 or 23? I just quoted the President of the United
States. He said, let's make America the most competitive place in the
world to do business. Well, if we were to lower it to 10, maybe
somebody else is going to lower it to 9. If we lower it to 8, maybe
somebody else lowers it to 7. What if we take it to zero? And I have
voiced my concern that, well, if you take it to zero, that means I, as
the American consumer, have to pay all the taxes because corporations
won't be paying taxes anymore.
And what my friend, who has years and years, decades and decades of
experience in the private sector says is, there's no secret drawer
where American businesses get the money to pay taxes. I go out and I
buy a Coca-Cola. Where does Coca-Cola get the money to pay taxes? They
charge it to me in the price of the product.
My friend is saying that the only taxpayer in America today is the
American consumer. There is no other taxpayer. Businesses don't pay
taxes--people pay taxes, whether it's the CEO of that business who has
a high salary and he pays taxes on his salary, whether it's the
consumer of that business who pays in a higher price, or whether it's
the shareholder of that business who pays through lower dividends and
lower rates of return.
Why not take the corporate tax rate to zero so we will be the most
competitive economy in the world?
I yield to my friend.
Mr. KING of Iowa. Just to explore that a little further and that
would be, looking at the corporate tax structure, there's corporate
income tax, and then there are all of the wages that are paid out in
payroll taxes to the employees. And of course one of the most
regressive taxes we've is the payroll tax. And so one might argue that,
well, those taxes are paid by the corporation, that half of the
payroll, that .0765 that I have multiplied so many times with my
employees that I've had over the decades. And of course that .0765
which is half of the 15.3 percent in payroll tax, half comes out of the
employer, half comes out of the employee.
However, the half that comes out of the employer would be wages for
the employee because it is a cost of doing business, it's a cost of
competitiveness. And so when we add into the price of the goods and
services provided by corporations, and I don't mean just corporations,
they can be LLCs, they can be partnerships, sole proprietorships, you
name it, a business entity that hires employees and/or provides goods
and services for retail market or supplies to those who do, all of that
structure of their taxes is built into the price.
And a fair amount of research brings us to a number that is generally
considered to be about 22 percent of the retail price of goods and
services sold in the United States as the tax component paid by the
suppliers that get it into the marketplace and in the end paid by the
consumer.
So those corporations that move overseas have a different tax
structure, but those products that come in from overseas have a 28
percent marketing advantage over the products produced here in the
United States because they don't have the burden of U.S. corporate
taxes, and that includes the payroll taxes that are part of that taxing
structure.
So I'd say that if we can remove the taxes from productivity in
America, we end up with a 28 percent marketing advantage for U.S.-made
products over those made in foreign countries.
And by the way, one more thing: I would not have picked up a nice
Georgia company like Coca-Cola to use them as an example, but then
that's just me.
Mr. WOODALL. As Coca-Cola is spread out all over the world, where
they happen to have their corporate headquarters in Atlanta, but for
how long? But for how long? We talk so much about trying to grow jobs
in America. What about just trying to keep the jobs that we've got?
What about just trying to make it a joy to do business in America
instead of making it a hassle to do business in America?
You might not believe this, Mr. Speaker, but this is a $10 haircut I
just got over the weekend. You probably think I paid a lot more than
that for this haircut. But as you think about what the gentleman from
Iowa said about where costs are hidden, where taxes are hidden, I paid
$10 for this haircut. But Derek, my barber, he had to pay 15.3 percent
in self-employment taxes. So $1.50 of that $10 went straight to the
Federal Government in self-employment taxes. Now he's a good barber, so
I suspect he is in higher than the 15 percent tax bracket, but let's
just say for the sake of argument, he's in the 15 percent income tax
bracket. So out of my $10 haircut, he had to take a $1.50 right off the
bat and send it to the government in self-employment taxes, then take
another $1.50 right off the bat and send it to the Federal Government
in income taxes. So for the $10 haircut he charged me, he's only taking
home $7 to feed his wife and kids. So is it a $10 hair cut, or is it a
$7 haircut?
What we tell Americans is, oh, we're going to lower your tax burden.
But what we've done is to hide that tax burden in the cost of
everything we buy because if Derek didn't have to pay those $3, he'd be
charging me $7 for a haircut, and he would still take $7 home to feed
his kids.
{time} 1610
To have an honest discussion about what kind of spending we ought to
do in this place, I think we have to bring all of those hidden taxes
out of price. Not only does it make us more competitive, as you
suggested, but it makes it possible for us as Americans to have an
honest discussion about is government doing too little or is government
doing too much.
And I think, as you suggested the studies suggest, it's about 22
percent of the cost of everything that we buy, on average, that is
hidden taxes that we think we're getting away with, but that we are
actually paying at the checkout counter.
Mr. KING of Iowa. If the gentleman would yield, I'd slip another
anecdote into this that comes from just last weekend. I was over in
eastern Iowa doing an event, and I happened to get reacquainted with a
young gentleman by the name of Michael Dicks. Now, he is 13 years old;
soon he'll be 14. But when he was 8 years old--I've told this story in
the Congressional Record in the past--he saved up his money to go buy a
little box of Skittles. So he had his change counted out just right in
his pocket--89 cents for a box of Skittles--and had to reach up to the
counter, I presume, and got his Skittles off the shelf and put them up
on the counter. And he counted out his 89 cents and the checker rang it
up and said, that will be 96 cents. And he said, but the price says 89
cents. And the checker said, but you have to pay the tax--that's the
sales taxes in Iowa--so that's 96 cents, young man.
And he turned to his dad and he said, Dad, I have to pay taxes on
Skittles? What a painful experience for an 8-
[[Page H7888]]
year-old young man. But think of what that means if our taxes are
transparent. That young man is going to grow up to be a conservative.
He's going to put fewer demands on government. He's going to demand one
thing--less taxes, less services. We're going to want to have more
personal and individual responsibility, and we're going to let people
provide for their own security in a lot of ways and achieve on their
own. That is a cultural transformation that comes if you have a
transparent tax and if you take the tax and stop punishing productivity
and put it on consumption.
Mr. WOODALL. Well, I would say to my friend, you talk about cultural
transformation, I would tell you that transformation is actually taking
us back to that entrepreneurial, self-reliant experience that America
began as a Nation. This business of hiding taxes and trying to make
people think they're getting something for nothing, that's a relatively
new experience in American culture, and it has transformed this
country.
I'm big on saying you've got to have skin in the game. To make good
decisions you have to have skin in the game. Right now, 50 percent of
the American population isn't paying any income taxes. They don't think
they have skin in the game. Now, they do because they're paying tax in
all of these hidden consumption opportunities that you and I are
talking about, but they vote as if they're getting something for free.
And as a Nation, if we're going to make responsible decisions--
particularly as it comes to borrowing from our children and our
grandchildren--we have to let Americans know what they are really
paying for the size and scope of government. And that's not to say they
can't say, I understand how much I'm paying and I'm willing to pay even
more, or I hate how much I'm paying and I'm going to pay less. But it
will absolutely bring us away from a culture that believes there is a
free lunch and back to a culture that understands that decisions have
consequences and that there is no taxpayer in America except for we,
the American consumers.
Mr. KING of Iowa. Will the gentleman yield?
Mr. WOODALL. I'm happy to yield.
Mr. KING of Iowa. History is replete with the Founding Fathers,
literary giants of the time, philosophers of the time, who looked at
the Greek democracy and they were appalled at what it had produced.
They produced for us a republic instead. But many of them spoke
eloquently about what happens when the public would realize that a
majority of them could vote themselves benefits from the public
treasury. Some of them said democracy ceases to exist; some of them
said that will destroy our republic. But I want to guess that most of
the people that were providing the wisdom at the time commented on
their fear that this country would move towards a majority voting
themselves benefits from the public treasury.
So that is one of the reasons that we have a Republic instead of a
democracy is because those of us who are elected as representatives of
the citizens of the Republic are to have a higher responsibility than
to listen to, let's say, people who want the fruits of someone else's
labor and don't want to labor themselves.
And so we're at this situation now where, in the early part of this
country, there was a policy that you had to be a land-owning male of
age and other qualifications in order to vote because they wanted the
public policy to be established by people that had skin in the game.
And today we saw a constitutional amendment requiring a balanced budget
fail here on the floor of the House of Representatives. I'd like to
have seen a stronger one, but it failed here on the floor of the House.
And that was a constitutional amendment with a cap at 18 percent of GDP
and a supermajority to raise taxes.
Put some of that philosophy back in where it requires a supermajority
to raise taxes, there is a restraint there that brings back some of
that philosophy that helps offset the disadvantage that the working
American has today who's paying those taxes. Your barber is at a
disadvantage because some of the hair that he cuts is of people that
aren't working. I'd say at least one out of every three heads of hair
that your barber cuts is somebody that is in that role of 100 million
Americans of working age who are not in the workforce, many of them are
voting, they are voting themselves benefits from the public trough.
And I'd suggest that we take the tax off of productivity in America,
stop punishing production, put it over on consumption. And I'm just
looking around for a bill number that I could attach myself to because
I'm drawing a blank.
Mr. WOODALL. I thank my friend.
You're absolutely right. When I talk to young people--I try to get
out to the middle schools and high schools in my district every week
when we have time back home--I say, I've got a $10-an-hour job in my
congressional office. Who wants to come to work for me? Who wants to
come to work for me? And I just gave a powerful presentation about how
you can come here and return America to its foundational roots. All the
hands go up. And I say, now, just to be clear, though, we're going to
have to put a $9 income tax on that $10 an hour, so you're only going
to be able to take home $1 at the end of the day. Now, who wants to
come work 80 hours a week for me? And all of the hands go down.
The power to tax is the power to destroy, and we use that power here.
With all due respect to our colleagues on both sides of the aisle, the
Fair Tax that I supported--that you were such a strong supporter of--it
has detractors on both sides of the aisle, because what the Fair Tax
says is we're not going to manipulate your behavior through the Tax
Code anymore. Because the Tax Code allows us to say, if you buy wool
sweaters, we're going to give you a tax credit; if you buy polyester
sweaters, we're going to take taxes away from you. If you go out and
buy Levi's jeans, we're going to give you a tax credit; if you go out
and buy Lee jeans, we're going to take taxes away from you.
Over and over and over again we decide who's supposed to win and
who's supposed to lose, and we punish or reward the American people and
the American small business environment through the Tax Code. And what
you and I have said in the Fair Tax is, I don't want that power in
Washington. I give that power back to the American people. You choose
what kind of jeans you want to wear. You choose what kind of sweater
you want to buy. You choose whether you want a golf cart or not.
We are not in the business of picking winners and losers. We're in
the business of raising as little revenue as is necessary to run this
Federal Government. And that takes power away from this body right
here. And it is only those folks who believe that the American people
are still smarter than you and I are who want to return that power. And
I thank you for being my partner in that.
Mr. KING of Iowa. And I appreciate the opportunity to be your partner
in this.
And I would say to the folks on either side of the argument that
disagree, they're both wrong, whether they're from the left or from the
right. And the bottom line is this: the Fair Tax does everything good
that anybody's tax proposal does that is good; it does them all and it
does them all better. And I'm happy to take that debate anywhere in
this land and have folks that will try that on and we'll finish second
in that debate.
I quickly yield back because the gavel is in the air.
Mr. WOODALL. If the gavel is in the air, I'll just say to the
Speaker, if you needed more information, Mr. Speaker, you could find it
at www.fairtax.org, or you could visit my Web page at
Woodall.house.gov. This really does speak to the challenges of America.
I thank the Speaker for the time, and I thank my friend from Iowa.
____________________