John Linder has introduced legislation (H.R.25), which would enact a national retail sales tax to replace income taxes, the estate tax, payroll taxes and capital gains taxes. Euphemistically called the “FairTax”, John Linder promises that his national sales tax on all goods and services would “be simple…and above all fair.”  After studying the so-called “FairTax”, President Bush’s Advisory Panel on Tax Reform rejected John Linder’s proposal for a number of reasons, including its lack of fairness to the vast majority of taxpayers who would see their taxes increase. The following are specific concerns with the so-called “FairTax”, some of which are cited by the Advisory Panel and others by independent economists and tax policy experts:

• John Linder’s “FairTax” would raise taxes on most Americans while lowering those of wealthy taxpayers. 
• The stated tax rate of 23 percent is misleading because it is a “tax-inclusive” rate, which is not how we think of a sales tax.  Linder’s proposal would actually add 30 percent to nearly all purchases. 
•  At the 30 percent rate, the “FairTax” will produce less revenue than the taxes it will replace. This will result in enormous deficits or dramatic cuts in public services. 
• To offset all lost revenue and maintain current service levels, a sales tax rate of 34% to 50% or higher would be needed. This would be in addition to state and local sales taxes. 
• Linder’s proposal assumes that virtually all purchases would be taxed, including food, medical services, financial services, purchases by governments, schools, churches, etc. If the tax were limited to items typical of state sales taxes, a rate of 64 percent would be needed. 
• Taxing all government purchases would require additional revenue equal to the amount of the sales tax just to maintain current service levels. Linder’s analysis ignores this fact. 
•  John Linder and “FairTax” proponents assume no tax evasion, which is unrealistic based on state experiences. 
• Contrary to John Linder’s claims, the “FairTax” would not bring jobs back to America that have been outsourced to foreign countries where labor costs are a fraction of U.S. labor costs. 
• The “FairTax” would not result in lower consumer prices unless incomes also decline by an amount equal to the embedded taxes. This is acknowledged by Linder’s often cited economist, Dale Jorgenson. 
• John Linder’s “FairTax” would tax new home sales but not existing home sales, which could have a devastating effect on new home construction. 
• John Linder’s “FairTax” would not eliminate the need for an IRS-like federal bureaucracy, but merely replace the IRS with another federal agency to administer the national sales tax and keep track of personal information required to administer grants to low-income taxpayers. 
• The “FairTax” would not eliminate the filing of income tax returns for taxpayers in Georgia unless the state income tax is replaced with a state sales tax. 
• A state sales tax in lieu of Georgia’s income tax, along with local sales taxes, would increase the total sales tax in Georgia by an additional 10% or more. 
• There is little if any peer reviewed research to back up the claims and overly optimistic predictions of John Linder and the “FairTax” proponents.