John Gisler

Fair Tax, a spending alternative to the current federal income tax system, “is starting to get a little traction,” according to 10-year proponent John Gisler.

“You get to keep your whole paycheck,” he said of the tax reform proposal for the federal government that would replace all income taxes, including alternative minimum tax, corporate income taxes and capital gains taxes, payroll taxes (including Social Security and Medicare), gift taxes and estate taxes with a single broad national consumption tax on retail sales.

He said the concept introduced in Congress in 1999 originated with three Texas oilmen who wondered what a tax system built from scratch would look like compared to one they “detested.”

“They ponied up $22 million for research by some of the top economists and universities in the country,” he said.

“The time has come for tax reform,” Gisler, a former Kalamazoo County commissioner who retired from pharmaceuticals sales and marketing with Upjohn, told Niles-Buchanan Rotary Club Monday noon at Riverfront Café. “Fair Tax is an option that should be considered and debated, along with other options that are truly reformational and don’t just tweak what we’ve got.”

“It’s so simple, you don’t even file a form at the end of the year,” Gisler said. “You pay as you go as you make retail purchases through the year. It’s transparent. It shows up on every receipt. It’s completely nonpartisan; it’s apolitical. Even if you’re a little bit of a libertarian, as I am, you need a certain amount of government. It is designed to be revenue-neutral, or whatever it takes to run the government we’ve got now, let’s generate the same amount of money only in a different fashion. We’ll worry about cutting government down or expanding it in another discussion.”

Fundamental to the Fair Tax is the notion that only people pay taxes. Businesses don’t. At the garden center he patronizes in Kalamazoo, if it learns in the winter the cost of peat moss is going up, he’ll just pay more for potted plants next spring.

“The tax they pay is strictly a cost of doing business,” he said. “They pass it along to the consumer.

“Prices should stay essentially the same long-term because you are taking ‘embedded taxes’ in each price. If you buy a loaf of bread, every company and every individual along the way of putting that bread in the store embeds taxes in their cost of doing business. Farmers have to buy fertilizer, seed, tractor fuel, all with taxes embedded. Then it’s milled and someone trucks it to a bakery. The average for all classes of goods is 22 percent. You only pay these taxes when you buy new goods and services. Used cars are taxed only when they’re new. This is not a tax on productivity or investment,” Gisler said.

Investment is a broad term by Fair Tax standards, according to Gisler.

“Education for yourself or spouse is an investment in human capital. When we saved for our first home, there were taxes on our interest. That doesn’t reward productivity and saving. With the Fair Tax, taking a second job and earning extra income, nobody messes with it until you spend it.”

Taxing spending instead of earnings makes American businesses more competitive, according to Gisler who maintains the system would stimulate the economy and create jobs.

“It eliminates compliance costs,” Gisler said.

A family of four breadwinner making $20 an hour working 40-hour weeks grosses $800, pays 15 percent income tax, leaving take-home pay of $619.

On top of the untouched take-home pay would be the “prebate” around $121 a week “to untax you from the cost of your essentials. Under Fair Tax your buying power would be $921. It works out to about a 14 percent increase in spendable income. It’s spread broadly across all citizens. Everybody is treated equal.”

Gisler said opponents to the Fair Tax proposal are the 115,000 people employed by the IRS and the members of Congress.

“A lot of them don’t like the idea because their campaigns are supported by lobbyists currying tax favors,” Gisler said. “Your job’s superfluous as a tax adviser if every retail transaction takes care of what’s necessary to collect.”

Gisler, who has a bachelor’s degree in biology and chemistry  from Wabash College and a master’s degree in business administration from Syracuse University, for four years has headed the 60-member Kalamazoo County Citizens for Responsible Government.

“If you think this is a good idea — which I do — there are bills in the House of Representatives and Senate. Write, call or email your representatives and ask where they stand on it and  whether they will co-sponsor,” said Rotarian Paul Rifenberg, who arranged the speaker.

“The thing I like the most about the Fair Tax is the economic development potential that exists for all the businesses that go to the Cayman Islands or Denmark to take advantage of lower tax rates,” Rifenberg said.

“There’s somewhere between $11 trillion and $14 trillion sitting in Cayman Islands accounts and other tax havens, such as Switzerland, Gisler said.

“If U.S. corporate income tax went to zero, it would become the place to do business and people wouldn’t think twice before building that next plant somewhere in the U.S. Japan cut theirs to 25 percent Jan. 1. The average for 32 countries in the OECD (Organization for Economic Co-operation and Development) is 25 percent. We punish companies for doing business in the U.S. the way we tax them.”