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S. 1494 (is) To ensure that small businesses throughout the United States participate fully in the unfolding electronic commerce revolution through the establishment of an electronic commerce extension program at the National Institutes of Standards and T...

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  1st Session
                                S. 1493

To promote freedom, fairness, and economic opportunity by repealing the 
 income tax and other taxes, abolishing the Internal Revenue Service, 
 and enacting a national sales tax to be administered primarily by the 



                July 30 (legislative day, July 21), 2003

 Mr. Chambliss introduced the following bill; which was read twice and 
                  referred to the Committee on Finance


                                 A BILL

To promote freedom, fairness, and economic opportunity by repealing the 
 income tax and other taxes, abolishing the Internal Revenue Service, 
 and enacting a national sales tax to be administered primarily by the 

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,


    (a) Short Title.--This Act may be cited as the ``Fair Tax Act of 
    (b) Table of Contents.--The table of contents for this Act is as 

Sec. 1. Short title; table of contents.
Sec. 2. Congressional findings.

Sec. 101. Income taxes repealed.
Sec. 102. Payroll taxes repealed.
Sec. 103. Estate and gift taxes repealed.
Sec. 104. Conforming amendments; effective date.
                      TITLE II--SALES TAX ENACTED

Sec. 201. Sales tax.
Sec. 202. Conforming and technical amendments.
                        TITLE III--OTHER MATTERS

Sec. 301. Phase-out of administration of repealed Federal taxes.
Sec. 302. Administration of other Federal taxes.
Sec. 303. Sales tax inclusive Social Security benefits indexation.


    (a) Findings Relating to Federal Income Tax.--Congress finds the 
Federal income tax--
            (1) retards economic growth and has reduced the standard of 
        living of the American public;
            (2) impedes the international competitiveness of United 
        States industry;
            (3) reduces savings and investment in the United States by 
        taxing income multiple times;
            (4) slows the capital formation necessary for real wages to 
        steadily increase;
            (5) lowers productivity;
            (6) imposes unacceptable and unnecessary administrative and 
        compliance costs on individual and business taxpayers;
            (7) is unfair and inequitable;
            (8) unnecessarily intrudes upon the privacy and civil 
        rights of United States citizens;
            (9) hides the true cost of government by embedding taxes in 
        the costs of everything Americans buy;
            (10) is not being complied with at satisfactory levels and 
        therefore raises the tax burden on law abiding citizens; and
            (11) impedes upward social mobility.
    (b) Findings Relating to Federal Payroll Taxes.--Congress finds 
further that the Social Security and Medicare payroll taxes and self-
employment taxes--
            (1) raise the cost of employment;
            (2) destroy jobs and cause unemployment; and
            (3) have a disproportionately adverse impact on lower 
        income Americans.
    (c) Findings Relating to Federal Estate and Gift Taxes.--Congress 
finds further that the Federal estate and gift taxes--
            (1) force family businesses and farms to be sold by the 
        family to pay such taxes;
            (2) discourage capital formation and entrepreneurship;
            (3) foster the continued dominance of large enterprises 
        over small family-owned companies and farms; and
            (4) impose unacceptably high tax planning costs on small 
        businesses and farms.
    (d) Findings Relating to National Sales Tax.--Congress finds 
further that a broad-based national sales tax on goods and services 
purchased for final consumption--
            (1) is similar in many respects to the sales and use taxes 
        in place in 45 of the 50 States;
            (2) will promote savings and investment;
            (3) will promote fairness;
            (4) will promote economic growth;
            (5) will raise the standard of living;
            (6) will increase investment;
            (7) will enhance productivity and international 
            (8) will reduce administrative burdens on the American 
            (9) will improve upward social mobility; and
            (10) will respect the privacy interests and civil rights of 
    (e) Findings Relating to Administration of National Sales Tax.--
Congress further finds that--
            (1) most of the practical experience administering sales 
        taxes is found at the State governmental level;
            (2) it is desirable to harmonize Federal and State 
        collection and enforcement efforts to the maximum extent 
            (3) it is sound tax administration policy to foster 
        administration and collection of the Federal sales tax at the 
        State level in return for a reasonable administration fee to 
        the States; and
            (4) businesses that must collect and remit taxes should 
        receive reasonable compensation for the cost of doing so.
    (f) Findings Relating to Repeal of Present Federal Tax System.--
Congress further finds that the 16th amendment to the United States 
Constitution should be repealed.



    Subtitle A of title 26 of the Internal Revenue Code of 1986 
(relating to income taxes and self-employment taxes) is repealed.


    (a) In General.--Subtitle C of title 26 of the Internal Revenue 
Code of 1986 (relating to payroll taxes and withholding of income 
taxes) is repealed.
    (b) Funding of Social Security.--For funding of the Social Security 
Trust Funds from general revenue, see section 201 of the Social 
Security Act (42 U.S.C. 401).


    Subtitle B of title 26 of the Internal Revenue Code of 1986 
(relating to estate and gift taxes) is repealed.


    (a) Conforming Amendments.--The Internal Revenue Code of 1986 is 
            (1) by striking subtitle H (relating to financing of 
        Presidential election campaigns), and
            (2) by redesignating--
                    (A) subtitle D (relating to miscellaneous excise 
                taxes) as subtitle B,
                    (B) subtitle E (relating to alcohol, tobacco, and 
                certain other excise taxes) as subtitle C,
                    (C) subtitle F (relating to procedure and 
                administration) as subtitle D,
                    (D) subtitle G (relating to the Joint Committee on 
                Taxation) as subtitle E,
                    (E) subtitle I (relating to the Trust Fund Code) as 
                subtitle F,
                    (F) subtitle J (relating to coal industry health 
                benefits) as subtitle G, and
                    (G) subtitle K (relating to group health plan 
                portability, access, and renewability requirements) as 
                subtitle H.
    (b) Redesignation of 1986 Code.--
            (1) In general.--The Internal Revenue Code of 1986 enacted 
        on October 22, 1986, as heretofore, hereby, or hereafter 
        amended, may be cited as the ``Internal Revenue Code of 2003''.
            (2) References in laws, etc.--Except when inappropriate, 
        any reference in any law, Executive order, or other document--
                    (A) to the Internal Revenue Code of 1986 shall 
                include a reference to the Internal Revenue Code of 
                2003, and
                    (B) to the Internal Revenue Code of 2003 shall 
                include a reference to the provisions of law formerly 
                known as the Internal Revenue Code of 1986.
    (c) Additional Amendments.--For additional conforming amendments, 
see section 202 of this Act.
    (d) Effective Date.--Except as otherwise provided in this Act, the 
amendments made by this Act shall take effect on January 1, 2005.

                      TITLE II--SALES TAX ENACTED


    (a) In General.--The Internal Revenue Code of 2003 is amended by 
inserting before subtitle B (as redesignated by section 104(a)(2)(A)) 
the following new subtitle:

                        ``Subtitle A--Sales Tax

``Sec. 1. Principles of interpretation.
``Sec. 2. Definitions.
``Chapter 1. Interpretation; definitions; imposition of tax; etc.
``Chapter 2. Credits; refunds.
``Chapter 3. Family consumption allowance.
``Chapter 4. State and Federal cooperative tax administration.
``Chapter 5. Other administrative provisions.
``Chapter 6. Collection; appeals; taxpayer rights.
``Chapter 7. Special rules.
``Chapter 8. Financial intermediation services.
``Chapter 9. Additional matters.


    ``(a) In General.--Any court, the Secretary, and any sales tax 
administering authority shall consider the purposes of this subtitle 
(as set forth in subsection (b)) as the primary aid in statutory 
    ``(b) Purposes.--The purposes of this subtitle are as follows:
            ``(1) To raise revenue needed by the Federal Government in 
        a manner consistent with the other purposes of this subtitle.
            ``(2) To tax all consumption of goods and services in the 
        United States once, without exception, but only once.
            ``(3) To prevent double, multiple, or cascading taxation.
            ``(4) To simplify the tax law and reduce the administration 
        costs of, and the costs of compliance with, the tax law.
            ``(5) To provide for the administration of the tax law in a 
        manner that respects privacy, due process, individual rights 
        when interacting with the government, the presumption of 
        innocence in criminal proceedings, and the presumption of 
        lawful behavior in civil proceedings.
            ``(6) To increase the role of State governments in Federal 
        tax administration because of State government expertise in 
        sales tax administration.
            ``(7) To enhance generally cooperation and coordination 
        among State tax administrators; and to enhance cooperation and 
        coordination among Federal and State tax administrators, 
        consistent with the principle of intergovernmental tax 
    ``(c) Secondary Aids to Statutory Construction.--As a secondary aid 
in statutory construction, any court, the Secretary, and any sales tax 
administering authority shall consider--
            ``(1) the common law canons of statutory construction;
            ``(2) the meaning and construction of concepts and terms 
        used in the Internal Revenue Code of 1986 as in effect before 
        the effective date of this subtitle; and
            ``(3) construe any ambiguities in this Act in favor of 
        reserving powers to the States respectively, or to the people.


    ``(a) In General.--For purposes of this subtitle--
            ``(1) Affiliated firms.--A firm is affiliated with another 
        if 1 firm owns 50 percent or more of--
                    ``(A) the voting shares in a corporation, or
                    ``(B) the capital interests of a business firm that 
                is not a corporation.
            ``(2) Conforming state sales tax.--The term `conforming 
        State sales tax' means a sales tax imposed by a State that 
        adopts the same definition of taxable property and services as 
        adopted by this subtitle.
            ``(3) Designated commercial private courier service.--The 
        term `designated commercial private courier service' means a 
        firm designated as such by the Secretary or any sales tax 
        administering authority, upon application of the firm, if the 
                    ``(A) provides its services to the general public,
                    ``(B) records electronically to its data base kept 
                in the regular course of its business the date on which 
                an item was given to such firm for delivery, and
                    ``(C) has been operating for at least 1 year.
            ``(4) Education and training.--The term `education and 
        training' means tuition for primary, secondary, or 
        postsecondary level education, and job-related training 
        courses. Such term does not include room, board, sports 
        activities, recreational activities, hobbies, games, arts or 
        crafts or cultural activities.
            ``(5) Gross payments.--The term `gross payments' means 
        payments for taxable property or services, including Federal 
        taxes imposed by this title.
            ``(6) Intangible property.--
                    ``(A) In general.--The term `intangible property' 
                includes copyrights, trademarks, patents, goodwill, 
                financial instruments, securities, commercial paper, 
                debts, notes and bonds, and other property deemed 
                intangible at common law. The Secretary shall, by 
                regulation resolve differences among the provisions of 
                common law of the several States.
                    ``(B) Certain types of property.--Such term does 

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