Replacing the International Revenue Service with a National Sales Tax

Floor Speech

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Mr. BURNS. Mr. Speaker, I thank the gentleman for yielding.

I would like to add my thanks to the gentleman from Georgia (Mr. Linder) for bringing this significant and important concept to the American people. It is time we have a change. The IRS has been a burden on all of us for too many years, and the fair tax offers us an opportunity to right a wrong that is long overdue.

I think it is interesting, if we look back historically, that when our Founding Fathers first developed the Constitution, an income tax was illegal. It was barred. It was not even accepted. It was universally disdained, and the wisdom of our Founding Fathers in the Constitution, article I, section 9, said, "No capitation, or other direct, tax shall be laid, unless in proportion to the census or enumeration herein before directed to be taken."

In 1787 they said no income tax. What happened? What happened?

Well, it appears that later on in the 1894 time frame, Congress came along and decided that they were going to tax income. They were going to suggest that we needed to generate some revenue and that we were going to unfortunately have to address this issue with an income tax; and Mr. Speaker, the income tax was a whopping 2 percent, 2 percent, flat tax. Two percent on incomes over $4,000, $4,000.

Mr. LINDER. Which is about the top 2 percent of incomes.

Mr. BURNS. Absolutely. So what we are going to do is tax only those people who make over $4,000, a king's ransom at that time, and unfortunately, at least for the Congress, they were trying to us e the existing Constitution. Because of its vagueness, the Supreme Court overturned it, said an income tax is unconstitutional. That led to the constitutional amendment in 1909 that fundamentally changed our tax system that we now struggle with today.

So I think it is interesting that if we went back to our Founding Fathers, they recognized the dangers of an income tax, and here we are in 2004 trying to say America, wake up. It is time.

Again, I thank the gentleman from Georgia for this visionary approach and the work that he has done in this environment, but we have talked about criminals and tax cheats and illegals who have an underground economy. Help the American people understand the challenge that we face just in that underground economy. Help them understand the numbers.

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Mr. BURNS. Mr. Speaker, I think it is important for the American people to understand that our current tax system does not provide all of those in our Nation the opportunity to contribute to our society; and the fair tax, a consumption-based tax, does just that. We all participate in a fair and equitable manner.

One of the biggest areas of concern is in the area of health ca9re and in the need to support Medicare and our Social Security retirement system and all of the things that are an essential part of what we are as America; but this fair tax, this tax would eliminate an income tax, Social Security tax, all Federal withholding taxes, is that correct?

Mr. LINDER. There would be no taxes on income whatsoever.

Mr. BURNS. One hundred percent of your gross income would be your net.

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Mr. BURNS. Mr. Speaker, if the gentleman will continue to yield, I think he is 100 percent right. One of the biggest challenges we face is the uninsured and the working uninsured, those individuals who would like insurance but, unfortunately, their incomes are taxed before they have the opportunity to buy the insurance. And if they are fortunate enough to have insurance coverage through an employer, there are certain incentives for the employer then to not be taxed on the contribution they make to their employees' insurance cove rage.

When we look at the current system, the current income tax system we have, I understand we are talking a 22 percent increase in the cost of everything we produce; is that correct?

Mr. LINDER. That is what we are currently paying for at retail.

Mr. BURNS. That is what we are currently paying for. So that means that Mexico and Brazil and the European Union and even Red China have a 22 percent advantage.

Mr. LINDER. Absolutely.

Mr. BURNS. An advantage over everything we produce.

Mr. LINDER. If we could lower the cost of production in Florida of fruits and vegetables b y 15 percent, Latin America could not compete with us. If we could lower it by 20 percent, we would blow them out of town.

Mr. BURNS. It is about fairness. It is about a fair, competitive, global environment. And right now the current income tax system is putting us at a severe disadvantage. The fair tax would relieve that, make that playing field more level, and more reasonable on an ongoing basis.

I am always amazed at the simplicity and the obviousness of a fair tax, a tax based on consumption. And again I will go back to our Founding Fathers and point out that they saw this even then. Even in the late 1700s, they recognized that taxing income was the wrong thing to do; that we need as a Nation to incentivize development and progress and investment and opportunity. Unfortunately, our current tax system does not provide those incentives.

Mr. Speaker, I would like to thank the gentleman for his leadership. I would like to thank him for his determination in ensuring that this message is brought to the American people and to this Congress. It is time we had a full debate. It is time that we had a full vetting of this issue, full discussions, and ultimately a vote in this body and certainly in the body across the way in the Senate. But, ultimately, the American people will benefit if they will understand the opportunities given within this fair tax proposal.

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Mr. Speaker, I rise to support the legislation of my friend and colleague Congressman John Linder of Georgia, the Fair Tax Act.

As this bill would enact a major and historic change in our system of federal taxation-one which would significantly alter the functioning of our economy-I think it important to review how we got to the system of income tax that we have today.

The founders of this country barred the federal government from enacting income taxes in the Constitution proper.

"No Capitation, or other direct, Tax shall be laid, unless in proportion to the Census or Enumeration herein before directed to be taken."-U.S. Constitution, Article 1, Section 9 (1787).

We need to consider the full implication of the importance of this ban being placed where it was in our Constitution.

All of the liberties outlined in our famous Bill of Rights-the right of free speech, worship, the right to bear arms, the right against unreasonable search and seizure-all were added to the Constitution after-the-fact, as Amendments.

Many of the founders felt that the Bill of Rights was unnecessary, as the Constitution didn't give the federal government the power to control the mentioned liberties to start with.

The primary authors were legal and policy purists. They thought it would be redundant and confusing to add Amendments barring the federal government from doing what it had no legal authority to do.

They also sensed more than a little danger to their liberties by doing so, since whatever freedoms and protections were not specifically addressed might be considered up for grabs by future power-hungry bureaucrats.

Without going on for hours concerning the original debate over the Bill of Rights, I believe most historians will agree on the essence of the discussion.

The winning side argued that if the provisions really weren't necessary, then it wouldn't hurt to add them, just to reinforce the fact that the federal government had no power to tamper with these rights.

The point of bringing this up is that the Founders of our nation, those who devised our entire system of government, actually argued with great passion over whether to pass the revered Bill of Rights, which are now copied and emulated worldwide as detailing the basic rights of mankind.

Yet these same founders had no such question over an income tax.

They were so fundamentally opposed to the concept it was banned by universal agreement, specifically, in the First Article of the Constitution itself. Did our Founders view the income tax as a greater threat to liberty than the lack of a Bill of Rights? I believe they did, and that's why we find that ban in our original Constitution.

The governmental powers necessary to enforce an income tax, and the individual rights and freedoms implied and detailed in our Constitution, simply cannot logically co-exist. The Constitution gave no power to the government to conduct unreasonable search and seizure, but that power would have been implied as a necessary enforcement tool to collect an income tax. The only way income taxes can be enforced is through opening every home in America to search both physically and electronically.

The Constitution gave no power to the government to force people to be a witness against themselves. But that power would have been implied as a necessary enforcement tool to collect an income tax. Every American would have to be required to file potentially incriminating documents to prove their income.

Further, a tax on income threatened to turn Americans against each other, and ultimately dest roy our free-market economy, and all our liberties in the process.

All those with smaller incomes could be tempted to use their democratic vote to simply seize the incomes of anyone with more money than themselves. In short order there would be no financial incentive for anyone to seek to create new wealth, and our economy would be identical to the former Soviet Union's-poverty for all.

In addition, there would be no natural check on excessively high and confiscatory tax rates.

Many of the founders, who were strong advocates of the principles of Natural Law, felt that all governmental systems should have natural restraints built into their structure.

Alexander Hamilton wrote in Federalist Paper 22 in 1787:

It is a signal advantage of taxes on articles of consumption that they contain in their own nature a security against excess. .....

If duties are too high, they lessen the consumption; the collection is eluded; and the product to the Treasury is not so great as when they are confined within proper and moderate bounds.

If we fund our government with taxes paid equally by all, every American is infinitely aware of tax increases and high rates.

They have within their individual power the ability to legally avoid or lessen those taxes by spending as little as possible. That's precisely why unfortunately a big-spending peacetime Congress in 1894 tried to adopt an income tax as a way to raise taxes, without the majority of the voters feeling it.

They came up with a two percent flat tax on incomes over $4,000, which was a very large income at the time, and argued that the restriction in the Constitution was sufficiently vague to allow their pernicious scheme to survive.

Within a year, the Supreme Court held income tax unconstitutional as an unapportioned direct tax. But the spending appetite of an industrial-age Congress could not be whetted by the wisdom of the founders. In one of the few cases in history of Congress rising to overturn a Supreme Court decision, Congress passed an Amendment in 1909 to reverse the foundational decision of Jefferson, Hamilton, Madison, and Jay.

By 1913, a sufficient number of states having been persuaded that this new tax would only affect a tiny percentage of Americans with extreme wealth-and not their voters-had brought the sixteenth amendment into law, and removed all limitations on the imposition of federal income taxes.

"The Congress shall have the power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumer ation."--16th Amendment to the Constitution as passed by Congress in 1909, and ratified by the states in 1913.

Congress immediately passed a federal income tax with low rates that affected only a few people with very high incomes. In the early days, it was considered a status symbol to have to pay income tax, as only the wealthiest had to pay.

But over time, the rates changed to shift the burden increasingly to lower income Americans, to a point in recent years in which people at the low]st incomes still pay high federal taxes, and the middle class shouldered the largest share of out-of-control federal spending.

We reversed a little of that with the tax cuts this Congress has enacted since 1994, but not nearly enough. In fact, just as the founders envisioned, it has become increasingly difficult to enact any significant reform, as the cry immediately arises, "tax breaks for the rich."

This evil system has indeed pitted American against American.

But it has done far more damage than even the moral decay based on economic envy envisioned by our founders.

It is now undermining our health care system, our manufacturing base, even our ability to feed and clothe our families.

It is allowing criminals, tax cheats, and illegal immigrants to live tax-free lives of opulence, while middle-income, two-wage earner families, no longer can save for their children's college or their own retirement. And it has created a federal agency-the Internal Revenue Service-that far too often has shown sniveling contempt for the basic natural rights of mankind, when dealing with their fellow Americans.

We have created an income tax system which adds 22 percent to the cost of every thin g we make in this country-a whopping 22 percent advantage in international trade for Mexico, Brazil, Europe, and most notably, Red China. Dump this tax, and our sorely-pressed manufacturing and agribusiness sectors can once again start competing on a semi-level field.

Illegal immigrants enter our country, earn cash, and pay no taxes, as they report to no one, leaving law-abiding Drug dealers and pimps earn fortunes tax-free, leaving single-parent working class homes to pay their share of our federal tax burden.

The very wealthiest Americans, and the wealthiest corporations-a legal entity which did not even exist during our Founder's Day-can and do avoid paying any federal taxes through the system of credits and write-offs created over the decades since 1913, as incentives for any number of things former Congress's at one time or another wished to encourage. Nowhere have those income tax incentives wreaked more havoc than in health care.

Corporate America is given a free tax ride on everything they spend on health insurance, while the waitress making $25,000 and having to buy her own policy is taxed on her premiums.

As a matter of fact, she's taxed on what she spends directly on health care, up to seven-and-a-half percent of her income, while the corporate executive making $100 million a year gets his top-of-the-line, zero deductible health insurance benefits tax-free. All while the tax-subsidized health insurance industry subsidizes the spiraling cost of health care, driving more and more middle-income Americans into the ranks of the uninsured, with second rate care at best.

We inherited this system of travesty and tragedy. We should remember how it came about-by a foolish Congress overriding the foundational principles laid down at our Nation's birth.

That foundation was built of the carefully constructed tenets of republican dem ocracy, designed to overcome the historical failure of previous systems of direct democracy. Every other attempt down through history came unraveled once the populace learned they could vote themselves largesse at the expense of others.

Our founders protected us against that evil, with one of the only direct restrictions in our Constitution.

The Congress of 1909, a Congress of a new century, faced conditions they believed outdated the quaint freedoms in such high regard by the first Congress. So they robbed us of that political inheritance. We are a Congress of a new century as well, and I believe our great challenge is the restoration of the individual freedoms and protections of our Constitution, in the face of new and challenging national and global economic conditions.

Freedom and fairness is never outdated. Surely, economic conditions and needs change from one generation to the next.

But I believe it is the duty of this body to faithfully and accurately translate the historic freedoms of this Nation into the economic language of the day-not to cast aside the very principles to which we owe our national wealth. Mr. Speaker, Congressman LINDER's bill restores the freedoms that have lain trampled and forgotten for nearly a century.

It will provide the economic seed for a rebirth of American manufacturing, farming, health care, and fairness.

It will begin the healing process from the injury and division sown in the past by pitting Americans against each other, resulting in devastating economic damage among those with the least.

Mr. Speaker, this bill deserves consideration at every committee level, and it deserves a fair vote in this body and the Senate. I urge my fellow Members to support that consideration, and support this bill.

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Mr. BURNS. Mr. Speaker, I thank the gentleman for yielding.

I would like to add my thanks to the gentleman from Georgia (Mr. Linder) for bringing this significant and important concept to the American people. It is time we have a change. The IRS has been a burden on all of us for too many years, and the fair tax offers us an opportunity to right a wrong that is long overdue.

I think it is interesting, if we look back historically, that when our Founding Fathers first developed the Constitution, an income tax was illegal. It was barred. It was not even accepted. It was universally disdained, and the wisdom of our Founding Fathers in the Constitution, art icle I, section 9, said, "N o capitation, or other direct, tax shall be laid, unless in proportion to the census or enumeration herein before directed to be taken."

In 1787 they said no income tax. What happened? What happened?

Well, it appears that later on in the 1894 time frame, Congress came along and decided that they were going to tax income. They were going to suggest that we needed to generate some revenue and that we were going to unfortunately have to address this issue with an income tax; and Mr. Speaker, the income tax was a whopping 2 percent, 2 percent, flat tax. Two percent on incomes over $4,000, $4,000.

BREAK IN TRANSCRIPT

Mr. BURNS. Absolutely. So what we are going to do is tax only those people who make over $4,000, a king's ransom at that time, and unfortunately, at least for the Congress, they were trying to use the existing Constitution. Because of its vagueness, the Supreme Court overturned it, said an income tax is unconstitutional. That led to the constitutional amendment in 1909 that fundamentally changed our tax system that we now struggle with today.

So I think it is interesting that if we went back to our Founding Fathers, they recognized the dangers of an income tax, and here we are in 2004 trying to say America, wake up. It is time.

Again, I thank the gentleman from Georgia for this visionary approach and the work that he has done in this environment, but we have talked about criminals and tax cheats and illegals who have an underground economy. Help the American people understand the challenge that we face just in that underground economy. Help them understand the numbers.

BREAK IN TRANSCRIPT

Mr. BURNS. Mr. Speaker, I think it is important for the American people to understand that our current tax system does not provide all of those in our Nation the opportunity to contribute to our society; and the fair tax, a consumption-based tax, does just that. We all participate in a fair and equitable manner.

One of the biggest areas of concern is in the area of health care and in the need to support Me dicare and our Social Security retirement system and all of the things that are an essential part of what we are as America; but this fair tax, this tax would eliminate an income tax, Social Security tax, all Federal withholding taxes, is that correct?

Mr. LINDER. There would be no taxes on income whatsoever.

Mr. BURNS. One hundred percent of your gross income would be your net.

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