Proponents of the FairTax say it's the most equitable way to tax people, based on the new goods and services they consume. And they say the way to do that is with a 23 percent national sales tax on those goods and services.
They say the revenue generated from such a sales tax could replace the revenue from income, Social Security, Medicare, self-employment, alternative minimum, gift, estate, corporate income and capital gains taxes.
The FairTax is known as a consumption tax, which is a tax not only on new goods, but services, too, which are currently not taxed: medical, legal and financial, among others.
No such tax exists anywhere in the United States, but support for the concept seems to be gaining momentum in Congress, and some states have begun studying whether to implement the tax, as well.
Tuesday, Utah legislators on the Revenue and Taxation Interim Committee, heard the pitch from Thomas Wright, former CEO of Americans for FairTaxation, the nonpartisan organization pushing the tax.
Utah legislators are continuing to study tax reform following the property tax debacle of 2007.
Skyrocketing property values, combined with four property-tax increases and delayed appraisals in Bountiful led to extreme jumps in property taxes.
Davis County leaders scrambled to put together an "equity adjustment" to provide temporary relief to the hardest hit property owners while ramping up the Davis County Assessor's Office so the entire county could be appraised in 2008.
As legislators study tax reform, various tax structures have been placed on the table, including acquisition value-based property taxes, similar to California's Proposition 13.
The FairTax is the most recent presentation, but Sen. Wayne Niederhauser, R-Sandy, co-chairman of the interim committee, said not to expect FairTax legislation in 2009.
Taxing the currently untaxed services could drive costs higher, especially for medical care, which accounts for most of the untaxed services in Utah.
The FairTax is still being studied in Utah, and no numbers have been generated to show how the tax would affect the state's revenues.
But that doesn't mean the tax doesn't have support.
Sen. Howard Stephenson, R-Draper, said the arguments for the FairTax are compelling.
"I'm convinced," Stephenson said Tuesday, adding that the FairTax doesn't require the public to reveal personal information to the federal government, such as how many people depend on him, how much he spends on medical care, how much he donates to charities and to whom.
"What business does the government have knowing any of this information?" Stephenson asked, calling it "patently offensive" that the government know that information. "That is reason enough alone to repeal the income tax."
Under the FairTax, providers of new goods and services would simply collect the 23 percent tax and pass it on to the federal government.
But some experts say the FairTax is regressive, because families with lower incomes spend a larger percentage of their earnings on goods and services, said Bryant Howe, assistant director of the Office of Legislative Research and General Counsel.
Other experts argue that the FairTax promotes savings and investment, Howe said.
Wright said the FairTax is a tax people want to have once they understand it.
It takes many of the burdens from small-business owners and increases their efficiency, Wright said.
Currently, California, Florida, Illinois, Michigan, New York, Ohio, South Carolina and Texas are studying how to apply the tax on a state level.
In Texas, where the most extensive study has begun, a 7.9 percent to 10.9 percent FairTax could replace state sales tax revenue and varying percentages of property tax revenueBut Utah would benefit more than Texas, Wright said, because Texas doesn't impose a state income tax. More information is available at fairtax.org.
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