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CNN Saturday Morning News

The Novak Zone -- Interview With John Linder

Aired July 26, 2003 - 09:30   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


THOMAS ROBERTS, CNN ANCHOR: Well, imagine if there was no more federal income tax, and you could keep your whole paycheck for yourself. Sounds pretty good, right? Well, that's being proposed by a Republican Congressman John Linder of Georgia, who joins Robert Novak in this week's edition of The Novak Zone.
(BEGIN VIDEOTAPE)

ROBERT NOVAK, HOST: Welcome to The Novak Zone. We're in the rotunda of the Cannon House Office Building on Capitol Hill, Washington, D.C., talking to Congressman John Linder, Republican of Georgia.

Congressman Linder, you had a letter to the editor of "The Wall Street Journal" this week with this headline, "Abolish the income tax and the IRS." How do you do that?

REP. JOHN LINDER (R), GEORGIA: Gone. Gone. Repeal the tax code, abolish the IRS, and replace it with national point-of-sale retail sales tax.

NOVAK: Now, people think of -- or would love to abolish the income tax. But they say, what happens to our army, what happens to our aircraft carrier, what happens to the national parks? Where do we get the money?

LINDER: We spent $22 million in research over the last seven years. And one of the things we discovered is that 22 percent of what you're currently paying for at retail is the embedded costs of the IRS. You're paying all the businesses that have touched that product, their income taxes, their payroll taxes, their accountants and attorneys to avoid the taxes.

If we were to abolish the IRS and let competition drive that cost out of the price system and replace it with a 23 percent embedded cost, your cost of living would go up 1 percent, it would raise the same amount of revenue we're raising today, but you'd be a voluntary taxpayer. You pay taxes when you choose, as much as you choose, by how you choose to spend.

NOVAK: Congressman, the young people work for this program are not very rich. They said 23 percent...

LINDER: They're currently paying...

ROBERTS: ... I wouldn't buy anything. LINDER: They're currently paying it, Bob. They're currently paying it. The prices would stay roughly the same, but they'd get to take their whole check home. And then to protect people up to the poverty line, we would give every household, rich or poor, a rebate check at the beginning of every month to totally rebate the tax consequences of spending up to the poverty line. Bill Gates would get it too.

NOVAK: How much would that be?

LINDER: Poverty level spending for a household of one is $9,000 a year. For a household of six, it's $30,000 a year, for a household of four, it's $24,500 a year. Those folks right now are losing 22 percent of the purchasing power to the embedded costs of the IRS today. They'd have a 22 percent increase in tax -- in purchasing power.

NOVAK: So what are the consequences for a middle-class family, we'll say $40,000, four people, what are the consequences of this?

LINDER: Depends on how they spend. If they live on the farm and grow their groceries, they'll live off the rebate. If they spend more than poverty level spending, they'll pay the 23 percent just like everyone else. But most importantly, everybody would be a voluntary taxpayer.

NOVAK: Do you have any apprehension, Congressman Linder, that somebody with an old clinker car will say, Boy, I'm not going to buy a car because I'm worried about that 23 percent tax?

LINDER: No, I'm not, because the average income earner is going to have a 56 percent increase in take-home pay the next day. They're going to have money in their pocket. We will have no taxes on used things. They might get rid of the clinker and buy another used car. No tax. We think everything should be taxed only one time. New houses would be taxed, just like new cars would be taxed.

But currently, our studies show that 28 percent of the costs of a new house is the embedded costs of the IRS. Plus, if you're earning $5,000 a month, you're only taking home $3,800. Under our system, you'd take home $5,000 a month, and interest rates would be lower.

NOVAK: Now, I have always felt that this kind of a tax reform, which I think is very interesting, will never go anywhere unless the guy who sits in the Oval Office pushes it. Do you agree with that?

LINDER: (UNINTELLIGIBLE), yes. This is a -- it requires a large national consensus, and the president's going have to speak out on it. But if the president speaks out favorably, and for the first time in his end of the year economic report, nine pages of that were dedicated to a consumption tax, to changing the system, to taxing people for what they take out of society, not what they put into it. And I think the president will come to it. And if he does, it will be a landslide victory.

NOVAK: Now, you have -- you started off, I think, as I remember, you just had you and Congressman Colin Peterson of Minnesota, Democrat. You have more co-sponsors now, don't you?

LINDER: We have about 32 co-sponsors. And I'm not working very hard to get co-sponsors. I'm working hard to convince the people to call their congressmen. I've done 500 talk-radio shows, I've done town meetings across the country. The public is ready for this. It's -- this -- the principal impediment to movement in this town is inertia. We need somebody to pull the starter gun, and it's got to be the president.

NOVAK: You have some of the House leadership with you on this?

LINDER: Tom DeLay.

NOVAK: The majority leader.

LINDER: The majority leader's on the bill. But more important than that, to me, is that the speaker has taken a keen interest in it. He wants me around the country, he wants to make it part of next year's House campaign agenda. He knows it will turn out votes. We won in 1994, spending the least amount of money we've ever spent, because we believed something. And 9 million additional voters turned out.

You tell them that you're going get rid of the IRS, and those 9 million folks will be back.

NOVAK: Milton Friedman, the great Nobel laureate, has always said we will never have comprehensive tax reform because of the relationship between the lobbyists and the members of the tax-writing committee. They give them the money, and the members of the committee make the tax act more complicated. How do you get around that?

LINDER: There is a growing consensus that the current system is irretrievably broken. We have 1 percent of the American people are paying 38 percent of all the taxes. The bottom 50 percent of Americans, earners, collectively pay 3 percent of all the taxes.

This is a system that can't continue to work. We can't even have more tax relief to create growth and create jobs, simply because too few people are paying taxes. We need to go to a system where everybody is treated the same.

NOVAK: And now for the big question.

Congressman Linder, you're a practical politician. You were head of the campaign committee at one time. You had a -- you ran a terrific campaign against a fellow Republican Congressman Bob Barr in the last election. When the people of America read in "The Wall Street Journal," abolish the income tax, abolish the IRS, when can they really expect that to happen, if ever?

LINDER: I don't think it's that far away. We're going to come to the conclusion that having a 22 percent tax component in our price system, when we're trying to export goods and services into a global economy, is just counterproductive. We can sell Caterpillar tractors overseas for 20 percent less and make the same profit. We'll change the world.

And I think the American people are going to come to this conclusion, but more importantly, the people in Washington are coming to this conclusion too. There's simply no opposition to it.

I believe in January the Farm Bureau, with 5 million family members, are going to endorse this bill. We're getting growing interest from all across the economy. There's very little opposition to it including CPAs. CPAs think this system is broken.

NOVAK: Congressman John Linder, thank you very much.

And thank you for being in The Novak Zone.

(END VIDEOTAPE)

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com







Aired July 26, 2003 - 09:30   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
THOMAS ROBERTS, CNN ANCHOR: Well, imagine if there was no more federal income tax, and you could keep your whole paycheck for yourself. Sounds pretty good, right? Well, that's being proposed by a Republican Congressman John Linder of Georgia, who joins Robert Novak in this week's edition of The Novak Zone.
(BEGIN VIDEOTAPE)

ROBERT NOVAK, HOST: Welcome to The Novak Zone. We're in the rotunda of the Cannon House Office Building on Capitol Hill, Washington, D.C., talking to Congressman John Linder, Republican of Georgia.

Congressman Linder, you had a letter to the editor of "The Wall Street Journal" this week with this headline, "Abolish the income tax and the IRS." How do you do that?

REP. JOHN LINDER (R), GEORGIA: Gone. Gone. Repeal the tax code, abolish the IRS, and replace it with national point-of-sale retail sales tax.

NOVAK: Now, people think of -- or would love to abolish the income tax. But they say, what happens to our army, what happens to our aircraft carrier, what happens to the national parks? Where do we get the money?

LINDER: We spent $22 million in research over the last seven years. And one of the things we discovered is that 22 percent of what you're currently paying for at retail is the embedded costs of the IRS. You're paying all the businesses that have touched that product, their income taxes, their payroll taxes, their accountants and attorneys to avoid the taxes.

If we were to abolish the IRS and let competition drive that cost out of the price system and replace it with a 23 percent embedded cost, your cost of living would go up 1 percent, it would raise the same amount of revenue we're raising today, but you'd be a voluntary taxpayer. You pay taxes when you choose, as much as you choose, by how you choose to spend.

NOVAK: Congressman, the young people work for this program are not very rich. They said 23 percent...

LINDER: They're currently paying...

ROBERTS: ... I wouldn't buy anything. LINDER: They're currently paying it, Bob. They're currently paying it. The prices would stay roughly the same, but they'd get to take their whole check home. And then to protect people up to the poverty line, we would give every household, rich or poor, a rebate check at the beginning of every month to totally rebate the tax consequences of spending up to the poverty line. Bill Gates would get it too.

NOVAK: How much would that be?

LINDER: Poverty level spending for a household of one is $9,000 a year. For a household of six, it's $30,000 a year, for a household of four, it's $24,500 a year. Those folks right now are losing 22 percent of the purchasing power to the embedded costs of the IRS today. They'd have a 22 percent increase in tax -- in purchasing power.

NOVAK: So what are the consequences for a middle-class family, we'll say $40,000, four people, what are the consequences of this?

LINDER: Depends on how they spend. If they live on the farm and grow their groceries, they'll live off the rebate. If they spend more than poverty level spending, they'll pay the 23 percent just like everyone else. But most importantly, everybody would be a voluntary taxpayer.

NOVAK: Do you have any apprehension, Congressman Linder, that somebody with an old clinker car will say, Boy, I'm not going to buy a car because I'm worried about that 23 percent tax?

LINDER: No, I'm not, because the average income earner is going to have a 56 percent increase in take-home pay the next day. They're going to have money in their pocket. We will have no taxes on used things. They might get rid of the clinker and buy another used car. No tax. We think everything should be taxed only one time. New houses would be taxed, just like new cars would be taxed.

But currently, our studies show that 28 percent of the costs of a new house is the embedded costs of the IRS. Plus, if you're earning $5,000 a month, you're only taking home $3,800. Under our system, you'd take home $5,000 a month, and interest rates would be lower.

NOVAK: Now, I have always felt that this kind of a tax reform, which I think is very interesting, will never go anywhere unless the guy who sits in the Oval Office pushes it. Do you agree with that?

LINDER: (UNINTELLIGIBLE), yes. This is a -- it requires a large national consensus, and the president's going have to speak out on it. But if the president speaks out favorably, and for the first time in his end of the year economic report, nine pages of that were dedicated to a consumption tax, to changing the system, to taxing people for what they take out of society, not what they put into it. And I think the president will come to it. And if he does, it will be a landslide victory.

NOVAK: Now, you have -- you started off, I think, as I remember, you just had you and Congressman Colin Peterson of Minnesota, Democrat. You have more co-sponsors now, don't you?

LINDER: We have about 32 co-sponsors. And I'm not working very hard to get co-sponsors. I'm working hard to convince the people to call their congressmen. I've done 500 talk-radio shows, I've done town meetings across the country. The public is ready for this. It's -- this -- the principal impediment to movement in this town is inertia. We need somebody to pull the starter gun, and it's got to be the president.

NOVAK: You have some of the House leadership with you on this?

LINDER: Tom DeLay.

NOVAK: The majority leader.

LINDER: The majority leader's on the bill. But more important than that, to me, is that the speaker has taken a keen interest in it. He wants me around the country, he wants to make it part of next year's House campaign agenda. He knows it will turn out votes. We won in 1994, spending the least amount of money we've ever spent, because we believed something. And 9 million additional voters turned out.

You tell them that you're going get rid of the IRS, and those 9 million folks will be back.

NOVAK: Milton Friedman, the great Nobel laureate, has always said we will never have comprehensive tax reform because of the relationship between the lobbyists and the members of the tax-writing committee. They give them the money, and the members of the committee make the tax act more complicated. How do you get around that?

LINDER: There is a growing consensus that the current system is irretrievably broken. We have 1 percent of the American people are paying 38 percent of all the taxes. The bottom 50 percent of Americans, earners, collectively pay 3 percent of all the taxes.

This is a system that can't continue to work. We can't even have more tax relief to create growth and create jobs, simply because too few people are paying taxes. We need to go to a system where everybody is treated the same.

NOVAK: And now for the big question.

Congressman Linder, you're a practical politician. You were head of the campaign committee at one time. You had a -- you ran a terrific campaign against a fellow Republican Congressman Bob Barr in the last election. When the people of America read in "The Wall Street Journal," abolish the income tax, abolish the IRS, when can they really expect that to happen, if ever?

LINDER: I don't think it's that far away. We're going to come to the conclusion that having a 22 percent tax component in our price system, when we're trying to export goods and services into a global economy, is just counterproductive. We can sell Caterpillar tractors overseas for 20 percent less and make the same profit. We'll change the world.

And I think the American people are going to come to this conclusion, but more importantly, the people in Washington are coming to this conclusion too. There's simply no opposition to it.

I believe in January the Farm Bureau, with 5 million family members, are going to endorse this bill. We're getting growing interest from all across the economy. There's very little opposition to it including CPAs. CPAs think this system is broken.

NOVAK: Congressman John Linder, thank you very much.

And thank you for being in The Novak Zone.

(END VIDEOTAPE)

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com