Americans For Fair Taxation - The Fair Tax

LINDER ANNOUNCES RECORD 60 CO-SPONSORS FOR FAIRTAX BILL

2007-05-08T20:11:00.000-07:00

Washington, D.C. - Congressman John Linder (GA-07) announced today that his revolutionary tax reform legislation, the FairTax, achieved 60 co-sponsors, which is a record number for H.R. 25.

“I am ecstatic, but I have to say, I am not terribly surprised. This has been the case all year. Grassroots support across the nation is motivating Members to call us up and ask for information on the FairTax, and when they read it they are always eager to put their name on the bill.”

Congressman Linder pointed out that the FairTax is the most highly co-sponsored piece of tax reform legislation in U.S. House of Representatives. In fact, the Flat Tax, which is the only other serious piece of tax reform legislation in the U.S. House of Representatives, falls far short of that number with only four.

“Again, I am just not surprised. In fact, this past Saturday I traveled to Macon, Georgia, to speak to another FairTax training session. They had around 50 people come out for several hours, on a Saturday, to learn how they can better educate others on the FairTax. That is real passion, and it is real traction, and I think that is what you see reflected in this incredible list of co-sponsors.”

Congressman Linder also expressed his appreciation to Representatives Darrell Issa (CA-49) and John Boozman (AR-03) for being the most recent cosponsors of H.R. 25, and for surpassing the bill’s highest number of co-sponsors in merely the first four months of the 110th Congress.

Fair Tax for Senior Citizens

2006-04-06T18:09:00.000-07:00

You have worked for many, many years and get a pension every month. Under the current tax plan you are taxed on the entire amount you received through the year. If you had a pension of $1000 a month (and I hope it was much more than that), you will be taxed on $12,000. I did my dad's taxes for several years and was appalled that his pension was taxed as income.

Maybe you worked for years and have a sizeable IRA. When you withdraw that money you will be taxed (unless you put that IRA into a Roth account, but most people have traditional IRA's). As I understand it, after a certain age, you will be penalized for not withdrawing a specific amount. I have heard that there is a 50% penalty if you fail to withdraw enough money after age 70.5. So you are both taxed and penalized for wanting to save your own money!

If you are lucky enough to have stocks and/or bonds you are taxed on the capital gains when you sell those stock. Let's say you sell stocks to pay for a medical procedure or you want to take a vacation; maybe you see your stock going down and want to get out ahead - the reason doesn't matter. You will be taxed on those funds. If you put the proceeds of that sale in your savings account you will be taxed at the end of the year. And you will pay taxes on that savings as long as you have a savings account.

Let's think about this scenario: your spouse passes away and you decide to move to a smaller house. You have a small mortgage (or maybe no mortgage at all) and thanks to today's real estate market you have a sizeable amount in proceeds that you put in the bank. It's for you "old age" or for a rainy day or whatever. Good for you! But. Uncle Sam requires that your declare each year how much you have in savings as part of your tax return. And you will pay taxes on that savings as long as you have a savings account. Ever hear that before?

The Fair Tax treats each of these instances the same way. You only pay taxes when you make a purchase. Your pension hits the bank on the 1st of the month. You will pay taxes on what you buy that month. Let's say your pension is $1000. If you spend $500 you are "taxed" on that $500. The tax is paid then and there, not at the end of the year (or rather when you file your taxes).

Under the Fair Tax, you don't pay tax on your pension, you don't pay taxes on stock sales, you don't pay taxes on the proceeds of the sale of your house, you don't pay taxes on your savings account or withdrawals from your IRA.

You will also receive, untaxed until used to buy new goods or services, a prebate each and every month based on the number of people in your household. Not based on your income or marital status, but on the size of your household. As a senior, you will receive a smaller prebate than a young couple with a couple of kids, but then, you will not be spending as much for the basic necessities of life.

As a person looking down the barrel of senior citizenhood, this is a no-brainer.

What About Me?

2006-04-02T17:14:00.000-07:00

What About Me?
By Bill Rollyson

When discussing the FairTax with most Americans, this is the underlying question many of them have. In most cases, the answer is that the FairTax is better for them than the current system.

But another question should be asked first. “What about me” in comparison to what? Usually the question is asked in relation to their current circumstances. Unfortunately, these current circumstances are based on twin fantasies of continued economic prosperity and freedom under the current system. As Bill Gross, well known bond fund manager of the PIMCO funds observed, “250 million Americans sitting around thinking up ways for the rest of the world tosupport us is not my idea of a real world outcome.” Or as Kent Conrad, a Democratic senator from North Dakota, points out, "We're not preparing for what we all know is to come,” We’re all sleepwalking through this period."

“I just came from a panel with Alice Rivlin of Brookings and Bob Bixby from the Concord Coalition and we couldn’t stop agreeing on the long term budget danger”, stated Brian Riedl, chief budget analyst at the conservative Heritage Foundation in February 2006 (as reported in the Boston Globe).

And so it is. Whether from the left or the right, there is broad agreement we are on a path that is unsustainable. As David Walker at GAO stated in November 2005, “"We face a demographic tsunami" that "will never recede.” And more recently, “Our current course doesn't just threatenour future economy and quality of life, but also our long-term national security.

”So first, let’s understand, the FairTax should be compared to the reality of the current path we are on, not the fantasy that lays on the surface. Think you have some special break under the current tax system? Unless you are a global company, it won’t last. Even if you can move globally, you leave family, friends, and fellow co-workers behind to face the consequences of our selfishness.

So I want to focus on issues other than those initially brought up by the “what about me” crowd. The FairTax has five qualities that every freedom loving American should embrace.

Change in Direction: I mention this one first because it is answers the issues raised above. The FairTax ends the myth of corporate taxation and makes American companies competitive in world markets.

As John F. Kennedy once said, “The great enemy of the truth is very often not the lie –deliberate, contrived and dishonest, but the myth, persistent, persuasive, and unrealistic. Belief in myths allows the comfort of opinion without the discomfort of thought."

The FairTax increases savings, and production and makes America the tax haven of the world. It increases opportunity for Americans. It funds promised benefits with a much broader and more stable base. It stops our drive off the cliff of economic insanity.

Control: Under any income tax system, your entire financial life must pass through a government filter before you have any control. Even if you falsely believe the current system or a flat income tax system would leave you paying no taxes, you must still report your income sources and expenditures to government. Under the FairTax, all your personal earnings from whatever source run through your control first. You decide what runs through the government filter by your own buying choices. Which is more consistent with a free society?

Visibility: Instead of a maze of illusion that leaves over 40% of Americans thinking government is free, the cost of Government will be equally visible to all under the bright lights of the retailregister.

Equality: The FairTax ends the division of Americans through the tax code. The prebate makes it progressive. Combined with the end of payroll taxes, it is even more progressive than the current system. Yet it treats all Americans equally. The prebate is the same for everyone regardless of income. It is based only on family size. The tax rate on consumption and the items subject to it are the same for everyone.

Accountability: Our current tax system leads to a largely unaccountable political system, regardless which political party is in power. Because it allows politicians to hide the cost of government from a very large percentage of voters and divide the rest into subgroups, there is greater motivation to enlarge government than to control it. The FairTax changes this. It unites Americans in holding government accountable.

The FairTax enhances our economic viability. It passes down a continued legacy of freedom to future generations of Americans.

Inaction will lead to higher interest rates, lower wages, shrinking pensions, slower economic growth, a lesser standard of living, higher taxes in the future for today's younger generation, less savings, more consumption, plunging stock and bond prices, recession, confiscation of assets to pay off debt, and instability.

While the problems above are recognized across party lines, solutions come in three packages. 1)A more socialistic society. The Government takes greater control of wealth and assets to pay off debt and spreads remaining resources among the people, 2) increased future taxes and lower future benefits for all Americans across the board, or 3) an immediate change in our policies that encourages US economic growth, personal savings and investment – this is what the FairTax does.

What about me? As John F. Kennedy said in his inaugural address on January 20th, 1961, “And so, my fellow Americans; ask not what your country can do for you – ask what you can do for your country.” Forty-Five years later, what we must do for the country and future generations should be clear.

Visit www.fairtax.org and educate yourself. Then join with us in passing the FairTax. In the end, you’re likely to find it was also the best thing you could do for yourself.

By Bill Rollyson

Illegal Immigration and the FairTax

2006-03-27T07:32:00.000-08:00

This article is great to point to many facts. However, one thing that is left out is that the illegal immigrants in this country now do not pay any income tax through their "under the table" wages. Therefore, if we enact the FairTax, they will be able to pay for the services that are being redistributed to them, already.

March 27, 2006
Illegal Immigration and the Fair Tax
By: Marcus Everett

With all the debate going on about what to do about illegals who have invaded this country by the millions, no one seems to have addressed the connection between the illegal worker problem and our tax laws. Whereas most Americans agree that something drastic must be done to secure our borders from terrorist threats, there is considerable disagreement about how to solve the problem of illegals who are here only to find gainful employment. This debate is further fueled by the claim that these illegals are necessary to do jobs that Americans are unwilling to do, and therefore are necessary to the economic health of the U.S.

What seems missing in the ongoing discussions of all this is the role our tax system plays in the matter. The current U.S. tax system is centered primarily around the income tax, which is a significant factor in making the U.S. citizen or even the legal immigrant at a distinct disadvantage to the undocumented illegal worker. I haven't seen an analysis as to how much more a documented legal employee costs a company than an undocumented cash worker, but I would guess it is at least double. Not only does the employee have to get a higher wage to cover his income tax, but the employer is hit with payroll taxes, health benefits costs, union labor costs and the administrative costs of compliance with all of these. This burden prices the American worker out of the picture, whether or not he is willing to do the more menial jobs.

Any careful analysis of the problem points to the income tax as the major culprit. Compliance requires draconian measures by the tyrrannical IRS, and as has been pointed out just recently, there is still a hugh hole in the bucket. Add to this the fact that the income tax does put the U.S. worker at a decided disadvantage to not only the illegal immigrant, but to most of the foreign workers in third world countries, and one can see why outsourcing and moving company production facilities offshore is so rampant. American worker productivity may still be better than most foreign competitors, but in the global market that advantage is offset by the tax burden.

The obvious answer to all this is a consumption tax in lieu of the income tax. NOT a flat tax, nor a combination of income and consumption taxes, but a complete rejection of the income tax as an acceptable mechanism for funding government. And, as the title of this tirade implies, there is a movement gathering momentum to do just that. Google 'Fair Tax' and do your homework. And in the process, consider how much the illegal immigrant worker problem would be improved if the American worker could compete with them on a more equal footing.

marcus.everett@citlink.net

Fair Tax Tidbit

2006-02-14T19:08:00.000-08:00

I heard on the Neal Boortz radio show today that Congressman John Linder was told (I'm not sure who it was, the CEO or other ranking corporate official of an unnamed national retail outlet) that if the FairTax is ever passed, they would begin advertising that they would reduce their prices by 22% on January 1, the day that the FairTax goes into effect.

Now, I don't know what national retail coporation this was, but let's play a little game here. If, for example, Wal-Mart, were to announce that they were reducing prices by 22%, do you think that it's competitors would continue to charge the same prices they are currently charging? Hardly. It's called competition, it's part of capitalism and free-trade and it's a good thing.

Seven states do not have a state income tax. They operate on a state sales tax and it works. I know this to be true because my state of Florida works under a state sales tax - there is no state income tax. And it works so well that Governor Bush wants to give every homeowner in the state a $100 bonus this year. It's being debated; some want to put the money back into the state in the form of roads and infrastructure. Perhaps a noble endeavor, but I think the state would be better off giving me $100 than putting it into a highway project.

I don't know about you, but if I got an extra $100 I would spend it. it would go back into the economy and generate more revenue for the State. Yes, fixing the roads is a good thing, but it won't return money to the State coffers like giving it to the citizens would. You see, chances are I won't spend just $100 at (name the retailer of your choice). More than likely, I would spend another $50 to $100 or more.

During the tax holidays (hurricane preparation items and back-to-school), the state makes money. Not on those items that are excluded from taxes during that period, but on items that are not exempted. Have you ever gone to a store and bought exactly what you planned and no more? Sure it happens, but I believe it's rare.

So the bottom line, as far as I'm concerned: FairTax? It's a good thing.

Mr. President, My Wish for 2006; Make America Decide !

2005-12-31T06:44:00.000-08:00

As Americans we say good-bye to 2005 and look to the future in 2006, we know the President will continue to lead boldly on all fronts of the War on Terror but my wish for 2006 is to focus on the Country’s Domestic Agenda.

Where America Debates but America also makes a Decision.
On Tax Reform ( Fair Tax, Flat Tax, or Tax Panel Report); On Border Security ( Guest Worker, Federal Crime status, Border Fence, Employer Enforcement ); On Social Security and Medicare Entitlement( Raise the payroll tax, Means Test, Tier 2 Solution and the Fair Tax)

The President will be preparing his 2006 State of the Union Address in which the following items should be debated and decided in 2006 to insure a better and brighter future for all Americans – Republican and Democrats. (Of Course it would be a lot easier to actually accomplish something if “Chicken-Little” Democrats weren’t spending all their energy saying, “the sky is falling” on every issue.)

Dear President George Bush, January 1st 2006

Topic: 2006 Domestic Agenda and the State of the Union Address
Possible title or theme for Speech: Let’s Debate but America must decide!

Set the Stage, Frame the Debate, Propose Solutions with choices for the American People and Congress to pick from not just One plan for “Chicken Little” Democrats to pick apart. Congress must produce legislation and Democrats must stop obstructing

Mr. President, the American people want clear choices not fuzzy general plans. Yes, you have laid the groundwork for Social Security Reform and Tax Reform, but you have not laid down clear choices. In the Social Security debate, you waited and waited on defining the plan and others defined it for you. Later, you lobbied around the country for 2 months on private accounts but you waited to long to do it. You were always playing catch up and never seemed to be in the lead.

Similarly, on Tax Reform, you proposed it in your 2005 State of the Union, and put a decision off to a Presidential Panel that delayed and delayed its scheduled report. When they did submit it, the country gave them a Grade of D to F. The report did not meet the criteria you set out at all. In 2005 State of the Union, You asked for a change or replacement of our archaic income tax code that would promote economic growth with a tax reform plan that is “ Fair To All “. The Panel’s report did not even come close.

The Challenge for 2006 is to be bold and specific but also give choices. A “Good, Better, Best” approach to each issue. Let the American people decide.
The “Good” Choice” may be a poorer choice but frame the debate as the Country has three choices and it is time to decide not put these off to future generations.
No more fiddling with our future: It is time to make the hard choices.

The President should use the bully pulpit to push for the “Best” Choice but present all 3 variations; clearly state that the status quo is not acceptable and that he will veto any Legislation that only tinkers around the edges of the problem as Congress traditionally does. These programs must change and Congress must act.

The President states his preference but demands the three choices be debated and voted on by Congress (Framing the debate). He also can and should state some ground rules to work within. This will not turn in to class warfare and the President will not support legislation on any of these issues that is based on a myth that taxes have to be raised on one family more than another in percentage terms. These are problems that all American families must share in and all must contribute to their solution fairly. Honest numbers must be used in the debate of these issues.

If Democrats can’t propose and can only oppose than force them to choose between the three choices on each issue. A vast majority of American support will fall within one of the three choices made by the President. Americans will see that Democrats will oppose all of them. The President wins because he has proposed defined choices that a majority of Americans support. Democrats lose because they play the “status quo” line, “class warfare” line, or the “Chicken Little” the Sky is falling” line.

Every proposal should have 3 choices for the American Families to consider and the President should lead by stating strongly that Congress must Act now. Americans understand and support the idea of “pay me now (little pain) or pay me (a lot more) later”. The later is a vast and overwhelming burden on our children and Grandchildren.

My Three Domestic Wishes for 2006 are Issues that will overwhelm and burden our Children and Grandchildren unless we act.

1. Tax Reform with Strong Economic Growth, Simplicity, and American Job Growth .

2. Border Security and Illegal Immigration Reform.

3. Social Security and Medicare Entitlement Reform.

Tax Reform has 3 possible choices that the President should outline and explain. Let the American people decide, not lobbyists and special interests but American voters and families. The Status Quo of an archaic income and payroll tax system is not consistent with the global economy in the 21st Century. Congress must act in order to insure a bright economic future for our Children and Grandchildren. Otherwise the current tax system will continue to support outsourcing, job loss, American manufacturing loss and economic inefficiency as billions is wasted on compliance with our archaic tax code.

Choice #1 - Accept and adopt the Presidential Tax Panel report, which includes changes in rates and elimination or restrictions of Home Mortgage Deductions and Local State Tax deductions. This is closer to a tinkering than a substantial change but the Panel must be given a spot at the tax reform table in 2006. The President should point out that many have given the panel a poor grade but that he thanks them for their contribution and leaves it to the American people to consider.

Choice #2 - Flat Rate Income Tax: The most well known is that outlined by Steve Forbes or Dick Armey. It is a plan that simplifies the income tax code and provides a substantial exemption up to $40,000 in income. Unfortunately, it leaves in place the most regressive tax on the working poor; the 7.65% payroll tax that comes from each working families paycheck and the additional 7.65% payroll tax paid by each of their employers which suppresses wage growth. A family of 4 making $25,000 pays no income tax(after refund and EIC) but does pay the payroll tax. With the 17% flat income tax plus the 7.65%, American middle class families have a total inclusive income tax burden of 23.65% under the Flat Tax. There would be no Mortgage interest deduction or local property tax deductions to offset the Flat Income tax only the $40,000 exemption and fill out a post card.

This is a revenue neutral proposal and has merit but does it go far enough to create jobs, improve exports, and grow our economy so that we can afford the programs of the future that we want our children and Grandchildren to inherit from this generation? American Families must choose and Congress must Act.

Choice #3 - The Fair Tax Legislative Package – HR 25/S25.
This plan has the most Congressional Co-sponsors to date. It is the most complete Legislative tax reform package currently on the Hill. Sponsored by Congressman John Linder in the House and Senator Saxby Chambliss in the Senate. It deserves serious study by the American people. The Fair Tax has been well researched over the last 10 years and is supported by many tax payer groups and other organizations. Congress and the President received an open letter by 75 Economists and Economic Professors last spring in support of the Fair Tax. See Article at: http://fairtaxreform.blogspot.com/2005/04/geter-done-economists-nationwide.html

The Fair Tax answers the President’s call for simplicity, promotion of ownership by having more take home pay, fairness, Growth in good paying American jobs, Economic growth on American Soil. In addition, the Fair Tax provides a broader tax base that supports future concerns in Social Security and Medicare. The Fair Tax eliminates the payroll tax and truly untaxes the working poor. The Tax inclusive rate of 23% is less than the total of the Steve Forbes Flat Tax combined with the payroll tax. The Fair Tax sends a rebate to every family of 4, $479 / month to pay the National Sales Tax on all purchases up to the poverty line. American families take home 100% of their paychecks.

See Articles:
Give Every American Family a Raise
http://fairtaxreform.blogspot.com/2005/02/give-every-american-family-raise.html

Fair Tax Solution for American Manufacturing and American Jobs
http://fairtaxreform.blogspot.com/2005/12/fair-tax-solution-for-american.html#comments

Top Ten Economic Benefits of the Fair Tax
http://fairtaxreform.blogspot.com/2005/02/fair-tax-top-ten-economic-benefits.html#links

In Tax Reform there is a lot to consider but these are the 3 choices the President should talk about with emphasis on the best choice – The Fair Tax. The Status quo of an archaic Income tax and payroll tax with Billions wasted in Economic dollars just to comply with the Tax code must end. The American people must decide and the Congress must Act.

Border Security and Illegal Immigration. The President cannot be lukewarm on this anymore. No matter what big agribusiness and other contributors want. He must be bold and he must give choices and ask the Congress to act.

Choice #1 – 1000 more Border patrol agents and a Guest worker Program.
The President has this on the table and the response from many is “ It is not enough”
Again, put it out there and let the American people not the lobbyists for business or the Mexican government paid lobbyists influence Congress anymore. Is this Good Enough?

Choice #2 - Recent House Bill passes will President and Senate Support?
Recent Bill that cleared the house does several things;
Adding 698 miles of fence to our Border with Mexico;
Make illegal immigration a federal crime and those that support illegal immigration would be accessories to that federal crime. This includes employers.

Choice #3 – Stiffen Penalties at all levels.
Create strong deterrents to this crime by not only making illegal entry a federal crime but with a strong minimum sentence of 5 years. Don’t fine employers but put them in jail. One South Carolinian State Senator proposes this and added the fact that large farmers are treating these illegal aliens like it was the old plantation days. The South argued that if they lost their cheap labor their economy would collapse. It is time farmers and other employers gave up their support of illegal immigration and the unfair wage many pay. The prison term will be the deterrent but put the illegals on work farms to pick the vegetables but charge the farmers an appropriate wage to pay for the cost of housing, feeding and deporting them.

Social Security and Medicare Entitlement Reform;

The President needs to take a new approach and take his original version of private accounts off the table so as to address long term funding of Social Security and Medicare together. Solvency Choices for both.

First, reset the stage, this is a problem that cannot be put off to the next generation. Both Social Security and Medicare Entitlement spending will swallow the national budget whole, if we do not act sooner than later. The American people and Congress must study this issue and Act on it to safeguard these programs for future generations.

But first there is one additional point we must all start with and it is time that we be honest with the American people about. Social Security is really a pay as you go system by the taxpayers of America. There is not a separate account where your payroll taxes were put and interest was earned. It is not a savings account. Those working today today pay retiree benefits. Social Security and Medicare need to be reformed to be solvent for future generations. If we only tinker, than these programs will swallow up our children and our grandchildren. The American people and Congress need to act and not pass this off again. It is time to make a Choice!

Choice #1 - Means Test Social Security and Medicare Benefits.

The original goal of Social Security was to keep Seniors out of poverty. The Goal was not to give those with already generous pensions additional monthly income to play golf.

Payroll taxes are taxes not a savings plan. The revenue is spent each year like any other tax. Lets send these benefits to those who truly need it. Those that can afford their own Health Insurance and have investments or pensions that give them an upper middle class retirement do not need full Social Security or Medicare benefits.

This is one choice but a choice should be made. Democrats often say, “Taxi the rich more”. This is a class warfare argument that backfires because the rich are taking their money legally offshore and they proportionally pay more than their fair share now.

Choice #2 - Raise Payroll taxes now and place it in an Investment Lock box.

To Keep Social Security and Medicare Solvent( without reducing benefits) you must start raising payroll taxes gradually to meet the needs of the Baby Boomers. We have 3 workers for every retiree now and will soon go to 2 workers. Raise the payroll tax over the next 5 years from 7.65% to 10% on all wage income and invest it in a portfolio of Blue chip stocks and Bonds.

This takes the surplus money from these programs away from Congress to use or to hide the true nature of their deficit spending. Put all Social Security and Medicare excess revenue into an investment Lock box of high quality conservative investments and don’t let Congress touch it. This could grow to support future deficits in these programs.

Choice #3 - Tier 2 Solution for Social Security and Medicare.
Provide a broader tax base for these programs that will grow to meet the needs with a faster growing economy. Combine Tax reform Choice #3 – The Fair Tax Legislation with the Tier 2 Solution for Social Security.

A National Sales Tax under the Fair Tax plan provides for a broader consumption tax base to support Social Security and Medicare. The wealthy do not support these programs with their investment income, stock dividends, capital Gains or inheritances. Under the Fair Tax a fixed portion of the sale tax goes to each of these programs.
Instead of these programs being supported by 2 workers per retiree, America will have the Personal consumption of all Americans supporting these important programs for Seniors.

The Tier 2 Solution for Social Security follows the retirement reform of States like New York who long ago new their overly generous programs were unsustainable. New York developed Tiered Retirement systems. Options for Tier one were greater than for Tier Two who were hired at a later date. Tier 2 solution is similar.

Read Article: New deal for a New Century – Fair Tax plus the Tier 2 Solution.
http://fairtaxreform.blogspot.com/2005/05/new-deal-for-new-century-fair-tax-plus.html

Tier 2 Solution Summary:

1. Start the Tier 2 system with those people currently 30 years old or younger. Americans born in 1975 or later would be the Tier 2 Generation.

2. Grandfather all other retirees under the old system if born before 1975.

3. Redesign the system to match the realities of the new century and the global economy.

4. Using the Fair Tax as a catalyst set up a new 3 legged stool to retirement security. Three separate accounts;

5. Account #1- Social Security Safety Net - Provide a standard fixed amount safety net for all Tier 2 Seniors set at the poverty level for an individual. HHS poverty line in 2004 for an individual is $9310/ yr or $776/m. Maid or Millionaire every one born after 1975 receives the same $776/m.

6. Account #2 Social Security and Savings Plan - For Tier 2 Generation establish a Thrift Savings Plan/Pension style account with matching funds from Uncle Sam. For every dollar theTier 2 Generation saves in this account the Federal government will provide a 50% match up to $1,000 per year. Save $2000 in your Pension savings and Social Security matches with a
maximum of $1,000. Similar to 401(k) programs, portable and worker owns it.

7. Account #3 – Universal Savings Account – Under the Fair Tax plan, American families take home 100% of their paychecks. An average American family will take home an extra $5,000 to $7500 more in spendable income above paying for the Fair Tax. This money can be saved and provide the vehicle for true “Ownership”. The Fair Tax provides the increased take home pay for a family to save for retirement and participate in Account #2 as well as extra take home pay for Health Care, Child Care, College Tuition, Down Payment on a Home and other Family needs. They own the account with no tax gimmicks and they decide what is best for them.

8. Economic Growth estimated 6 to 10 % with the Fair Tax. This helps the Social Security and Medicare to have increased revenue to support the needs of all future retirees.

The President must Lead boldly but not give America one choice but 3 on these issues. Let them decide which is the best but lead them to action on these issues; not tinkering and putting it off to future generations.

Lead us to Action Mr. President.
Choices must be made for a brighter America.

Merrill Bender

Press Release: Presidential Response to Tax Reform delayed until 2007

2005-12-05T09:08:00.000-08:00

How should the President respond to a Bloomberg news article which indicates the President will delay major tax reform until 2007 or 2008 and let Congress tinker with small changes in 2006.

http://www.bloomberg.com/apps/news?pid=10000103&sid=awZ8H8tBjAAU&refer=us

If he and Secretary Snow want to set the groundwork for Major Tax reform than they need to define and narrow the choices before the American people. Start them thinking more about it now in a focused way.

They could float 3 ideas which they say they are studying further and getting input from Congress on. This is the Presidential Press release I would like to see;

PRESS RELEASE;
WHITE HOUSE, PRESIDENT GEORGE W. BUSH;

TOPIC; MAJOR TAX REFORM.

SUMMARY; PRESIDENT RESPONDS TO NEWS REPORTS ON TAX PANEL; TAX REFORM; NATIONAL SALES TAX; FAIR TAX; REGRESSIVE PAYROLL TAX ; STRENGTHENING THE AMERICAN ECONOMY AND PROVIDING GOOD PAYING AMERICAN JOBS.

The President is reviewing 3 key possibilities for Strengthening the American Economy and increasing good paying American Jobs here at home through a better Tax system for the 21st Century. He is reviewing and discussing 3 broad areas:

1. The President's Tax Panel plan is one possibility but the President's worry is that it does not go far enough in making the tax code simpler. It does not answer the call for Economic growth, job creation or encouraging an "Ownership" society.( i.e encouraging Home Ownership,)

2. A Consumption tax as mentioned by Alan Greenspan and supported by 75 Economists in the Spring of 2005 is another overhaul plan, but it would have to be a system that is simple, only charged once, visible and transparent for all Americans, contain protections for the poor and be difficult for lobbyists and Congress to tinker with in the future.

A consumption tax could solve a lot of problems including the regressive nature of the payroll tax which weighs most heavily on the working poor; The best solution so far for a consumption tax seems to be the Fair Tax sponsored by Congressman John Linder and Senator Saxby Chambliss. Other Consumption tax plans lack the safeguards of the Fair Tax.

3. A possible third option might be a Flat Income tax like the Steve Forbes plan. However, that doesn't address the regressive payroll tax or provide the same level of economic growth and Job creation as the Fair Tax.

The Press Release might conclude with,

The President's economic team is studying the choices for a major overhaul to relieve the pressure of our archaic tax code from American families, American business and our American Economy. However, we need American support for honest change and not just tinkering with the old archaic IRS Tax code.

If we can meet the challenge of a new system that can protect the American Economy in the global marketplace; keep good paying American Jobs; and help American Families meet their needs here at home than that is what the Federal Government should be considering. The President is working to find the best choice seeking input from both sides of the aisle and more importantly from the American People.

The President realizes we need a Tax system that can grow our economy, with more growth there is more revenue to support the programs that Americans want. We need a tax system to support and fund the entire federal budget, pay off the national debt, support Social Security and Medicare; a tax system that promotes good paying jobs and leaves enough money left over for American Families to buy a home, pay for health insurance, send their children to college and save for retirement. That is the goal and if we can get away from the Political Games often played in Washington than both political parties, the Congress and the President can give the American people what is needed.

Send this to the White House and Secretary Snow and tell them this is what you are wanting to hear from your President. comments@whitehouse.gov

Read Neal Boortz "Fair Tax book" or visit www.fairtax.org

Support From the Least Expected

2005-09-25T10:57:00.000-07:00

I have the FairTax book, and it's worth more than anything. What's even funnier, I WORK FOR THE IRS over in Chamblee. I type in all the 1040's you could ever imagine. I try to visually interpret the chicken-scratching that some people call writing. I know about the waste that goes into compliance and enforcement. All for a tax system that was never properly ratified back in 1913. Waste, Waste, Waste! I can't wait for the FairTax !!! Sure it'll cost me my cushy government job, but I don't really mind. I'll have enough money to start MY OWN BUSINESS for the first time in my life, and that feels great. Count on my vote!!!

Libertarian Voter, Acworth, GA

Fair Tax wins CNBC Poll 74% to 26%

2005-08-25T12:11:00.000-07:00

CNBC's Kudlow & Company hosted by Larry Kudlow held a short debate or discussion of the Fair Tax and the Flat Tax on Wednesday nights show. Larry encouraged viewers in the first half hour to go on line and enter their opinion on whether they liked a 17% Flat Tax or the 23% Fair tax. As of the close of the poll 2952 votes were cast and the Fair Tax Won 74% to 26%.

The Discussion included Radio Talk Show Host Neil Boortz and Wall Street Journal contributor Stephen Moore.
I wrote an article in January in response to his support of the Flat Tax:
http://fairtaxreform.blogspot.com/2005/05/zero-income-tax-and-zero-payroll-tax.html

Neil started the discussion with a fun jab at Stephen Moore and said, Let's declare the winner by who has the highest sales and ranking on the NY times Best Seller List. Neil Boortz's Book "The Fair Tax Book" is currently #1 and Steve Forbes's Book on the Flat Tax(which Moore supports) is far behind.

Stephen Moore pointed out that the popularity of both books shows that the American people are very interested in changing the current system to something new and not just tinkering around the edges of the current Income tax code. Stephen and Larry also discussed that their sources had indicated that the President's Tax Reform Panel will not recommend major reform in its report at the end of September but only suggest minor changes in the current code.

This certainly flys in the face of the popularity of the Fair Tax and the disgust the American people feel toward the IRS and the complicated tax code that requires a tax accountant to prepare.

What is required is a ground swell by the public in support of the Fair Tax. Much Like the problems on the Border with Mexico and illegal immigration, it takes the public demanding change to push politicians to action.

The Fair Tax certainly won the debate last night and that is inspite of the fact that the poll question was misleading in favor of the Flat Tax. You see the 17% Flat tax still leaves in place the payroll tax of 7.65% for a total rate on income of 24.65%.

The Fair Tax replaces both Income and payroll taxes with a 23% Inclusive sales tax rate.If the Poll asked; Do you want a Flat Tax with a total 24.65% rate OR Do you want a Fair Tax with a 23% Rate on Purchases?

I am sure the results would have been even better.For an honest poll see this article repeated with a poll at RedState.org
http://merrill-bender.redstate.org/story/2005/8/25/15831/5293

For more information on the Fairtax read the FAQ section of www.fairtax.org

and read " Give Every American Family a Raise"
http://fairtaxreform.blogspot.com/2005/02/give-every-american-family-raise.html

So, What is Really Fair?

2005-08-23T20:30:00.000-07:00

As many people know, it is no secret that many citizens, especially seniors, have contributed money to investment accounts (i.e. Roth IRAs) that have already been taxed through income. That is exactly why I was planning to write a letter to Mr. Linder and start a discussion about how the H.R. 25 bill could be manipulated slightly to compensate this disadvantage for Roth investors. I could venture to say that I am one of the FairTax bill’s biggest supporters, since I jumped on board about one year ago. However, no plan is perfect, and this is the one thing I saw as imperfect.

So, I was barely into my discussion with my wife about the letter I was going to write, when she throws out something mind-blowing. My original thought was to provide an exemption for the people that have already paid income taxes on their investments, much like the Inventory provision in the HR 25 bill for retail businesses that are affected. (For those of you who do not know, the HR 25 bill includes a section that states that no inventories of businesses in place at the time of enactment will be charged the tax, as a transition clause.) She asked me what investments I was talking about. My response was that I was talking about investments that have already been taxed once through the redistribution tax, (I’m sorry, I mean the Income Tax) like Roth IRAs, as opposed to 401Ks and Traditional IRAs. So, what about my dad’s guitars, she asks? If you couldn’t figure it out, her dad is into collecting guitars as an investment. “Um…” She adds, “Would he be compensated?”

You might think that would be rare, but she made me think more broadly. Yes, it would be great to provide some compensation to the people that put money into their Roth IRAs, BUT what about the house that I bought with after-tax money, which I will sell eventually. I don’t buy them, but what about those people that buy gold coins? My point is, that everything that you buy, especially real estate and items you sell later, has already been taxed via your income. Not only that, but it has been taxed (approximately 22%) additionally without you knowing it through hidden passed-on corporate taxes.

Also, keep in mind that the government has needed to fund itself up to this point. It will still need to fund itself, even after the FairTax is enacted. Should we take back the money that we paid to the government already, just because we will have a different way of funding the monstrosity after the FairTax is enacted?

Well, there would be one way the government could overcome the dilemma, which is to stick it the “other people”. We could tax the people that have invested in the 401Ks more heavily after the FairTax, to compensate. Or we could let everyone that bought anything, off the hook, but make the pre-tax investors pay the future sales tax. Would that be fair? Unless you follow Marxism, I would say “absolutely not”. This is why the FairTax was brought about in the first place. It keeps the deductions and loopholes out of the way.

So, what it comes down to is that no system is perfect, nor will any ever be. But, even with this dilemma, the FairTax is as close as possible and will require some transition costs. There is no denial about this quandary. Sometimes it is very necessary to take one step back to move two steps forward.

So let’s get rid of the 22% embedded taxes for everyone and let the people alone that haven’t been taxed that extra confiscatory income tax already. That is fantastic for them. If I am being taxed less in the first place, what would it matter if someone is being taxed less than I am. People should mind their own business.

It is understandable that many people would have felt that this would be a disadvantage. Look at me; I did. Education is the key; much like my wife did for me today. Learn from other people, and use the truth. There will be nothing we can do about how the government has funded the services that we all use, already. Let us move on.

This country will continue without you, after you leave here. Keep in mind the people that will follow: your children and grandchildren. Let us not ruin their livelihood by being caught up in this one snag.

Flat Tax has Flat Tires for Our Economy; The Fair Tax Supercharges

2005-08-18T18:43:00.000-07:00

By: Merrill Bender • Section: Diaries; Redstate.org

Steve Forbes has published a new book called the "Flat Tax Revolution" where he promotes his old 1996 Presidential campaign concept of reducing your Income tax filing to a flat 17% rate and a simple postcard style form.

Mr. Forbes has resurrected from the auto junk yard of tax reform a car that won't run and is easier for special interests to hijack and steal later on. He is trying to inflate the tires of this old reform idea but the engine in this car will not provide enough energy to rev up our economy or go the distance to create quality jobs for American Families.

Mr. Forbes old (Flat Tax)Car is up against John Linder's and Neil Boortz's new Book "The Fair Tax Book" ( New York Times #1 Best Seller) which lays out a well researched Legislative Package which has been fined tuned to provide a Progressive Tax Reform and Tax simplification solution that truly supports American Workers, American Families while supercharging our American Economy in a way that fights outsourcing and brings American manufacturing back to US Shores.

The Flat Tax leaves in place the most REGRESSIVE tax on the working poor and Middle Class. 7.65% is pulled out of the First Dollar and every dollar there after that Average American Families Make. Another 7.65% is paid by their employers and many Economists say that suppresses wages and prevents low wage earners from earning more to suport their families. The Fair Tax eliminates the Regressive Payroll tax and still fully funds Social Security and Medicare.

For many of the same arguments that Steve Forbes presents for supporting the Flat Tax, The Fair Tax does it ten times better. and solves so many more of our tax and economic problems affecting the working poor and the middle class in America. The Fair Tax, Untaxes the poor by eliminating the payroll tax and giving them a true net tax rate of 0%.( with FairTax Prebate)
The Fair Tax is a fully researched and documented package that has already been put into full legislative form and is waiting in the garage of Congress, ready to rev up our economy and give every American Family a raise in take home pay. The AFFT (www.fairtax.org) has spent the last ten years and over 22 million dollars in focus group studies, polls and economic research to see what works well economically and works well for American families.

The better answer to Steve Forbes call for a 17% Flat income tax and keeping a 15.3% total Payroll tax - is The Fair Tax which takes ZERO Income tax and ZERO payroll tax out of your paycheck and allows you to take home 100% of your paycheck in take home pay.

That is actually what will happen under an up to date and ready to go Legislative Package- HR 25/ S25 commonly called the Fair Tax- www.fairtax.org. The Fair Tax Legislation has 37 Congressional Co-sponsors including the powerful #2 man in the House- Congressman Tom Delay.

The original Sponsor of the Legislation Congressman John Linder of Georgia started in the 106th Congress and has included the Bill in the 109th Congress as HR25. Support continues to grow as more people know the facts about the Fair Tax.

Congressman Linder has written a new book with Talk Show host Neil Boortz called The Fair Tax Book, Saying Goodbye to the Income tax and the IRS which outlines in a very factual way the strong economics that support the Fair Tax research and shows how this new simpler retail sales tax is better for American Families, giving them more take home pay even after paying the federal sales tax and buying all the same things they bought the year before under the Income tax.

Mr. Forbes Flat Tax car (Lemon) only eliminates about half of the $225 to $250 billion dollars in tax compliance costs where the Fair Tax eliminates a much stronger 90% of compliance costs. Mr. Forbes leaves 90% of the cumbersome IRS tax code because even under a Flat tax, 90% of the code determines the definitions and calculations of the income to be taxed. Then you tax it at 17%.

Mr. Forbes does not have a group of over 75 nationally known economists writing letters to Congress in favor of his idea. The Fair Tax has that support.

http://fairtaxreform.blogspot.com/2005/04/geter-done-economists-nationwide. html
He also leaves in place a tax code that is more likely to be corrupted by lobbyists and special interests in the future. Lobbyists who will continue to manipulate the code to rob Peter to pay Paul. Under the Lemon Law he should return this car to the used car lot he got it from.

American families want a new tax reform car that is safe and well tested for the economic roads of a new century. Two of our largest states operate their state budgets on a sales tax with no income tax, Florida and Texas.. These 2 States are ranked 15 and 19th in the world for their economic output and a Sales tax works for all their State functions.

The Fair Tax is "Family Friendly Tax Reform" whose time has come. http://fairtaxreform.blogspot.com/2005/02/give-every-american-family-raise. html

The Fair Tax package eliminates all Personal and Business income taxes, payroll taxes, AMT, and Death taxes. Due to these eliminations, prices will drop 22 to 25% and then the Fair Tax replaces them all with a revenue neutral federal retail sales tax on new products and services. Consumers will pay about the same as they do now.

American business and American labor should take strong note of the fact that exports are not taxed; thus the Fair Tax will provide a boom to American manufacturing because American products will be 22% lower in price for sale overseas. We can't compete with low wage countries but we can compete with lower taxes on business, products and services made in America. The result is a boom to the economy and a boom to better paying manufacturing jobs in America.
The Fair Tax Legislative package has been well researched and is well supported in the research section of their web site - www.fairtax.org.

Dr. Dale Jorgensen of Harvard University has researched the economic impact of the Fair Tax. Dr. Jorgensen calculates a 10.5% growth in the economy in the first year of the Fair Tax.
The Tax Reform debate and the research is far beyond the simple discussion of Flat Tax, VAT or National Sales Tax, though some will still go through the motions. A complete package is waitng in the wings ready to go - The Fair Tax.

The Fair Tax is much more than a National Sales Tax, it has additional provisions that result in prices dropping 22 to 25% before you add in their NST. Consumers will pay about the same for products and services as they did before but take home a much bigger paycheck that is 100% free of federal income or payroll tax.

In addition, the Fair Tax has provisions to maintain Progressivity by providing a prebate of the sales tax up to the poverty line to every family. For a family of 4 they receive $479/m for a Couple they receive $357/m. An Average family of 4 making $50,000/yr will have more than $7500 in additional take home pay and after tax purchasing power under the Fair Tax there by making it both progressive and fair. The more you spend the higher your effective tax rate. Supporters say, "Those that Know the Facts Love the Fair Tax". More importantly it is the only comprehensive tax reform proposal that eliminates the income tax and the more regressive payroll tax.

The Fair Tax meets all the guidelines set down by President Bush for his tax reform panel including promoting home ownership and supporting charities.

Steve Forbes has commented on the Fair Tax and misquotes how it works, his biggest error is to try and scare people away form the Fair tax and to his Flat Tax by saying families that buy a $100,000 home will now pay with the Fair Tax $130,000; UNTRUE.

Under the Fair tax the costs to Builders drops the price of the new home from $100,000 to $75,000 ( Economic research proves it); Than you add in a Federal Retail sales Tax of 30% Exclusive (23% inclusive equivalent) The New price will be $97,500. You pay about the Same and the taxes are paid. That Family also took home 30% more in take home pay and can afford that house much more easily than under the Income tax.

In addition, the Fair Tax also meets the 3 standards set by House Minority Leader, Nancy Pelosi in her open letter to the President on Tax Reform sent 12/15/04; 1) Tax Simplification; 2)Tax Fairness(Progressivity); 3) Revenue neutral.

This Car is waiting in the garage gassed up and ready to go. Democrats and Republicans need to climb on board and drive our economy in a positive and new direction with the Fair Tax Legislative package.

The Fair Tax has been built from the ground up, it has been test-driven and shared with many researchers, economists, average Americans and American Organizations.

Supporters include 560,000 members of Americans for Fair Taxation, 350,000 members of The National Tax Payer's Union, and is outlined as a legislative agenda item of the 6 million member American Federation of Farm Bureaus.

The Fair Tax has been fined tuned and polished for the 21st century. It is an economic engine waiting to rev up our economy and send us down the road better able to compete fairly in the global market place and to grow a financially stronger "ownership society" at home.

Tax Reform: Now or Never

2005-08-15T16:09:00.000-07:00

by Jan Larson
Tax Reform: Now or Never
August 08, 2005 07:40 AM EST

As with the weather, a lot of people complain about the U. S. Tax Code, but few do anything about it. The reality is that the opportunity to do something about the tax code doesn't come around very often; maybe once per generation but now, in the year 2005, we have that opportunity.
For the sake of all Americans and future generations of Americans, we must not squander this chance.

The President made tax reform one of the main objectives for his second term. He has vowed to reform the tax code, to make it "pro-growth, simple and easy to understand, and fair to all."

To this end, the President appointed a bipartisan panel to study the current outdated and unfair tax system and recommend changes. Change doesn't come easily in Washington and people are generally frightened by change, but in this case, change is absolutely necessary.

The current U. S. Tax Code is incomprehensible. No one understands every aspect of the code and even experienced tax professionals do not arrive at the same amount of tax due for any but the most basic of tax returns.

It is estimated that compliance costs drain over $200 billion per year from the economy and still millions of dollars of taxes due are never collected.

The granting of favors via the tax code is one of the major "duties" of Congress. A tax break here means a campaign contribution there. Some feel-good social engineering via the tax code today means votes tomorrow. Give special interest groups, their lobbyists and members of Congress enough time and their incestuous relationships produce the monstrosity of a tax code that we have today.

There is a better and fairer way for the government to collect taxes that will not only pay for government services but also promote economic growth and eliminate Washington tax engineering - the Fair Tax.

There is not enough space here to present all of the details of the Fair Tax, but briefly, the Fair Tax is a national sales tax that applies to the retail sale of goods and services. The income (both personal and corporate), payroll and inheritance taxes would be eliminated under the Fair Tax.

The first thing that comes from the mouths of the opponents of any sort of tax reform is that any change will hurt the poor and benefit the rich. In this case, they are half right. The Fair Tax would, with few exceptions, benefit everyone - rich and poor alike. The exceptions? Congressmen, lobbyists, tax attorneys and accountants.

Low-income families would be protected in two very important ways. First, everyone would receive a payment each month equal to the tax that would be paid on goods and services up to the poverty level. This payment would be made much as Social Security payments are made to retirees today. Low-income families would effectively not be taxed on the necessities of life.

Second, the highly regressive payroll tax would be eliminated. Currently, every working person is taxed 6.2% of his or her wages or salary with their employer paying an equal amount, up to an income threshold (presently $90,000 per year) and an additional 1.45% by both the employer and employee with no income limit. Those earning $90,000 or less per year are effectively paying 15.3% (counting the employer's portion which could otherwise go to the employee) right off the top. When income tax advocates talk about eliminating low-income people from the tax rolls, they never talk about the 15.3% haircut that low-income earners receive every payday. The Fair Tax puts that hard-earned money in the pocket of every worker.

The second thing that those that are uneducated on the Fair Tax screech is that prices for goods and services would skyrocket if a national sales tax were added to the sales taxes already collected in 45 states. It is very important to understand that upwards of twenty percent of the cost of retail goods and services under the present system represents the embedded taxes in the production chain. That is, the corporate income taxes and payroll taxes paid along every step of production are reflected in retail prices. When these taxes are eliminated, the final cost to the consumer of goods and services will remain essentially unchanged under the Fair Tax.

The Fair Tax would dramatically increase the competitiveness of American products in international markets thereby fueling economic growth. The Fair Tax would put 100% of your paycheck in your pocket. The Fair Tax would broaden the tax base - visitors to the United States would pay and the millions of dollars if ill gotten gains that escape the income tax in the underground economy would be taxed. The Fair Tax is, most of all, fair! No preferences. No loopholes. No tax breaks for some but not others. No paperwork to file.

The Fair Tax is not some pie-in-the-sky dream. The Fair Tax has been introduced in both the House (H. R. 25) and Senate (S. 25). The Fair Tax could be the most important piece of tax legislation since the Boston Tea Party, but it will NOT happen without citizen education and input.

Radio talk show host Neal Boortz and Congressman John Linder (R-GA) have recently written a book, The FairTax Book, which describes the details of the Fair Tax. The book is available on the Americans for Fair Taxation website [1].

Learn about the Fair Tax and then make your voice heard in Washington. Every voice counts. The Fair Tax can become a reality but only if every American that believes that there is a better way calls or writes their senators and congressman and make it abundantly clear that the status quo is no longer acceptable. Take the time to make that call or write that letter in support of the Fair Tax. It is now or never.

[1] http://www.fairtax.org/

Jan A. Larson is currently employed in private industry in Texas. He holds a Bachelor of Science degree from the University of Nebraska, a Master of Science degree from the University of Kansas and an MBA from Colorado State University. He is also a contributing columnist on a number of websites including The Conservative Voice.

FineTuning the Honing of the FairTax

2005-08-08T11:10:00.000-07:00

At www.freeliberal.com there's an interesting discussion going on about the FairTax. Rober Capozzi posted a response to letters discussing the plan giving his current thinking on the issue. I, of course, can't resist the temptation to respond to his response.

Capozzi writes: "Grandiose plans generally don't happen. Instead, Congress tends to be highly incremental in everything it does." I suppose any tax plan, incremental though it it, could be called "grandiose," although it hardly compares to the current tax code, which is a product of Congress.

I would call the Civil Rights Bill grandiose, however. And women's rights was no small flash-in-the-pan. Both were passed by Congress after a few legislators and some constituents demanded it. Congress is slow and often dumb but it is not stupid. Congress eventually does what its constituency demands. It is hardly news that the American people are fed up with the current tax code.

The fact that, as Capozzi writes, " corporations DO have collectively granted privileges, and be open to the notion that the commonwealth should be compensated for that quid pro quo" should pose no problem. If corporations don't have to pay taxes and can lower the price of goods, business should increase with the burgeoning economy. So what if they have a few special privileges granted by government; their contribution toward a healthy economy is compensation enough for government.

"My point is that the housing special interests are VERY, VERY powerful." That, of course, is a fair point. But it assumes that all of the housing special interests oppose the FairTax and I (a retired realtor) do not find that to be the case. There are many, many advantages for the housing industry should the FairTax be passed and those experts who take the time to study the issue and apply it to their own situation almost invariably discover reasons to support it.

Capozzi continues, "Ultimately, though, while any tax reform is helpful, it's really a sideshow, IMO. However taxes are raised pales in comparison to the government's spending levels. " That is true -- so it has been. On the other hand, the FairTax is a new proposal, and one developed after a decade of study and experimentation. It is no fly-by-night idea written by Congressional aides and small-town college professors. When economists from places like Harvard, Stanford, Rice, MIT, etc. develop something new like this, it's no sideshow.

Government spending is out of hand but that's not the fault of Congress. It's the fault of citizens who allow Congress to go on spending rampages with no protest at the ballot box. You can stop Congressional spending, but only if you mount a grassroots effort against it. That certainly never will happen with an economically oppressed citizenry like we have now.

"Reduce government from 40% of GDP to 30 or 20% of GDP, and FairTax might move my dial. A tall order, indeed, but it's my take on the appropriate priorities." Obviously you are not personally overburdened by tax issues. You probably have most of your taxes taken out of your paycheck so you have no idea exactly how much you are paying. If you are lucky enough to get a rebate at the end of the year, you're not counting the fact that if you had put the entire amount into a savings account, you would have earned additional money on it, money that the government earned -- and spent -- for you.

Others of your fellow citizens are not so fortunate. There are many, many poor people who can't get ahead because taxes take so much of their income they can't save. There are middle class families who do fairly well but would do better if they didn't have to worry about being bumped into a higher tax bracket. There are retirees on whom the tax burden is so bad they can't save to assure they don't run out of money before they die.

First we have to get the unfair and unreasonable tax burden off our backs; then we can take on other issues in Congress.

Flea Market - Not the Next Growth Market

2005-08-06T20:00:00.000-07:00

The sky is falling! Everyone is buying from the flea market! Nobody is buying from the store anymore!

What a scenario, huh? People, let us look at the facts. Unless they do it already, nobody is going to rush out to the flea market to buy their items. Think about it. Let us look at our current system, and then see how it would change under the FairTax. Currently, between 15% and 26% (22% on average) of embedded taxes are included in the price of an item purchased at the retail counter. When somebody takes that item home, and then decides they do not want it anymore, they may decide to sell it on craigslist.org or at a garage sale. However, the person selling the item at the garage sale is not incurring any additional tax costs (except the income tax they paid before they bought that item – another subject for a different article). They buy, and then sell it – no money goes to the government for that used item sale. That is the way it happens now – embedded taxes when new, but no embedded taxes when used.

What would happen if the FairTax becomes law? Well, first, the new items would competitively decrease in price because of all the embedded taxes and compliance costs (Remember – average of 22%). Second, the used items do not have those embedded costs, so there would be virtually no price decrease. OK, so the new items would be cheaper than a “like new” product. Nevertheless, let us add the 23% sales tax to the mix. Add that rate to the new items. However, you do not add that rate to the used items. What do you have? It is a wash (virtually no difference), plain and simple!

What it comes down to is that there will not be an advantage to suddenly going out to buy used clothes and other items. Price differences will remain virtually the same between new and used.

Lower Taxes Anyway You Slice It

2005-07-22T21:37:00.000-07:00

I know that we have been technical in the blog lately, but I am sorry; I have to continue with it. The only reason is that this piece of information I am about to share with you, is so important, it makes or breaks many people’s perception of the FairTax.

Many opponents of the FairTax argue that volunteers of the Americans for Fair Taxation and many proponents of the H.R. 25 plan are liars. This just is not true. The opposition claims that the 23% sales tax rate is actually a 30% rate in disguise. While, the H.R. 25 FairTax plan will charge 30% at the register, I argue that this is not deception.

Let us define some terms here: Sales taxes are typically quoted as a tax-exclusive rate and income taxes are normally quoted as tax-inclusive. Tax-exclusive is defined as what the rate is after you paid for an item. Such as, you go to the register to pay for a $100 item, but the total comes to $107. The 7% sales tax was excluded from the price until you had to pay for it. Although 7% on the $100 item is $7.00 – that same $7.00 is 6.54% of $107.

Tax-inclusive is defined as what the rate is, inside the total amount (gross pay). Assume you bring home a $1,000 paycheck, but really only get $800 take-home pay. The 20% was calculated on your gross pay of $1,000 – not the $800 that you actually have to spend. That same 20% within all of your pay, would be 25% on your take-home pay.

This can make a huge difference in what rates that are quoted. Everybody is used to the old (current) way of doing things: income taxes that are taken out of our paycheck. The advocates for the FairTax are trying to compare apples to apples when they are quoting 23%. A 23% tax-inclusive sales tax is comparable to a 23% tax-inclusive income tax in this case.

It would be fine and rather true to quote the FairTax rate as a 30% rate. However, what does that say in your mind? As an example, to someone who is in the 28% marginal income tax bracket, this would seem like a bad deal. Not so, just by comparing these simple rates, alone, the FairTax is actually a better deal. Because, if you compare your income tax rate as a tax-exclusive rate similar to the 30% sales tax, the rate is 28% marginal rate is actually 38.89%. In addition, the 38.89% does not even include the payroll taxes (Social Security and Medicare) that are taken out of the paycheck. For this income bracket, that rate would be an additional 4.67% (tax-exclusive). Tack on the other 4.67% that your employer is paying to the government (instead of giving you a raise). Oh, and don’t forget about that 28.21% (tax-exclusive) in average embedded corporate taxes and compliance costs. Voila: 76.44%! No, ladies and gentlemen, this absolutely is not an exaggeration. Believe it, because it is true: some of us pay 76% to the government. With the FairTax, that 76.44% will be reduced to 30% (At the VERY MAXIMUM).

Here’s a breakdown of the marginal tax rates for the current income tax compared to the 30% FairTax rate:

7.65% payroll taxes = 8.28% plus another 8.28% that your employer pays
10% = 11.11%
15% = 17.65%
23% = 30.00%
25% = 33.33%
28% = 38.89%
33% = 49.25%
35% = 53.85%

So, what it all boils down to, for all of the Conspiracy Theorists, is that you can say that the rate is 23% compared to the tax rate that you pay now in the current system (tax divided by net pay). On the other hand, you can list all the higher tax-exclusive income tax rates and compare them to the 30% that you want to quote.

There is also one minor thing in this. When the FairTax is enacted, purchasers will not have to calculate an item based upon its retail price plus the tax. They will want to know the whole price at the register. Nobody will have to figure out what the tax is on that $7.21 item. They will go to the register already seeing on the price tag, a price of $9.37. The 23% tax equals $2.16 divided by $9.37. Since $9.37 will be on the price tag, wouldn’t the 23% rate be the relevant rate anyway.

What it all boils down to is that if you disagree with the FairTax, it is not due to a deceptive tax rate. It is something else, so mention that, but not the rate.

A True Story

2005-07-09T16:51:00.000-07:00

What you are about to read is a true story. I know it is, because happened to me.

I just got my annual pay raise. I got a $.74 per hour raise. I know that most people consider themselves lucky if they get $.25 an hour, but you have to remember that I've been working here for over twenty years. I have long said that you'll never get rich working for government, and the pay usually sucks to start with, but you stay with it and eventually, you'll start making a living wage.

I work two forty-hour weeks in one pay period. We’re paid 26 times per year. It takes a couple of extra steps to figure out how much per month I make if I need to know a monthly figure, but it’s not hard. Just multiply the pay figure by 26 then divide by 12. Close enough for government work, as we always say.

Anyway, seventy-four cents an hour comes to $59.20 a pay. My Federal payroll deductions went up $55.21 leaving me with a cool $3.99 per pay to spend however I choose. I'm talking about payroll deductions, FICA Regular and Medicare, and withholding taxes. None of my other deductions were effected.

Gee…I can buy an extra gallon and a half of gas every two weeks! Woo-hoo! $55.21 amounts to 93% of my raise. That's 93% that went to taxes. Am I mad? You bet I am. Had I not been a Fair Tax proponent before, I would be now.

Decisions. Decisions. What ever will I do with that extra $3.99 every two weeks?

Fair Tax all day, everyday!

Prebates Based on 2005 Data

2005-06-29T18:35:00.000-07:00

Here is the 2005 data for the rebate
Karen Walby
Director of Research
FairTax.org
Prebate

Family / Annual Consumptn / Annual Rebate / Monthly Rebate
1 person / $9,570 / $2,201 / $183
and 1 child / $12,830 / $2,951 / $246
and 2 children / $16,090 / $3,701 / $308
and 3 children / $19,350 / $4,451 / $371
and 4 children / $22,610 / $5,200 / $433
and 5 children / $25,870 / $5,950 / $496
and 6 children / $29,130 / $6,700 / $558
and 7 children / $32,390 / $7,450 / $621

Couple / $19,140 / $4,402 / $367
and 1child / $22,400 / $5,152 / $429
and 2 children / $25,660 / $5,902 / $492
and 3 children / $28,920 / $6,652 / $554
and 4 children / $32,180 / $7,401 / $617
and 5 children / $35,440 / $8,151 / $679
and 6 children / $38,700 / $8,901 / $742

SOURCE: The 2005 Department of Health and Human Services Poverty Guidelines, Feb. 18, 2005.

Leading Illinois Down the FairTax Path

2005-06-20T04:37:00.000-07:00

The Illinois Leader recently published a letter from a Dr. Waters in Georgia, objecting to the FairTax. The good doctor, unfortunately, had not done his homework. The following is my response to his mis-statements:

Dear Editor;

Let's cast a little light of truth on Dr. Rick Waters's objections to the FairTax> He wrote:

"The "Fair Tax" has several harmful elements. It will: 1. Tax already-taxed monies when you spend them (Roth IRA)."
Not if you don't spend them. Say you have $5000 in a little Roth account when the FairTax goes into affect. Say you continue to add to that amount over the years -- at a faster rate when you're rid of the income tax and can spend or save or invest ALL your money. Say when you retire you have $160,000 in that account. Say you transfer $105,000 to an interest-bearing payout account and spend the other $55,000. Only the portion you spend on new goods and services will be taxed. Meanwhile the original $5,000 is in that interest-bearing account, untaxed.

"2. Tax promised tax-free monies (certain disability benefits, pensions, insurance proceeds, etc.)."
Again, those will be taxed only if the recipient buys new goods and services, and only if s/he has already spent past the poverty level. The FairTax provides a monthly stipend to everyone to assure that no one pays tax up to the poverty level.

"3. Kill the economy by driving purchasers from 30+%* (*23% federal sales tax plus any related state and local sales taxes) taxed new items to buying used (the "Fair Tax" only taxes new items)."
This argument assumes that the wealthy will suddenly decide to forego buying Vera Wang and Versace gowns, limousines and Jaguars, two or three mansions, Rolex watches and dining at Le Cirque and suddenly patronize WalMart, buy their clothes at Lerner's and ride around in Kias. I don't think so. The wealthy will pay more in taxes because they buy more luxurious goods.

"4. When added to Social Security's 7.5% tax and state income taxes, everyone could end up in essentially a 30-40% tax bracket. "
AHAH -- Gotcha! Dr. Waters didn't do his homework, and speaks what he knows not of! The FairTax REPEALS the income tax, social security taxes, employee taxes, corporate taxes and more. But because it taxes a broader spectrum of the economy (the $6 TRILLION crime industry, for example, plus illegal immigrants, drug and porn dealers, tax evaders -- the IRS says that's an additional $350 BILLION -- and 40 million foreign tourists annually), the economy will grow -- and that's good for us all.

Dr. Waters needs to check his facts at www.fairtax.org so he can write more accurately.

Sincerely,
Sunnye Tiedemann

Increasing the Tax Base - Summary

2005-06-19T15:09:00.000-07:00

We started out talking about the wage-earner group. This is you and me. This is the group that have traditional jobs where Federal taxes are deducted from our paychecks each and every payday. Then we added the criminal element to the mix. Then added tourists, illegal immigrants, and finally teenagers.

Let’s consider this: the Fair Tax is a consumption tax. You pay a tax based on what you buy. Those who currently pay an income tax (the wage earner) will no longer pay taxes through a payroll deduction, but will pay taxes through their consumption as will the criminal, the tourist, the illegal immigrant, and the teenager. The one thing all five groups have in common is that they buy “stuff” whether it’s food, clothing, souvenirs, jewelry, CD’s, DVD’s, or whatever.

By including these four groups with the wage earner the tax base is dramatically broadened. The Democrats say they are concerned that a consumption tax will put an unduly heavy burden on the poor and the middle class. Adding these groups will ease the burden that we all currently bear.

Increasing the Tax Base - Group 4

2005-06-12T18:51:00.000-07:00

Here’s a group you probably never thought about. While this group isn’t required to pay taxes, they spend a huge amount of money.

Teenagers comprise an up and coming group of future taxpayers. Many, if not most, teenagers don’t have jobs. When they do have what I call "traditional jobs", they will be paid at entry level wages - minimum wage. They usually don’t make enough to report their income, but still have taxes taken out. The group I’m focusing on in this essay are the teens who are unemployed or have jobs babysitting, lawn mowing, and the like. They don't have taxes automatically withdrawn so they don't "pay" taxes on their income.

The reason I include teenagers is that they do have money, whether from allowances, birthday or Christmas gifts, babysitting and lawn mowing, or just getting money from Mom or Dad. Under the Fair Tax they will become tax payers when they buy clothing, CD’s, DVD’s, or whatever it is teenagers buy today.

I know, there will be those who lambast me because I advocate adding teenagers to the tax base, but what is really wrong with it? They pay a state tax on those items now. The addition of a Federal consumption tax is not going to stop them from buying what they want. If anything, they will become more savvy shoppers and make their money go farther. Many teenagers want to be "adults", so, let them pay taxes like adults do.

We started out with the wage-earner group and added the criminal element, tourists, illegal immigrants, and now teenagers. Next, a summary of the tax base.

Open Letter to Rush Limbaugh

2005-06-09T20:44:00.000-07:00

Dear Mr. Limbaugh;

Today was the first time I've ever heard your radio show and I am shocked -- shocked, I say --and disappointed in you. In your answer to the FairTax question it was painfully obvious that you did not know what you were talking about. Obviously you don't understand the situation.

You support a flat tax. That's what we had to begin with, and look where we are now. A flat tax is an INCOME tax. It taxes productivity. It has to have exemptions and exceptions and incentives to make it work, and once you add those, it's not FAIR to someone -- historically that's us guys in the middle. AND the flat tax is on top of an income tax. That's really close to the VAT that has decimated European economies.

You said, "The Home Mortgage Interest Deduction - now a lot of people, because it's been around for so long, it … it's so important, that's one of the reasons that some people buy a house - only to get the deduction on a mortgage. "Ah, I can save a lot of money!" But, Mr. Limbaugh, to get that deduction, you have to itemize your taxes and 3/4 of the taxpayers don't bother to do that.

Besides, people buy homes for emotional reasons, not financial ones. A house or yard reminds them of their childhood home or they want to personalize with paint and shelves and they can't do that in a rental. The build up of equity is a nice little extra but the tax incentive does not motivate them AND that incentive is unfair to renters -- retirees, for example, who can't keep up a big yard any more and rent an apartment for something smaller with no upkeep. That's regressive.

Here's what you need to know: The progressive FairTax proposal is the only one extant that was developed by top-notch American economists (Harvard, MIT, Rice, Stanford and more) over a decade of study, taking into consideration not only the national economy but the will of the American taxpayer. It is NOT a Value
Added tax or a flat tax.

It is the only proposal that repeals the current income tax, social security tax, employment taxes and corporate taxes, among others and yet funds the government at present levels. By removing Federal taxes it lowers retail prices by the 20% to 30% manufacturers and retailers now add to prices of goods to pay their taxes.

The FairTax gives every American 100% of his or her pay- or pension check.

Each American with a social security card (children, too) receives a monthly stipend to assure that s/he does not pay tax on necessities up to the poverty level; thus the poor pay no tax and the wealthy pay their share. (The wealthy buy more expensive things than the rest of us.)

The FairTax is on new goods and services only and the price of those goods and services stays approximately the same because of the removal of the aforementioned embedded taxes. It is not assessed on charitable gifts or contributions. There are no exemptions or so-called "incentives" in the
FairTax, or it would not be fair! One man's incentive is another's disadvantage in taxation.

The FairTax is a progressive tax that expands the tax base and fertilizes the economy. Because we pay only when we buy, the wealthy pay more (since they tend to buy couture dresses instead of Target specials, limousines and Jaguars instead of Toyotas and Hondas, two or three mansions instead of a
small house in the suburbs, etc.) and since people who can afford it prefer quality to economy and half the fun of having money is showing off, it's highly unlikely that they will change. Heck, if they wanted to save money,
they could by buying at WalMart now!

The FairTax brings the $350 BILLION the IRS says it loses to tax evaders annually (that's $2,000 extra each of us pays to make up for the slackers) into the economy, along with the 6 TRILLION dollar criminal, drug and porn dealer underground economies. Illegal immigrants and 40 million foreign tourists annually will pay into the tax base. The FairTax makes the USA the only country in the world that does not tax productivity -- opening us up to foreign investment as well as bringing home those outsourced jobs.

The biggest argument against the FairTax is that people believe Congress will never support and it would take too long to repeal the 16th Amendment. Congress will act if their constituents demand it of them -- remember the suffragettes? (Well, we're too young, but we've heard of them.) Congress also passed prohibition, then repealed it. Besides, the FairTax would give Congress more money to play with. They use money for power and they'd have more of it with FairTax. What's bad about that from their point of view. They could fix the national highway system, provide better pay to keep soldiers' families off of food stamps and give each family that $100,000 for each soldier killed or even missing in action. And National Health Care -- OR they could lower the FairTax rate. Maybe all of the above!

As for the 16th, it doesn't need to be repealed until after the FairTax is passed. It speaks only to the apportionment of taxes; once the income tax and the tax code are gone, the 16th will be easy. Remember when Congress decided to lower the voting age to 18? (We ARE old enough to remember that
one!) They got that ratified in 8 months. It CAN be done and you, too, can decide how to spend, save or invest ALL of your income.

Call me if you'd like to talk about it.

Sincerely,
Sunnye Tiedemann

House Tax Writers Contemplate Overhaul

2005-06-08T19:38:00.000-07:00

And the “politics” of politics roll on. If this article doesn’t shout out that we need tax reform, I don’t know what else would. This shows the deep pressure for politicians to keep the tax loopholes in place. Notice, the first politician talked about here, Charlie Rangel is the representative I mentioned in an earlier article… one of the few that oppose the FairTax.

Also, who is Chairman Bill Thomas kidding? Being concerned about tax incentives (loopholes) is one thing. However, the promotion of savings is a great boost to our economy. Saving money and subsequently investing it, grows money (the economy). Has he not heard of the time-value of money? If you save money as a country, you have more to spend in the future (money for poor people to pay bills with). About his class warfare statement, has he ever gotten a job from a poor person? Wealthy people, that need more incentives to save, create the jobs of this country.

I fear that too many politicians get trapped in the game of money for themselves and not their constituents. But my biggest fear is that it will only take several HONEST Washington politicians at one time to make the necessary changes for our government. We have been very short on those, since the beginning of time.

06.08.2005, 04:23 PM
Associated Press

House tax writers contemplated the difficulty of abolishing tax breaks in the name of simplicity on Wednesday while considering ideas to overhaul federal tax laws.

"I came to Congress to close up all the tax loopholes," said Rep. Charles Rangel, the top Democrat on the House Ways and Means Committee. "How little did I know that so many would be incentives."

Lawmakers typically design tax breaks to encourage or support certain behaviors. They span from business credits for creating jobs and providing health insurance to personal deductions for education and mortgage expenses.

Rangel asked for help from economists, assembled to explain competing tax proposals, as the tax writers consider whether to keep or drop tax breaks and pick winners and losers.

"There's a long list of things, and a lot of them are political, a lot of them are special interests, a lot of them are well intended," said Rangel of New York.

The tax experts urged the committee to shed some tax breaks. The hearing set the stage for a report later this summer from a presidential commission studying ways to make taxes simpler, fairer and more economically productive.

President Bush's Advisory Panel on Federal Tax Reform has already said the tax laws contain too many deductions and credits, and that the first purpose of taxes is to raise money to fund the government.

Leonard Burman, co-director of the Tax Policy Center, told the committee that the tax deductions and credits embedded in the tax system tell middle-income families to pay tax and then "if they jump through a whole bunch of hoops they can get a bunch of it back."

"We're saying that certain people get a benefit, other people don't. People are working really hard at determining their tax liability," Burman said.

Rep. Nancy Johnson, R-Conn., said tax incentives have proved themselves as an efficient way to get government benefits to many people at a low cost.

"I think the record demonstrates their power," Johnson said. "You've got to have better information for me to convince me that tax credits aren't powerful or important in structuring a society."

R. Glenn Hubbard, dean of Columbia University's Graduate School of Business and Bush's chief economic adviser from 2001 to 2003, said most economists agree tax incentives are powerful.

"They do stimulate the desired activity almost always," Hubbard said. "The question is, are they the best way of doing that?"

Ways and Means Committee Chairman Bill Thomas, R-Calif., said he's concerned about tax incentives, especially those that promote savings, that help wealthier taxpayers but don't provide a big enough incentive for poorer taxpayers.

"I'm worried about the person who's worried about the first dollar saved," Thomas said after the hearing. "I'm not interested in creating new ways for rich people to make more money."

Response to Wm Gale and Peter Orsag's article titled, U.S. Economy: We're All Living on Borrowed Time

2005-06-08T06:57:00.000-07:00

June 1, 2005.
"The situation is pretty simple. The private sector is saving next to nothing."" Do you have ANY idea how hard it is to save when a hefty chunk of your paycheck is taken out to pay the IRS and social security, not to mention employee taxes? The income tax is so bad that families with two paychecks have to be extra careful not to work hard enough to get boosted into a higher tax bracket where the AMT hovers. I don't think you do. Too many high income people like yourselves find ways to cut your taxes through loopholes, etc.

"The federal government continues to borrow substantial amounts. As a result, national saving ? the combined thriftiness of government, businesses and households ? is at its lowest level since the Depression, and the nation is borrowing massive and growing amounts from abroad. All of this is coming at the worst possible time, as the nation prepares for the tremendous pressure on Medicare, Medicaid and Social Security created by the imminent retirement of the baby boomers and rising healthcare spending." Frustrating, isn't it. And it's so true. Strangely enough, there's a solution, one that the Brookings Institution refuses to consider seriously, presumably because it was developed by your competition -- economists from Harvard, MIT, Stanford, Rice, and others. It's called the FairTax.
The FairTax would rid us of the fearsome, regressive, repressive and unfair income tax and give everyone 100% of their paycheck to spend, save or invest as they choose with BEFORE tax dollars. Because the FairTax taxes only new goods and services (and at a rate that keeps the price of goods the same as they are now), it taxes everyone fairly. It's a progressive tax because everyone, rich and poor and in-between, gets a rebate so that no one pays tax on necessities up to the poverty level.
Most important to your concerns, however, since the FairTax is a consumption tax, those who now evade paying their taxes (the IRS says that's $350 BILLION annually -- they recover $50 Billion of that, leaving $300 Billion UNcollected), members of the drug and porn industries ($ Trillions of dollars), illegal immigrants and 40 million foreign tourists annually would pay into the system, broadening the tax base enormously.

"Because our foreign creditors have to be paid back, foreign borrowing mortgages whatever future income the country generates." The FairTax would make the US the only country that doesn't tax productivity. Think what an attraction that would be to foreign investment. Then we wouldn't even consider borrowing from them! They would be here paying consumption taxes like everyone else.

"The big deal is that we are even less equipped to deal with the deficit problems now than we were in the Reagan era. Nor did the problems just disappear on their own. They were resolved through difficult political choices and some good luck." Yes we are. And we'll have a lot of good luck going for us if you and Brookings would just remove the blinders from your eyes and back the FairTax.

One thing is for certain: You can complain all you want about the condition of the economy but unless you are willing to get in there and fight to correct it -- and the FairTax ) is really the best offer on the table so far -- you're part of the problem. Complaining doesn't do any good unless you back a viable solution.

FairTax is Still the Way to Go

2005-06-06T21:37:00.000-07:00

The President's Tax Reform Panel is soliciting comments on the potential benefits and problems with the various tax reform proposals that have been presented to the Panel (last month). I wrote in response to their request and have decided to share that reasoning here, as follows.

Dear Mr. Mack III, Mr. Breaux, and other Panel Members,

I admire your action to find out what the American people think about our current tax code system. Please consider what I have to say as you go further in your research. I favor the consumption tax system called the FairTax. The FairTax would eliminate the Internal Revenue Service and the repeal the 16th Amendment, under House Bill HR 25.

Please consider the following benefits of the plan, compared to the other plans presented to your panel last month (Flat Tax, Consumed Income Tax, Freedom Flat Tax, and the BEST Plan).

All FICA taxes are eliminated, both for individuals and corporations. All other plans leave the current payroll tax system in place, continuing the regressive nature of the payroll tax system.

The FairTax consists of one, simple rate at the cash register. All of the other plans, still tax businesses in one way or another. This not only taxes the producers of the goods of this country (which should be untaxed for being a driver in the economy), it also taxes different producers and different individuals at different rates, which is wrong.

These first two facts mean that there will be a dramatic reduction in the overall price level of all goods and services. The currently institutionalized cost of taxes that is contained in all prices will be eliminated, and competition will force the prices down.

The IRS is eliminated. As with the other items, the institutionalized cost of compliance, both for corporations and individuals, will be eliminated. The IRS has a "corporate culture" of its own that puts it into adversarial position with every citizen. It cannot be reformed or transformed. It must be eliminated. With the IRS and the income tax system in place, no matter how simple, it leaves room for changes and more loopholes. In 1913, the current income tax system started out as a Flat Tax on the wealthiest individuals. The current system needs to be scrapped, along with any other income tax.

The individual gets to decide, through lifestyle purchases, how, where and when to pay taxes. The "rich" cannot avoid taxation through sheltering. Every other plan still leaves many gaps for loopholes that politicians and beurocrats could enjoy to use the American people as puppets and shell out class warfare.

Under the FairTax, because only retail businesses will be filers (but, not payers of the tax), all other plans utilize between twice (the BEST Plan) to 10 times the amount of filers (All other plans). Because retail businesses will be collecting and remitting taxes, a 1/4% collection allowance will go to the retailers and the state governments for managing the system, without the Internal Revenue Service.

Every citizen gets to experience the cost of government in a direct, visible way, the share of which increases as the level of purchases increases. Because the other plans still tax businesses in some way, under those plans, individuals would not know their portion of business taxes that they pay.

The distribution of the tax burden is mitigated by a monthly rebate check to every family for taxes paid on purchases up to the poverty level. This offsets any taxes paid by the poorest among us. The BEST Plan also uses a rebate check. However, the other tax systems would still use “deductions” and personal “exemptions” to manipulate the tax burden of the American people.

The FairTax plan is an integrated proposal with many positive features, not the least of which are the advantages that will accrue to residential real estate ownership. Owners will be able to pay the entire house payment, both principal and interest, with “pre-tax” dollars. They will get this benefit without itemizing deductions, which only a small percentage of homeowners do today. With the other plans, extra filing will be required to get any deduction, if it is offered. Under the FairTax, they will be able to save for down payments much faster, without the penalty of taxation.

Also, interest rates will be even lower than they are today. Because all of the other plans still tax businesses, interest rates would stay near the current level.

Because only new (not used) goods and services will be taxed at the final point of purchase, there are some items that would include a built-in deduction (as they are called in the current system), including tuition, charitable contributions, savings, investments, and interest payments (the familiar mortgage interest deduction). The Freedom Flat Tax only uses a standard deduction. All other plans also use different deductions, such as the benefit the FairTax will bring, although it is not called a “deduction”.

We are losing jobs because of our tax system. The income tax on corporations causes the prices of our goods and services to go so high that we can no longer compete in the international marketplace. We all want products that are less expensive. Countries with lower corporate tax rates can make items at a lower cost.

To benefit American manufacturing and job growth, we need to eliminate corporate business and payroll taxes to not only eliminate the pass-through cost to American consumers, but also to create a greater demand for American-made products for export, if exports do not pay the same tax. American workers cannot compete with low wage countries nor do they want to, but we should compete globally with lower taxes on business and on American made products. Good paying manufacturing jobs will be the result of creating a corporate tax-free zone in America. Instead of business going offshore to Mexico or China or the Bahamas for Corporate headquarters, American businesses will have a major incentive to produce in the United States and increase their financial, investment, and equipment capital in our country.

The FairTax has an automatic provision for border adjustability. However, the Flat Tax, Consumed Income Tax, and the Freedom Flat Tax all do not have any border adjustability under their system, except for the business tax portion of the Consumed Income Tax. The BEST Plan has a destination principle tax, but is not automatic.

The FairTax has the lowest compliance costs of all the plans presented, with the BEST Plan not far behind. However, with the income tax in place, all other plans still have significant compliance costs, but lower than the current system.

System inequities will persist under the Consumed Income Tax and the Freedom Flat Tax. Under the Consumed Income Tax, there are higher marginal tax rates for larger businesses, while the election to choose between taxing methods under the Freedom Flat Tax creates unfairness.

Independent research supports revenue neutrality under the FairTax or the BEST Plan. However, no sufficient research data exists for the other income tax plans.

The tradeoffs for the FairTax plan include the diminished jobs for tax lobbyists and IRS agents. However, with the increased amount of jobs throughout the country, many other opportunities will open for them. No longer will drug dealers, prostitutes, and illegal immigrants be able to skirt by without paying their fair share.

Current seniors of the wealthiest caliber (extremely minor percentage of people) that have saved investments could be double-taxed after the passing of the FairTax. However, many benefits will be gained for their children and grandchildren. Also, the decreased retail prices and rebate checks will diminish most of the negative aspects for wealthy seniors. All in all, the difference will be nominal for them, compared to other citizens.

There will be some transition costs. However, those will be minimal, whereas most tax-incentivized investments and accounts will only need to take away the payment of income taxes. For example, municipal bonds will no longer have tax-free benefits, but they will still be the same bonds.

No matter what the plan you recommend to the President, all will have lower administrative costs, save the country money, and will be better than the current complicated system.

Please consider the FairTax plan, which has already been extensively researched and is in the works in Congress. The BEST Plan does not have any legislation currently in Congress and the other plans, besides the FairTax, are income taxes, which are inferior to the FairTax.

"Family Friendly" Tax Reform vs the FairTax

2005-06-02T13:04:00.000-07:00

Summary;

The so-called “Family Friendly Tax Reform” is complicated, invasive and, overall, the poorest of all the proposals so far put before the panel.
Proponents claim the FairTax is unfair because a family making $50,000 a year would pay the same amount in taxes for food, housing clothing, etc. as a family making $500,000 annually. This is not so simply because the wealthy family buys more expensive goods and services (mansions instead of houses, limousines instead of Toyotas, Versace dresses instead of Lane Bryant) than the middle class family. Therefore, they would pay more taxes.

In this piece I take each of the arguments presented by a proponent of the “Family Friendly Tax Reform” and compare them to the FairTax.
The estimate of necessary sales tax rate of about 60 percent to fund the federal government at its current levels because taxable retail sales account for less than one-third of all U.S. economic activity fails to consider the fact that the FairTax will tap the $350 Billion a year that the IRS says tax evaders do not pay every year as well as assure that drug dealers, porn pushers, and illegal immigrants all pay into the system along with 40 million foreign tourists annually,
I explain why refundable tax credits, replacing old tax breaks with new ones and exchanging old exemptions and incentives for new and broader ones do not meet the requirement for fairness and, in fact, penalize the elderly, the poor and people who don’t own homes.
In conclusion, a tax that gives everyone 100% of their paycheck or pension and still funds the government, provides a rebate so no one pays tax on necessities up to the poverty level, broadens the tax base by assuring that present tax evaders have to pay taxes, repeals the income tax and other regressive taxation and makes US companies the only ones in the world that do not tax production is the best, most profitable way to go for the country and for its citizens. The FairTax is a win/win tax – taxpayers win, government wins and the economy wins.

Family Friendly Tax Reform vs the FairTax

A new proposal for tax reform called "Family Friendly Tax Reform" should be compared to the FairTax to see which best meets the President’s directive.
Daniel Weinstein, a major proponent of the "Family Friendly Tax Reform" asks, "How would a national sales tax actually make matters worse? Its advocates have long argued that by taxing the things we buy instead of the salaries we earn, such a tax would both simplify the tax code and promote personal savings over material consumption. But the reality would be far different. Consider this: A family making $50,000 would pay the same amount in taxes as a family earning $500,000 for such basic items as food and clothing. For the lower-income family, sales taxes would add up to a big chunk of the family budget. For the wealthier family, taxes would barely be a consideration. That's hardly fair." Weinstein chooses not to recognize that the wealthy spend differently from the rest of us.

If wealthy families spent money the way middle- and lower-income families did, they would all pay the same tax. However, lower-income families don’t buy two or three mansions – one in town, one in Aspen, another on the shore – and they don’t drive around in limousines and Jaguars. They wear clothing from Walmart and Penney’s instead of Versace, Chanel, Vera Wang, etc. Their weddings are in church halls instead of country clubs; they eat out at Red Lobster or Olive Garden instead of Daniel’s, La Cirque or Babbo’s in NYC or The Dorchester Terrace in London. That’s why higher income families will pay more tax – they buy more expensive things.

Weinstein continues, "Some proponents say that food and clothing could be taxed at lower rates -- or exempted altogether -- while luxury goods could be taxed at higher rates. . . And while some have argued that a national sales tax would eliminate the need for the Internal Revenue Service, they overlook the fact that we would need a new agency to collect tax revenues from businesses." Instead of exemptions, FairTax provides a rebate for all taxpayers. That’s fair. It would be nonsense to tax luxury goods at higher rates since they are more expensive in the first place. Elimination of the IRS is elimination of the 60,000 page tax code that no one understands and that the IRS enforces unfairly and unevenly. The collection system for a sales tax would be smaller and non-invasive.

"Worst of all, a national sales tax would have to be much higher than its proponents admit. In fact, the Brookings Institution's William Gale estimates that it would take a sales tax rate of about 60 percent to fund the federal government at its current levels, because taxable retail sales account for less than one-third of all U.S. economic activity." Mr. Gale’s figures did not include consideration of the $350 Billion a year that the IRS says tax evaders do not pay every year, which would necessarily be tapped by a consumption tax. He also left out the money that will be paid into the system by drug dealers, porn promoters, and illegal immigrants who now pay no income tax at all. Add to that income from consumption taxes paid by 40 million foreign tourists annually and you begin to see where Mr. Gale’s estimates are totally incorrect.

Also, the FairTax was developed by some of the finest economic minds in America, not as a superficial intellectual exercise or as a weighted response to make the figures prove a foregone conclusion, but over a 10-year period with careful research into all phases of the US economic system. Economists from a wide political spectrum (Harvard, Rice, MIT, Stanford, and more) came up with a politically unbiased system when they developed the FairTax.

Weinstein again: "There is another hearty perennial tax reform idea: the flat tax -- one theoretically low income-tax rate for everyone. But that, too, would be a raw deal. As former Undersecretary of Commerce Robert Shapiro has calculated, maintaining current federal revenues would require a 21 percent flat tax. . . A flat tax would thus represent a substantial tax increase for a large majority of taxpayers." I have to agree with him here – because the flat tax does not get rid of the current income tax. We do not need any tax that is simply added to the system already in place, including the “Family Friendly Tax”. THAT would be regressive.
Weinstein continues, "'Family friendly tax reform' would bring $436 billion in net new tax relief to American families. It calls for eliminating 68 tax breaks that are redundant. . . replaced by four generous new tax incentives that would be easily understandable, available to the vast majority of taxpayers, and consistent with the progressive values of work and family." That’s exchanging tit for tat and therein lies the first major problem with this plan. First, It keeps the income tax and the IRS. The IRS is the only group in this country with search and seizure rights – you are guilty until proven innocent and the cards are stacked against you. Under this so-called family-friendly reform” those rules still hold.

"The first new incentive would be a refundable college tax credit that would substitute for five existing education tax breaks and provide a $3,000-a-year incentive to students for four years of college and two years of graduate school. . . The second major incentive would be a home mortgage deduction that would be available to all homeowners, not just those who itemize. By allowing non-itemizers to claim the deduction, we can increase homeownership while reducing the number of Americans who must file the more complicated 1040 tax form. Third, a new family tax credit would replace three existing tax incentives -- the Earned Income Tax Credit, the Child Credit, and the Dependent Care Credit -- and provide more benefits to more families than all of them combined."
What about renters? People don’t buy houses to get tax credits; they buy homes that remind them of their idea of “home,” or because they like the schools or they want privacy. Or maybe they’re just tired of living with white walls and generic light fixtures in a rental that they can’t personalize.
Incentives, as we have learned with the income tax, most often turn out to be dis-incentives. With Weinstein’s plan you are still paying for education and homes with after-tax dollars. How much better – and what better incentive – to pay with before-tax dollars. Under the FairTax plan, everyone gets to keep 100% of their income to spend, save or invest however he or she sees fit.

"Finally, a universal pension (UP) would replace 16 existing IRA-type accounts with a single portable retirement account for all workers. . . . Universal pensions could also offer a progressive alternative to Bush's plan to divert Social Security payroll taxes into private accounts." The FairTax leaves it up to the individual to choose how to save and invest money. Tuition, house payments, all purchases – all paid with before tax dollars. It’s cynical for government to treat citizens like incompetent children, trying to guide them with "incentives."

Other things are missing in this tax plan that are simply and neatly handled by the FairTax. The "Family Friendly" plan neglects the elderly and the disadvantaged – the FairTax takes care of them nicely by providing a prebate – a monthly stipend so that no one pays tax at all up to the poverty level.

The FairTax does not tax productivity. The Family Friendly plan does. To be the only country in the world that doesn’t tax production gives the US a HUGE international trade advantage. The "Family Friendly" tax system doesn’t even address those issues nor does it promise to expand the tax base like the FairTax does. Under this system, Weinstein again: "This approach would also restore basic fairness to the system by treating everyone the same. Millions of middleclass and low-income families are not able to take advantage of the existing mortgage deduction because they don't itemize, and millions more don't contribute to an IRA or 401(k) because they can't afford it. By making all four of these broad new tax incentives available to non-itemizers and making the incentives for college and retirement refundable, everyone will get a tax break." But it doesn’t treat everyone the same: What about families who don’t own homes? There’s no help here for renters – many of the elderly don’t WANT to struggle with the upkeep of homes and yards. Giving them all of their pension funds, like FairTax does, is fair.

The President charged the panel with the direction to simplify tax laws, to make the tax law fair while encouraging home ownership and charity giving, to promote economic growth and strengthen US competitiveness in global markets. There is only one proposal before the panel that meets all those criteria and that, ladies and gentlemen, is the FairTax.

Keep it Now or Later

2005-05-31T21:01:00.000-07:00

I’m not really sure I know what it is sometimes. But, some people actually think they always have to spend money to save money. It’s like going shopping with a coupon, but you actually walked out with an item, but having less money than what you walked in with. People are like this all the time with tax deductions.

I actually heard my accountant (which I’m not going to fault, because they all do it) tell me that I need to come up with more deductions; because it will help me with my 1099 income. Hey, go buy a $2,000 computer, so you can get a $600 tax deduction. Does this make sense to you? Not me. But, hey maybe that’s why I favor the FairTax over the several other convoluted options presented to the President’s Tax Reform Panel earlier this month.

Under the FairTax, some important deductions would go away. I can tell you, however, that is a very good thing, for even the ones getting the deduction currently. The home interest deduction is one of them. For one thing, only about 30% of the American taxpayers even take this deduction. The remainder of us use the standard deduction, which is simpler. Under the FairTax, EVERY HOMEOWNER would take advantage of the tax laws. Under the FairTax, you would get that “deduction” without filing any paperwork

Take this as an example. Say you have a store coupon for $0.20 off of a $1.00 item, such as a box of crackers. You, an avid shopper, expect to pay $0.80 for the crackers when you get to the counter. That is what a deduction would be like for you. What if the cashier told you that they were having a sale today, and all the crackers are free? Would you be upset if you couldn’t use the coupon? I hope not. If so, stop reading…there is no hope. Under the FairTax, you wouldn’t have to use the coupon (deduction). You would be getting it for free. Interest, including mortgage interest, is not taxed under the FairTax.

So, not only do you save for a down payment much quicker under the FairTax; if it is a new home, you only pay a sales tax on the price of the house and not the interest. Even better, if it is an existing home (some call them “used”), you don’t pay any sales tax at all. Not only that, but the interest that you are paying will be less, by about 25%.

Now: on to something even brighter. Why do people make contributions to charities and/or churches? Once again, it would not be wise to come to the end of the year and say “I want to pay fewer taxes, so I’ll contribute my money to a charity”. Just because you donate, doesn’t mean you save money. People contribute money to organizations because they care about an issue, such as feeding starving children or building a church. It would be an insane assumption to believe that charity contributions would decrease because people no longer have a deduction. Under the FairTax, there is no need for a “deduction” when you don’t pay any taxes anyway on contributions and gifts. If you are not buying a product or service, you won’t be paying taxes. That means that without filing a 1040 and claiming a deduction, you can give till it hurts (more than before because you will be doing it with pre-tax dollars), without any federal bureaucracy taking a single red cent from your pocket. Would you rather give your organization $1.00 - free-and-clear or $0.70 from after-income-tax money (if you spent all your earnings on charity)?

If you think it would be awesome for your checkbook, think about the non-profit organizations, such as 501(c)3s. Non-profit organizations would no longer have to pay (time or money) for massive paperwork just to get their non-profit status or file tax returns. So, all in all your $0.50 gift from your gross pay becomes a $1.00 contribution to them. I think that they could stand to use double their money that they are getting now.

One more thing: the education tuition (i.e. college and private elementary schools) that is paid out for human capital (a “mental” investment) is paid with pre-tax dollars, too. If anybody has ever tried to claim a deduction for education, they know it’s not even a full deduction, such as the mortgage-interest or charity deduction. Without forms, education tuition will be tax-free.

Please sit down and think about it: If you are not paying income taxes, you do not need deductions! It is only when the government is taking your money in the first place, when you need deductions to compensate.

Lancing Vance

2005-05-29T08:24:00.000-07:00

Lawrence Vance wrote this piece called FairTax Fraud for the Mises Institute online. Here is his entire argument (it begins about halfway down the first page of his article). Just for the record, I want to state here that I have read S 25 and HR 25 in their entirety. Vance seems to think FairTax supporters haven't done that.

But onward: His article is in blockquotes. Mine is in straight text.

. . . So rather than just repeat them and apply them to the current FairTax scheme, I will focus instead on problems with the FairTax proposal itself.

The Fair Tax Act of 2005 is H.R. 25 in the House (introduced on January 4) and the identical S. 25 in the Senate (introduced on January 24). FairTax proponents who complain about the complexity of the Internal Revenue Code are going to have a hard time convincing those of us who have actually read this bill (it came to 59 pages when I printed it out from my computer) that it will simplify the tax code when it contains language exactly like that which appears in the tax code:

(b) Rebate Defined- For purposes of subsection (a) (2), the term 'rebate' means so much of an abatement, credit, refund, or other payment, as was made on the ground that the tax imposed by chapter 41, 42, 43, or 44 was less than the excess of the amount specified in subsection (a)(1) over the rebates previously made.

Come now, Mr. Vance, surely you know better than that: The language of the bill has nothing to do with the performance of the FairTax. It simply describes it; it will be a matter of history once it is passed and the FairTax goes into effect.

Strangely absent from the list of co-sponsors of H.R. 25 is Congressman Ron Paul(R-TX). Representative Paul has consistently been named the "taxpayers'
friend." If the FairTax proposal was as friendly to taxpayers as its proponents say it is, I would expect Congressman Paul's name to be first on the list of co-sponsors. FairTax advocates claim that their plan would repeal of the 16th Amendment.

I suppose Congressman Paul is like so many of his peers, he doesn’t care what his constituency says, he’ll wait to see what everyone else does. That seems to be how Congress operates – lots of Indians and a very few Chiefs. And the Indians are more interested in themselves than their constituency. That, however, can and will be changed.

However, all H.R. 25 does is repeal Subtitle A of the Internal Revenue Code of 1986 that relates to income taxes and self-employment taxes and Subtitle C that relates to payroll taxes and the withholding of income taxes. The only mention of the 16th Amendment in H.R. 25 is when it says: "Congress further finds that the 16th amendment to the United States Constitution should be repealed." To repeal the 16th Amendment would require a constitutional amendment. Can Congress be relied on to pass a constitutional amendment that repeals the 16th amendment after a national
sales tax has already been enacted? And even if Congress passed a constitutional amendment, it would still have to be approved by three-fourths of the states. Without the repeal of the 16th Amendment, what is to prevent an income tax from being imposed again after a national sales tax has been enacted?

Actually you're only partly right. A constitutional amendment has to be passed by 3/4 of the LEGISLATURES of the states. That's so easy that it was accomplished in less than a year when they passed the 26th Amendment.

The FairTax will be passed only if a massive grassroots effort gets it passed. Once that is done, that same grassroots effort will turn toward the repeal of the 16th Amendment.

I find it sad that you, who supposedly are an expert in these matters, do not seem to be aware that the current income tax system we labor under is unconstitutional. Surely you would mention that in this context if you were aware of it. Article 1, Sec. 9 of the Constitution of the United States says, “No capitation, or other direct, tax shall be laid, unless in proportion to the census or enumeration herein before directed to be taken.” Amendment 16, the US Supreme Court found in Stanton vs US Baltic Company, “conferred no new power of taxation but simply prohibited the previous complete and plenary power of income taxation possessed by Congress from the beginning from being taken out of the category of indirect taxation to which it inherently belonged.” In fact, the tax on individual income is so unconstitutional that the IRS hasn't challenged a number of lawsuits about it lately. But that's another issue. Back to the FairTax.

Although the FairTax would eliminate the filing of all individual tax
returns, the FairTax turns every business into a tax collector. Every small
service business and every Internet business that does not currently collect
state sales taxes will have to collect taxes for the federal government.
Every doctor will now have to charge sales tax on his services. Where will
this end? Will the neighborhood boy who mows lawns have to begin collecting
federal sales tax on each lawn mowed? Will the neighborhood girl who baby
sits have to do likewise?

Those retail businesses already pay taxes – state taxes. FairTax would simply be an extra checkbox on the state sales tax form. As for the babysitter and lawn-mower, those are service jobs that are so small that there’s no reason to expect them to pay taxes at all. Certainly no one’s going to come after them if they don’t.

The national retail sales tax rate under the FairTax plan is 23 percent.
That is on top of state sales taxes that are currently collected by
forty-five states. That is on top of the sales tax that many cities and
counties also collect. That is on top of the special taxes that exist on
hotel rooms in most areas of the country. I suppose that a national retail
sales tax would also apply to gasoline. There is no mention of the federal
gas tax anywhere in the Fair Tax Act of 2005. No list of taxes that are
supposed to be eliminated under the FairTax includes the federal gas tax.
Does this mean that there will be an additional 23 percent tax on each
gallon of gasoline?

You forgot to mention that every item that is sold at retail already has from 20% to 30% embedded taxes in the price. Companies and corporations pass the taxes they pay along to the customers who buy their product. Those taxes would be eliminated by the FairTax, thus bringing the price of those goods and services down so that adding the FairTax to the price comes out even. Although the prices of goods and services would be reduced by elimination of income taxes, employee taxes and other corporate taxes, the price to the consumer will be the same when the FairTax is added on. The reason for that is to fund the government.

Of course if we should insist that the government reduce its spending, we could lower the FairTax.

The FairTax will make it easier for Congress to raise taxes. The initial
rate of 23 percent is supposed to begin in 2007. For years after 2007, "the
rate of tax is the combined Federal tax rate percentage." This combined
percentage is the total of three things: the general revenue rate (stated to
be 14.91 percent); the old-age, survivors and disability insurance rate; and
the hospital insurance rate. This is all but saying that the rate will be
adjusted every year. And it will be very easy for Congress to do so. To
raise several billion dollars of additional revenue, all that will be
necessary is for Congress to raise the tax rate by one percentage point by
small adjustments in one or more of the three items that make up the
combined percentage rate. It will be sold to the American people as "a penny
for progress," or some other deceitful scheme.

So what’s new? It’s already easy for Congress to raise taxes; the difference with the FairTax is that they can't do it in secret like they can with income taxes. They do it all the time without bothering to tell the taxpayer. With the FairTax, individuals know what they are paying and can see exactly what Congress is doing (unlike now, when so much of our taxation is hidden). Under FairTax, the economy will expand Under FairTax, the taxpayer can control how much s/he pays in taxes simply by controlling his/her spending. You can do that with income tax only by stifling your income – and people do that, to the detriment of their livelihoods and the economy.

However, you’re overlooking a most important facet of the FairTax and that is the fact that it taxes consumption rather than productivity. When the US is the only country in the world that does not tax productivity we will become immensely attractive to foreign investment. American corporations who have left the US will find it economically feasible to bring those jobs home. Corporations like Daimler will find the US fertile ground for business. The economy is predicted (by world-class economists who have studied this) to grow by 10% a year once the FairTax is in effect.

Under the FairTax system, there are no longer any Social Security and Medicare taxes. However, this does not mean that Social Security and Medicare will be eliminated. The inclusion in the combined percentage of the old-age, survivors and disability insurance and the hospital insurance rates means that the Ponzi scheme known as Social Security will continue as it is, only the way it is funded will change.

There’s nothing wrong with social security and medicare that a little money wouldn’t cure. These are programs that are in place to ease the way for our older and physically disadvantaged citizens that speak well for the humanity and social consciousness of our society. With the increased tax base and burgeoning economy stimulated by the FairTax, both will be in fine shape.

The "underground economy" that income tax advocates complain about will
certainly increase under the FairTax system. Even if the highly dubious
claim that there will be an "average producer price reduction of 22 percent
for goods and services in just the first year after the adoption of the
FairTax" is true, not having to pay a 23 percent tax on an item is a
tremendous incentive to make a purchase in the "underground economy."

I think you misunderstand what the underground economy is. You are speaking of embedded taxation, which I covered earlier. The “underground economy” consists of tax evaders ($350 BILLION annually, according to the IRS), drug dealers, pornography of all kinds, illegal immigrants and more, all of which are, necessarily, consumers and all of which would pay taxes under the FairTax system. Add to that 40 million foreign tourists a year and you have a very significant increase in the tax base.

The claim that the IRS will be eliminated under the FairTax is bogus.
Although the national sales tax will be collected by the states from
retailers, it is still a national sales tax, and as such, its collection
will have to be overseen by some agency of the federal government. Just
because the bureaucracy will no longer be called the IRS doesn't mean that
it will be eliminated. According to The Fair Tax Act of 2005:

There shall be in the Department of the Treasury a Sales Tax Bureau to
administer the national sales tax in those States where it is required
pursuant to section 404, and to discharge other Federal duties and powers
relating to the national sales tax (including those required by sections
402, 403, and 405). The Office of Revenue Allocation shall be within the
Sales Tax Bureau.

Title II, chapter six, section 603 of The Fair Tax Act sets up the Problem
Resolution Office and authorizes "problem resolution officers." There will
still be tax courts according to title II, chapter six, section 602 and
chapter nine, section 7451. Changing the phrase "Internal Revenue Service"
to "Department of the Treasury" and "Commissioner of Internal Revenue" to
"Secretary" doesn't eliminate the federal bureaucracy.

No, but it cuts it significantly – from thousands to tens. Nothing is going to eliminate the Federal bureaucracy and no one in their right mind would want to do so. FaitTax just makes it smaller and more efficient and frankly, Mr. Vance, I think you’d have to be either insane or stupid not to support that.

With the FairTax, the federal government will also be a tax collector in a new way: at the post office. There is no exemption of postal goods and
services mentioned anywhere in the Fair Tax Act of 2005. I suppose this
means that stamps, P.O. Box rental services, and package mailing services
will be subject to the new 23 percent tax.

There is no exemption for anything in the FairTax. With e-mail, UPS and FedEx, the USPO is somewhat redundant anyway. Besides, a postage stamp that used to cost 3 cents now costs 37. That happened without the FairTax and with no improvement in service.

The FairTax is progressive. What could possibly be fair about a progressive tax where some people have to pay a higher percentage than others merely
because they are deemed to be "rich"? How is the FairTax progressive? I
thought it was a flat 23 percent on all new goods and services? It is and it
isn't. Under the FairTax plan, everyone pays the 23 percent tax on
everything, but "every household receives a rebate that is equal to the
FairTax paid on essential goods and services." The rebate is given out each
month, and is based on family size and the poverty level. But like the
current tax code, the FairTax can also function as a tool for income
redistribution because "the poor [will] actually pay less than zero-percent
retail sales tax on their spending. Much like with the earned income tax
credit of today, the rebate may give them more money than they actually
spend on retail taxes."

Rich people get rebates, too. And the wealthy don’t have to pay more if they don’t want to. They can shop at WalMart instead of Armani’s or Chanel, buy at Target rather than Harry Winston’s or Nordstrom’s. They can drive Chevys and Toyotas instead of using limousines or scooting around in Jaguars. A purse from Penneys lasts as long as a Kate Spade purse and a house is just as nice as a mansion or two. But I bet they won’t do it. Half the fun of being rich is showing off.

The real problem with the FairTax is threefold. In " An Open Letter to the President, the Congress, and the American People Concerning Reform of the
Federal Tax Code," which is posted on the FairTax website along with the
endorsement of seventy-five "professional and university economists," we can
see the trouble with the FairTax immediately:

We are not calling for elimination of federal taxation, which would be
irresponsible and undesirable. Nor does our endorsement call for reduced
federal spending. The tax reform plan we endorse is revenue neutral,
collecting as much federal tax revenue as the current income tax code,
including payroll withholding taxes.

There is only one word to describe the fact that the federal government now
spends almost $3 trillion a year: obscene. At least 90 percent of what the
federal government spends is unconstitutional, wasteful, or against the
limited-government principles of the Founders. The only thing the FairTax
does is change the way the state confiscates the wealth of its citizens. As
Congressman Ron Paul says: "The real issue is total spending by government,
not tax reform."

If you think the real issue is Federal Spending, then deal with that issue and leave the FairTax alone. Like veteran’s benefits and prescription prices, national health care and national transportation, Federal Spending has NOTHING to do with taxes. If that’s your issue, deal with it. Reducing income taxes won't cut spending; it'll just cause a raise in taxes somewhere else. MY issue, and the issue of 600,000 other Americans is to get rid of the current income tax structure and replace it with the FairTax.

Because the FairTax is a consumption tax, Murray Rothbard's conclusion about
consumption taxes is apropos:

The consumption tax, on the other hand, can only be regarded as a payment
for permission-to-live. It implies that a man will not be allowed to advance
or even sustain his own life, unless he pays, off the top, a fee to the
State for permission to do so. The consumption tax does not strike me, in
its philosophical implications, as one whit more noble, or less
presumptuous, than the income tax.

That’s poli/soci-speak. Jargon that has nothing to do with the actual day-to-day problems of working, paying bills and trying to earn a little better life for your family. “Permission to live?” That’s sheer semantic stupidity. A consumption tax like the FairTax makes it possible for people to control 100% of their income – to spend it, save it or invest it. Whatever we do with it is good for the economy and good for us. Stop throwing smoke bombs like that in your arguments and stick to reality.

The FairTax does nothing to tame the federal leviathan. The solution is
nothing less than a drastic reduction or wholesale elimination of its
revenue source. What is fair about allowing the government to confiscate 23
percent of the value of every new good and service? FairTax proponents may
call it necessary legislation, but I call it highway robbery.

You are repeating yourself; I suppose because that's your real argument. And it is not an argument against the FairTax -- actually it's an argument FOR the FairTax. No tax or lack of tax is going to tame that. Only control of your congresspeople and senators can do that and if you can’t control them, replace them. What’s fair about adding the tax is that with the eliminated embedded tax, prices come out even. FairTax doesn’t cost more but it increases the tax base and the economy. Call it highway robbery if you want, but you’ve called so many other things incorrectly (and emotionally) in this piece, I don’t think another little bit of tacky name-calling will matter a bit.

Increasing the Tax Base - Group 3

2005-05-28T18:09:00.000-07:00

Illegal Aliens. One of my favorite topics. Illegal aliens are usually, although not always, paid in cash, so payroll taxes are not taken out. I differentiate immigrants here as “illegal” because those who are here legally are paying taxes through a payroll deduction. I am assuming that the illegal aliens we are talking about here is the immigrant from a depressed country and there are here to earn money to help their families survive back in the old country. And yes, I know that is not the only reason illegal aliens are in the United States, that’s a topic for another time and place. I may have problems with the “reason” they are here, but I am more concerned with the “way” they are here. But that too, is a topic for another time and place.

The illegal alien generally doesn’t have a traditional job. They are usually day laborers and paid in cash. They are gardeners, hotel maids, dishwashers, mechanics, nannies, and in other jobs where the employer is willing to pay them in cash. Are they bad people? Of course not. That’s not the point. Even though they are here and try to “fly under the radar” they will need public assistance in the form of social services. At some time or another, because they work at minimum wage jobs, someone will help them to apply for welfare, WIC, Medicaid, and any other number of social welfare programs that my liberal side and my fiscally conservative side fight over. These programs are all paid for through my (and your) tax dollars.

Under the Fair Tax, illegal aliens would automatically be added to the tax rolls every time they made a purchase. Here in Manatee County we have a large Hispanic population. I see Hispanics in every store I shop in. So, my point is, under the Fair Tax, they would pay a tax every time they shopped, just as I would.

We started out with the wage-earner group and added the criminal element, tourists and now illegal aliens. Who will be in the next group?

Taking Browne Down

2005-05-27T08:00:00.000-07:00

It's downright cowardly to post opinions on a blog without allowing comment on them. That's what this fellow called Harry Browne has done. He says he has too many things going right now and doesn't have time for responses but he'll read e-mail. If he's THAT busy, he'll just delete e-mail and no one will see your carefully researched and thought-out responses so I've decided to post mine publicly. I'll quote his statements directly (and put them in italics) and answer each with mine.

Browne writes: "National Sales Tax: I've been opposed to the idea of a national sales tax from the first time I heard of it — so long as it does not involve a dramatic reduction in federal spending. Without a reduction in spending, it is just rearranging the burden of big government (which is also the case for any tax cut that doesn't involve a reduction in spending). And thus is a complete waste of our time and effort if we support it." Yes, government spending should be cut but that has nothing to do with the issue at hand. Tax collection and tax spending are two entirely different issues. HOW taxes are collected does not affect how government spends the money.

"I've said that, once the poor have been made exempt and all the politically strongest industries have exempted their products from the tax, the rate will have to be at least 30% — and probably even more than that. Because of this, it's very unlikely that the tax will ever even be enacted."
"People who say it can't be done should get out of the way of those who are doing it" Chinese Proverb.
Under the FairTax the poor are not exempt. No one is exempt from anything, which is one of its strong points. With FairTax, everyone pays the same amount on new goods, approximately what we're paying now. However, everyone gets a rebate to keep everyone from paying tax of any kind up to the poverty level. It's a great idea -- NO ONE pays taxes up to the poverty level.

"Now Bryan Russel has written to me to provide a number of other reasons to shun the idea of a national sales tax. Here's some of what he said:• It would hurt the economy because it would be an incentive for people not to buy new products, but to buy used items instead (garage sales etc.) to avoid the huge tax." This argument is an un-thinkiing one. Take new cars, for example. Everyone knows that when you drive a new car off the lot, it depreciates in value by some 20% or more immediately, before you even park it in your driveway. Also, you could rent a new car for less than you can buy one. Neither fact has hurt new car sales at all. People still buy new cars for many reasons that have nothing to do with saving money: They can afford it, or they like the smell of a new car, or they're wealthy and want to show off their wealth. (Like buying a new Cadillac every year!)

"• Immediate criminal element in all retailing. Can you say "black markets"?! " Do we have a huge black market in new cars? The same analogy works here.

"• Endless companies lobbying for their product to be tax exempt or at a reduced tax because it is environmentally friendly or is produced by a minority owned company, etc. In short, we would end up with a complicated sales tax code similar to the income tax mess." Read my lips -- NO exemptions. No need to lobby because there are NO exemptions. The fact that the current income tax has those is what has prompted this move to the FairTax in the first place. Besides, when companies are not taxed on their production, they have a built-in incentive to produce more.

"• We might end up having to carry "tax I.D. cards" because sooner or later the politicians would decide that poor people should pay at a lower rate and maybe rich people would pay at a higher rate." "We might" have to fly to the moon for breakfast, too. "We might" is meaningless fop. Do you have a social security card? That's all you need to get your prebate. Poor people pay less tax because they spend less money. The wealthy buy mansions instead of houses, are dressed by Lagerfeld and Versace instead of Penney's and Dillards. They travel in lear jets, jags and limousines instead of Chevys and Toyotas to places like Monaco instead of Las Vegas. Donald Trump is not going to suddenly start buying at WalMart to save money. Part of the fun of being wealthy is showing off, living high, and spending the money.

"• We would need to keep records of how much sales tax we pay — to make sure someone who is making $200,000.00 a year is not paying only $500 in sales tax and thus must be "cheating" by buying things in the new black market or whatever."
With FairTax only merchants keep records on the tax -- they do that for state taxes now, anyway. And they are repaid a quarter of !% on the dollar for being the middleman. It's easy for everyone to know just exactly how much they do pay because it's right there on the sales slip but it's already paid.

As for tax evasion -- sure. Some people will find a way to evade some taxes. If a person is a crook, changing the tax structure isn't going to change his ways. However, FairTax will bring $350 BILLION of now-evaded taxes into the tax base, along with drug dealers, porn dealers, prostitutes and illegal immigrants who do not pay taxes at all now. Also 40 million foreign tourists a year will pay into the tax base. FairTax will broaden and strengthen our economy far beyond what it is at present.

"• Government regulations would be overwhelming. The government would be prying into inventory books, as well as tracking all goods to make sure the tax is paid. TVs and other high dollar items might have to include microchips to track them to make sure the tax gets paid." That's what the IRS is now. That's part of the reason to get rid of the income tax and install a new and much more visible FairTax.

Perhaps you've noticed that every one of these arguments is a pie-in-the-sky argument, based on myth rather than fact. "What if," "it might," "it would be" -- all naysaying negativism based on false probabilities rather than facts. Silly, ineffective arguments, each and every one.

The FairTax is a consumption tax that gets rid of the IRS and all the attendant time and effort spent on income taxes while funding the government at current levels, including social security and medicare. It solves the social security problem.

It also gets rid of employee taxes and other corporate taxes.

FairTax requires people to pay a tax on new goods and services only without raising those prices significantly. It provides a montly rebate to everyone who holds a valid social security card and thereby assures that no one pays tax on anything up to the poverty level.

The FairTax gives you your entire paycheck to do with as you choose -- spend, save or invest. Whichever you choose of those options is good for the national economy. Pay your entire house payment with pretax dollars.

FairTax strips hidden Federal income taxes and compliance costs and makes US goods more competitive in international markets and brings outsourced jobs home along with foreign companies to the USA since we'll be the only country in the world that doesn't tax productivity.

I think Mr. Browne has been too busy to do his research on the FairTax. And, folks, your comments, pro or con, are welcome on this blog.

Increasing the Tax Base - Group 2

2005-05-23T16:52:00.000-07:00

We have an enormous number of people coming here from other countries. They are called "Tourists". They come by plane, train, bus, car, and cruise ship. And God Bless them! Many cities and states depend on the tourist dollar to survive. They visit our amusement parks, museums, national parks, eat in our restaurants, sleep in our hotels, rent cars, buy clothing, souvenirs, food, and all the things that tourists do when they are on vacation. Tourists don’t have jobs in the US, so they are not required to pay taxes.

Tourists don't pay taxes, but they have the use of our social services all the same. Social services such as police and fire, courts, and yes, even military protection, to name a few. But they contribute nothing to the costs of these services. Oh, you could say that when they pay a state sales tax they are paying for those services and you would be right. But, don't forget, they do enjoy the protection of the Federal government too.

For example: Transportation Safety Administration (TSA). Think of the tourists who go through TSA ports every day. As bad as it may be, TSA is a branch of the Federal government and must be paid for somehow. Currently, it's paid for out of our tax dollars.

Another Federal agency is the military. When foreign tourists on in American, they enjoy the protection of the United States military. What? You think that should the US be invaded or attacked, the military will be looking for birth certificates or passports before protecting the citizenry? No, they will protect all of us within the US borders against the terrorist or invader.

In 2003, there were approximately 40.3 million tourists to the United States. They spent approximately $93.7 billion (yes, billion with a “b”) dollars while visiting. I won’t even try to figure how much money that would have meant in tax revenue.

By “adding” international tourists to the “tax rolls” by way of a consumption tax, tax revenue increases dramatically.

We started out with the wage earner and then added the criminal element. Today we added the tourist. What group will be added to the list next?

Increasing the Tax Base - Group 1

2005-05-17T17:22:00.000-07:00

This first group is right under your nose. Pick up a newspaper, turn on the radio or TV and you’ll hear about this group. You may have had a close encounter with this group. I’m talking about the criminal element.

Very few criminals pay income tax. They don’t have traditional jobs. What are they going to put on a tax form for “employer”? The names of their victims? Too cumbersome and quite often, they have no idea of what their victim’s names are and, get this! They don’t care! Or if they sell drugs, maybe they should put the name of their supplier? Oh, that might be bad for business, not to mention their lives. And since criminal activities are illegal, it might not be a good idea to file taxes in the first place. Somebody might start asking questions.

The criminal who actually pays an income tax does so because they have an income that covers their illegal activity. Some criminals run an automotive business of some sort so that they can funnel stolen cars or car parts through the business (chop shops). They may pay taxes on the their income from the business, but not on the stolen cars or parts. Someone else might have a business where they sell property stolen by other people (fences). Maybe they have a business that covers their drug sales. I used to live next door to a beauty salon that had people coming and going at 1 and 2 in the morning. I knew something was going on, but had no personal knowledge of what was happening, but my first thought was drugs. Turned out I was right. Adult entertainment facilities (strip joints) are known for their drug sales. Do you think the owners claim the sale of drugs on their income tax forms?

Like the wage earner (you and me), the criminal element has to buy certain essential items like food and clothing. No matter whether upright citizen or criminal we also buy other things, furniture, electronics, entertainment such as CD’s, DVD’s, Playstations and games, jewelry, cars, vacations, and houses. The difference may only lie in the cost of the item. The criminal, unless his (or her) money is spent on drugs, always seems to have more “stuff” than I can afford. To be fair, there are an awful lot of criminals out there who don’t rob and steal for just the money, or for the thrill of it. They don’t steal so they can buy “stuff”. They steal for drug money.

The reason why they steal doesn’t really make a difference. They don’t file an income tax. They still have to buy clothing and food and the same things you and I buy. By instituting a consumption tax, they will pay the same taxes that you and I pay.

Broadening the Tax Base

2005-05-16T10:42:00.000-07:00

I think we all agree that the current tax system is burdensome. No one l know likes having to take the time to fill out their tax forms every year. Gathering the forms, waiting until your employer gives you your tax information, then trying to figure out what your tax liability is, what you’ve already paid in, filling in the forms, writing a check if necessary and finally actually filing. Do I mail it or send it electronically? Did I claim all the deductions I’m entitled to? Did I do something that will trigger (gasp!!) an audit?

I think we can all mostly agree that we hate paying taxes. Do you realize that paying an income tax is a relatively new concept? The 16th Amendment, Income Tax, was passed in 1913. That’s less than 100 years ago. We’re not talking about something that’s been around since the dawn of time. Taxpayers figured out how much they owed and wrote a check payable to the US Treasury. It wasn’t until WWII that the government started automatic withdrawals from our paychecks (the deduction on your pay stub called Federal Withholding). Again, a relatively new concept. It was to make it easier for taxpayers during the time of war. And then, it was only supposed to be until the end of the war. Uh huh. Congress got hold of this cash cow and wouldn’t let go.

In the 1930’s FDR started the Social Security program. It was designed to help the elderly and poor during the Depression. A noble concept that my liberal side agrees with. It was funded by money taken from the tax payer, the deduction on your pay stub called FICA-Regular, and put into a “Trust Fund” where funds were disbursed from to give to those eligible.

During the 1960’s, more social programs were enacted: Medicare being one. Again, a noble concept. But, in order to fund these programs, money had to come from somewhere. Congress decided that our payroll taxes could pay for it. And this is funded by the deduction on your pay stub called FICA-Medicare.The problem comes in when there are fewer taxpayers for each social welfare program recipient. That’s the problem we’re facing today. The Baby Boomer generation (1946-1964) is beginning to retire. And yes, I have a vested interest in this problem. I’m a Boomer, born right smack in the middle.

So, what do social welfare programs have to do with the Fair Tax Act? I’m so glad you asked! When the FTA is passed (I’m an optimist, I believe it will be passed when people understand what it can do for them), it will immediately broaden the tax base to include large groups of people who do not currently pay income taxes. By including these groups, the tax base will be broadened and all social programs can continue.

What? They don’t pay taxes? I have to pay taxes! Why don’t they? Well, let’s examine these groups and find out why they don’t pay taxes. What groups are we talking about? Well, come back for Part II and find out.

2005-05-13T15:38:00.000-07:00

National Retail Federation Doesn’t Get it

What would you do if I told you that I would give you the equivalent of whatever you pay in Federal payroll taxes each payday? What would you do with that money? The National Retail Federation thinks you would put it a coffee can and bury it in your backyard. Or maybe you’d put it under your mattress. Maybe you’d hermetically seal it in a mayonnaise jar and leave it on Funk and Wagnall’s back porch.

You probably wouldn’t do any of the above. If you’re like the average American, you’d spend it in some way. You might pay bills, maybe pay off a credit card or two. You might put it in a savings account and use it to pay off your car or mortgage. Or maybe take a vacation. You might save it for your child’s college education. You might save it towards a down payment on your first home. The idea is that you would spend it.

For the last several years, Florida has given its citizens a tax-free week where no state sales tax was collected when people bought items that would be used for going back to school. It wasn’t just for children’s clothing; adult clothing was included. Also included were backpacks, school supplies and the like. The eligible items were really stretched the imagination. Last summer, instead of tax-free school supplies, the state gave us $.08 cents per gallon off gasoline because gas prices were so high. I wonder if they’ll do that again this year.

I know that the Florida legislature has decided that in June, we’ll have a tax-free week for hurricane supplies. Batteries, generators, lumber, radios, and just about anything else that could be used for hurricane alerts will be tax-free.

And, if I know Florida taxpayers, they will be out in droves, buying things they didn’t buy last year to prepare for hurricanes because it will be cheaper (no state sales tax). It’s human nature to buy “stuff”. Hurricane supplies, gasoline, and back-to-school items aren’t exactly “stuff” but I think you understand what I’m getting at. When people have money, they spend it. The NRF has it all wrong. When the economy is good, people spend. When your personal economy is good, you go to dinner, you go to the movies, you buy clothes, cars, boats, jewelry, and even houses. You begin to take vacations. You begin to think of saving and investing for the future.

The NRF is also concerned that the working poor would be all but destroyed because a tax rate of 23% would take all they earn. What the NRF doesn’t say is that there is already a corporate tax hidden in the price of all goods they are currently buying. Economists say that tax is as high as 22%. With the Fair Tax, prices would be reduced because taxes would not be charged to the retailer, only the end user – you, the purchaser. So, that item that now costs $100 would be reduced to about $78. A national retail tax of 22% would be about $17 and you would pay $95.00. You would save $5. Not a big savings, but it’s a savings!

You would also have your entire paycheck, minus state income tax and any deductions you have that are not Federal taxes. I have about $350 taken from each paycheck. That means I would have an additional $350 each and every paycheck to spend as I see fit. I doubt that I would bury $350 in a coffee can in the backyard!

I honestly just don’t understand why the NRF isn’t behind this 1000%. More money in the pocket means money spent in the stores. The stores will benefit, the store employees will benefit, and the taxpayers will benefit by a national retail sales tax.

The FairTax is Still the Answer

2005-05-11T20:17:00.000-07:00

There was recently a letter presented to the Americans for Fair Taxation for answers. Karen from Iowa needed some help answering several questions that her son, Michael, had. I decided to take the questions that Michael had and answer them in a public forum. The following questions and comments were presented, in red text. My responses are in black text (and bold).

He opens with: The Tax Gap is an interesting topic, and unfortunately one that is rife with holes. Did you realize that most of the tax gap is attributed to illegal trade? Not cheating on taxes, but actually selling drugs, prostitution and the like.?

Ok, nonetheless, we still have a tax gap and the FairTax would solve most of the problem by putting a sales tax in the face of prostitutes and drug pushers. Also, only retailers would be taking on tax form filing, which reduces the number of filers by 80%, and subsequently compliance and cheating.

One of the problems with a consumption tax vs. an income tax is that consumption taxes increase the incentive to shop on the black market.Because the drug dealers are already not paying taxes on the product they sell, having a consumption tax will not provide much more of this $300B (tax gap) to the government. Yes, the dealers will pay taxes when they buy homes or fancy cars, but a consumption tax will create black markets for these types of goods, and the drug trade takes money out of the hands of the drug users that is then not taxed when they consume the money by purchasing drugs.

Illegal drugs will not be taxed – correct. But, are they taxed now? Not quite. We’re looking for better alternatives than the current system. It would be great if there was a perfect option that has been as researched as the FairTax, but there isn’t.

Keep in mind that used items are not taxed under the FairTax. Tax avoidance with the FairTax will dramatically decrease (not go away) with the FairTax. There will be stiff penalties in place for retailers that cheat the system, which will be the only filers.

There actually are many downsides to HR-25. If you want to champion this cause, you'll need to find these and understand the cost/benefit trade off. There is no black and white.

Correct. I’ll go ahead and tell you the downsides. Current Roth IRA holders will have a disadvantage with this system. Municipalities that use tax-free bonds for debt will have a disadvantage under the FairTax, compared to the current system (when only considering that aspect of the plan). However, compared to other bond holders, there is no disadvantage. But overall; even tax-free bond debt holders; everyone will thrive under the FairTax system.

The important thing to take from this is to come up with a solution for the little problems that need tweaking, along the way. Slamming the whole system because of these issues does no good. Optimism can do you good! No one could disagree that the FairTax in general is much better than the current system.

On a separate note, sometimes there is black and white in this world.

For example, consumption taxes increase black-market activity. Will anational sales tax create a new federal criminal class of people who trade on the black market? i.e: you can go to the Federal Pen with Martha Stewart for selling Grandma's collectable jewelry and not reporting it?

Once again, used items are not taxed at trading time. So, the answer is “no”. Taxes will be collected at the retail level (i.e. Wal-Mart and Target).

Where should the tax be applied, only at the end-consumer (a sales tax as proposed) or at every exchange in the process (a value-added tax)? A sales tax will encourage cheating by people starting fake businesses. How do you regulate this? Will it take another Federal entity like the IRS?

The FairTax bill explicitly states that the only tax that will be collected will be at the cashier’s register, as an end-consumer, only once. Fake business entities are a possibility, but will be regulated, at a much smaller cost and size than the current IRS, I might add. The states already regularly regulate activity such as this for business licenses.

Like (I asked on a different occasion), do you allow a "poverty line", or any exemptions to the sales tax, like home-sales? When you start doing this, who should make the decisions about what "favored industries" will get this very large and lucrative tax break? If we exempt home sales, how much does that increase the taxes on clothing sales? Remember that food, clothing, housing and transportation are four of the five largest consumer expenses - the largest is taxes. What about college tuition?

The FairTax plan explicitly includes a monthly rebate for a set amount for every American at the sales tax (30%) times the poverty level already set by the Health and Human Services. This creates, like you stated, a way to avoid favoritism, which is most efficient and reduces lobbyists. This will create the effect of progressivity, which many Americans feel is important for a tax system. The only items that will not be taxed, which are technically not retail items, are education expenses, charitable contributions, and interest payments. Education is considered to be a human investment. This is essentially the same thing as an income tax deduction for charity and mortgage interest. Which, I might add is more efficient than the current system of deductions because workers will be able to donate and pay for their home with pretax dollars.

Consumption taxes also go against "family values", because they increase the tax burden on young, working families that need to spend more money than older established families do. A young family needs a home to live in, affordable appliances, diapers, bed-sheets, and more groceries than older couples. Because of this, younger families are also likely to purchase lower-quality durable goods (appliances), that need to be replaced (and taxed again) sooner than an older couple. If I buy a new house, I need to get a washer, dryer, fridge and stove - and let’s say for $2,000, but these appliances are of such quality that they only last for 10 years. An older couple who has an irreparable stove can elect to spend $1,000 on a new high-quality stove - that will last for 30 years. So the average annual taxes are higher on the young couple for the exact same service, just because they don't have enough money to afford the better quality durable goods with a lower per-year tax rate.

I’m sure you will agree that young people grow old eventually, right? I wish there was a fountain of youth, but there is not one, yet. Everybody’s entire life spending pattern will be the same, eventually. This is a transition issue, and it is understood what you are saying, but it will all work out in the end. Once again, no tax reform plan is perfect.

I also need to get you a copy of (the book) How to Lie with Statistics. The article (you quoted in another text) uses bad statistics because it tags a "flat surtax" against a floating allocation system. (Our) taxes were not $4,000 too high last year because of tax cheat(er)s. $312 billion divided by $2,052 billion (the national budget) is a tax increase of 15.11%. (We) will pay approx(imately) $8,000 in Federal taxes this year. So if the drug dealers had paid their taxes instead of me, and the government was nice enough to lower the tax rates so that I could keep this money, I should only pay $6,800. This means that (we) only get socked for $600 each ($1,200 / 2 people), not $2,000. The proper statistical number is that "Federal income taxes could be lowered by 15% without reducing Federal expenditures if the cheat(er)s paid this money". This is because the top 5% of earners ($250,000+ a year) pay approx 75% of the income taxes.

You are correct. I’m sure somebody had their math wrong on that one. It’s still an issue that would be helped by the FairTax, no matter how much it is. About the high taxes of the top income-earners... isn’t social redistribution awesome?

A consumption tax is a good idea, but one that is fraught with pitfalls and unknowns. There is a much more simple solution. IRS tax simplification is a concept that few politicians talk about anymore.They made a feeble attempt in the late 80's, and Ross Perot championed the idea, but Congress soon started mucking the process up again under Clinton and Bush.

In 1913, when the income tax was enacted, our system of income taxation was simple. From there, it all fell apart. I would agree that tweaking the current system would be easy and not require much change for the very courageous politicians that we have in Washington. But, we would still have the IRS and the ability to muck up the system, just one year later with lobbyists and new rules. You remember 1986; you said it yourself. No matter how much simplification, (unless completely redone) there will be too much room to get where we are today.

Tax simplification is easy to understand. There are only 3 brackets, poor, middle class, and rich. When I looked at this in college, the numbers were not too complicated. For each person in a family (including children), you can get your first $10,000 in income with no tax and no social security. The next 20,000 pays approx 10% federal tax and 5% FICA. Everything over 30,000 pays 35% federal tax and 8% FICA. Simple, (right)? It is a postcard system for the 80% of American's who only earn W-2 salary, interest and pensions. A family of (four) gets the first 40,000 tax free, pays 15% on the next 80,000, then 43% on everything over 120,000.

As I was saying, the Flat Tax (which is what you are championing) is a good idea in theory. It won’t work though. The 1913 tax legislation started out as a Flat Tax, even more so than you are proposing. In fact, after listening to the Tax Reform Panel’s meeting today, I’m more convinced. Even called a Flat Tax, there are already plans for loopholes and deductions. We have to scrap the system and start over. We have to cut our losses. There is no way out without getting rid of the IRS completely and the income tax. Why are we so stuck on taxing work anyway? We need to open the door for people to get ahead, not to be taxed on everything they make.

Again, in college, this decreased total taxes on the poor (bottom 20% of taxpayers) by just a little bit, decreased taxes by about 10% on the middle class (21% to 90%) and increased taxes on the rich by only 5% (top 10% of taxpayers). Since the mid-1990's, the tax burden has shifted more to the middle class from the rich, so I would expect the top-tier increase to be somewhat higher if somebody recalculated this today. The brackets would also need tuning, maybe $15,000 for the poor and $25,000 for the middle class.

One problem with your theory is that, unlike the FairTax, it hasn’t been researched. You mention that a set range of income has not been set. The FairTax has been researched for more than a decade and is ready to go, with legislation already in the House.

Another problem is that your plan’s burden of taxes shifts from one class to another. We don’t need class warfare. The FairTax only shifts the burden from current taxpayers to current non-taxpayers, which increases the tax base significantly. Virtually all current taxpayers will benefit under the FairTax. An increased tax base comes from prostitutes, drug dealing income-earners, tourists, illegal aliens (millions of people that use our federal services now), and tax cheaters.

I also need to add that a system like this focuses on "family values". A truly fair system would not be based on family size; after all, it is my decision to have 3 or 4 children, so why should retired people or people without kids pay more in taxes than I do?

I would agree. I hate it when welfare recipients have children just to get more money from the government. The current income tax system with child credits is exactly like you say. The FairTax (I guess similar to the current system), however is based on the logic that more goods and services are needed for each individual, child or adult. Because the monthly prebate is given to everybody, it covers the tax on essential goods and services for one person. The tax system is not based on family size; it is based on individuals that just happened to be in a single family.

To add some more comments, I would suggest that everybody read about the bill at http://www.fairtax.org/ and http://www.myfairtax.org/, and contact your congressperson in support of the bill.

The Time for FairTax is NOW

2005-05-10T05:34:00.000-07:00

by Frank Salvato

It is a rare thing when the American people can get excited about a piece of federal legislation that involves taxes. Normally, our elected officials are trying very hard to figure out how to sugarcoat yet another tax increase so they can supplement their habit of funding things like museums for ground hogs and rodeos and tropical biospheres in the farm belt. But a bill sponsored by US Representative John Linder offers a “once in a lifetime” opportunity for our lawmakers to not only do what is right by the American people, but do something that makes them look good as well.

Say the word “change” to a member of congress and immediately their palms begin to sweat and their eyes start to shift nervously from side to side. Faster than the New York Times can put up another picture of a terrorist with a hood over his head, politicians erect a security wall in an effort to maintain the status quo.

But this time it doesn’t have to be that way.

Congressman Linder’s bill — H.R. 25, dubbed the FAIR Tax Bill — is a brilliant piece of legislation. What it proposes is nothing short of genius in its simplicity. The bill would replace our current inferior system of the income tax with a revenue-neutral personal consumption tax. The IRS would be eliminated as we know it and there would never be another tax deadline or audit again. It sounds too good to be true, right? Well, it is within our grasp. All we have to do is “lobby” our elected officials for it.

This proposed legislation would put in place a more equitable tax system while affording a win-win situation for the American people, business and government. In fact, there are no losers but for the political spendthrifts, not even the people employed by the Internal Revenue Service would lose.

If the FAIR Tax system was adopted, taxpayers would be able to keep 100% of their paychecks. In return a 23% consumer tax would be assessed on goods at the time of purchase. That may sound high but consider that most Americans fall into the 15% tax bracket and have to pay 7.65% in payroll taxes (just about 23% right there). Then add in all of the hidden taxes placed on goods and services, 23% is less than what most people pay now.

The beauty of this system is that it is directly proportionate to what people spend. Those who earn more tend to spend more and would pay more in taxes because they make more and spend more. Those with lesser income tend to spend less thus they would be paying less in taxes. The system is proportionate unlike the system in place today.

Critics say that the proposed tax would be unduly harsh on those below the poverty level. That couldn’t be further from the truth. Under the FAIR Tax a rebate payment would be issued to every American household to replace the sales tax paid on necessities. No American would pay taxes on necessities and those living below the poverty line would effectively pay no taxes at all.

Congressman Linder’s proposal provides a more stable tax revenue generating system than the income tax because consumer sales vary less than does the income of the American people. We have the most robust economy in the world with consumer confidence that is rivaled by none. This tax system allows us to benefit from that confidence.

Further, because this tax is assessed on the “end user” business-to-business purchases and expenditures would not be taxed. The proponent organization Americans for FAIR Tax has commissioned research studies that indicate that would stimulate an estimated 20% to 30% drop in consumer prices allowing for our spending dollars to go even further than they do today.

In a last gasp of twisted rationalization I can almost hear the politicos now, “But what of all the employees at the IRS and at the tax preparation companies?”

To be sure, there will be a need for credentialed tax professionals within the FAIR Tax system. Taxes are still being extracted so there will be a need for auditors. The difference here is that auditors would be allowed to be auditors instead of having to act like law enforcement officers. There would be some who would be in need of employment after the change — there’s that scary word again — most tax professionals are highly trained. With the estimated 10.5% growth the FAIR Tax would stimulate, the economy would be ripe to absorb these professionals into the private sector. This would eliminate the IRS and its feeding off of the public trough at a cost of $250 billion every year.

Oh, and by the way, the FAIR Tax would make moot the ongoing argument about Social Security and Medicare. Government would be fully funded under the FAIR Tax system.

The only reason this exceptional piece of legislation may not become a reality is that the politicians didn’t want it put in place. The only reason they could possibly have to cheat you and me out of a superior and more equitable system of taxation would be because they are afraid of “change.” The new system might spotlight their pork barrel addiction and their failure each and every year to balance the budget and spend within their means. The only reason they wouldn’t vote for this intelligent piece of legislation is greed.

If you are tired of taxpayer funded studies on the mating habits of the South American three-toed tree sloth and redundant public works projects, contact your elected officials today and demand that they support the FAIR Tax. After all, they work for you, you shouldn’t have to work a third of a year for them.

Frank Salvato is a political media consultant and managing editor for TheRant.us.

ZERO Income tax and Zero Payroll Tax

2005-05-09T05:12:00.000-07:00

I originaly wrote this op-ed in late January after Stephen Moore wrote his article on the flat tax. Considering that Stephen will also be testiyfying along with Steve Forbes on the Flat Tax ( tired, weak and anemic solution) to the President's tax reform panel, I thought it would be good to share it again.. I hope you will enjoy the car analogy and remember the Fair Tax is a fullly researched and documented package that has already been put into full legislative form and is waiting in the garage ready to rev up our economy and give every American Family a raise in take home pay.

Merrill Bender is an author of several articles on the ten-fold economic benefits of the Fair Tax Legislative package and writes on his tax blogger site - Tax Reform "Fair To All"

The answer to Stephen Moore's January article titled "How much Tax would you like to Pay?", is ZERO Income tax and ZERO payroll tax. That is actually what will happen under an up to date and ready to go Legislative Package- HR 25/ S25 commonly called the Fair Tax- www.fairtax.org.

The FairTax has a ten-fold economic benefit to the American economy that far surpasses the limited benefits for a Flat Tax that Mr. Moore admits he rolled out over 8 years ago. Mr. Moore has resurrected from the auto junk yard of tax reform a car that won't run and is easier for special interests to hijack and steal later on. He is trying to inflate the tires but the engine in this car will not provide enough energy to rev up our economy or go the distance to create quality jobs.

Mr. Moore's car only eliminates about half of the $225 to $250 billion dollars in tax compliance costs where the Fair Tax eliminates a much stronger 80 to 90% of compliance costs. Mr. Moore leaves 90% of the cumbersome IRS tax code because even under a Flat tax, 90% of the code determines the definitions and calculations of the income to be taxed.

He also leaves in place a tax code that is more likely to be corrupted by lobbyists and special interests in the future. Lobbyists who will continue to manipulate the code to rob Peter to pay Paul. Under the Lemon Law he should return this car to the used car lot he got it from. American families want a new tax reform car that is safe and well tested for the economic roads of a new century. Two of our largest states operate their state budgets on a sales tax with no income tax, Florida and Texas.

The Fair Tax is " Family Friendly Tax Reform " whose time has come.The Fair Tax package eliminates all Personal and Business income taxes, payroll taxes, AMT, and Death taxes. Due to these eliminations, prices will drop 22 to 25% and then the Fair Tax replaces them all with a revenue neutral federal retail sales tax on new products and services. Consumers will pay about the same as they do now.

However, exports are not taxed thus the Fair Tax will provide a boom to American manufacturing because American products will be 22% lower in price for sale overseas. We can't compete with low wage countries but we can compete with lower taxes on business, products and services made in America.

The Fair Tax Legislative package has been well researched and is well supported in the research section of their web site - www.fairtax.org. Though Mr. Moore uses old information from Dr. Dale Jorgensen of Harvard University in his article, he must be unaware of the up to date information and research quoted from Dr. Jorgensen that supports the Fair Tax Legislative package. Dr. Jorgensen calculates a 10.5% growth in the economy in the first year of the Fair Tax.The Tax Reform debate and the research is far beyond the simple discussion of Flat Tax, VAT or National Sales Tax, though some will still go through the motions.

The Fair Tax is much more than a National Sales Tax, it has additional provisions that result in prices dropping 22 to 25% before you add in their NST. Consumers will pay about the same for products and services as they did before but take home a much bigger paycheck that is 100% free of federal income or payroll tax. In addition, the Fair Tax has provisions to maintain Progressivity by providing a prebate of the sales tax up to the poverty line to every family. For a family of 4 they receive $479/m for a Couple they receive $357/m. An Average family of 4 making $50,000/yr will have more than $7500 in additional take home pay and after tax purchasing power under the Fair Tax there by making it both progressive and fair. The more you spend the higher your effective tax rate. Supporters say, "Those that Know the Facts Love the Fair Tax". More importantly it is the only comprehensive tax reform proposal that eliminates the income tax and the more regressive payroll tax.

The Fair Tax has just been re-introduced from the 108th Congress to the 109th Congress as bills, HR 25 and S25. The Fair Tax had 55 Co-Sponsors in the last Congress and plans to have over 100 in the new Congress. Dennis Hastert and Tom Delay have both indicated support. Congressman John Linder of Georgia was the original sponsor of the Fair Tax bill and has just been appointed by the Speaker to the important House Ways & Means Committee and its tax writing subcommittee.

The Fair Tax meets all the guidelines set down by President Bush for his tax reform panel including promoting home ownership and supporting charities. In addition, the Fair Tax also meets the 3 standards set by House Minority Leader, Nancy Pelosi in her open letter to the President on Tax Reform sent 12/15/04; 1) Tax Simplification; 2)Tax Fairness(Progressivity); 3) Revenue neutral.

This Car is waiting in the garage gassed up and ready to go. Democrats and Republicans need to climb on board and drive our economy in a positive and new direction with the Fair Tax Legislative package. The Fair Tax has been built from the ground up, it has been test-driven and shared with many researchers, economists, average Americans and American Organizations. Supporters include 560,000 members of Americans for Fair Taxation, 350,000 members of The National Tax Payer's Union, and is outlined as a legislative agenda item of the 6 million member American Federation of Farm Bureaus.

The Fair Tax has been fined tuned and polished for the 21st century. It is an economic engine waiting to rev up our economy and send us down the road better able to compete fairly in the global market place and to grow a financially stronger "ownership society" at home.

2005-05-05T22:35:00.000-07:00

The Manipulative and Powerful
Part II of II

Wow! I was just reading off Nancy Pelosi’s (D) website. I’m amazed at what is coming out of her face. As I was saying, they really do think we are stupid. I am appalled to think that some people actually believe what they report. I think I’ll just go right off the top and refute everything she and Mr. Rangel reported on September 23, 2004.

They say: “Today, we are here to highlight one of the many clear contrasts between Democrats and Republicans: Republicans want to undermine our American values of prosperity and fairness with a new national sales tax of at least 30 percent and as high as 50 percent or more on all goods, including homes and cars.” First, why she does not know that this is a bipartisan bill, I do not know. Tell Mr. Cramer (AL-5), Mr. Peterson (MN-7), Mr. Hall (TX-4), and Mr. Conaway (TX-11), all democrats, that this bill is not bipartisan. Secondly, the only thing H.R. 25 (FairTax) strives for is fairness and prosperity. If everybody, especially Ms. Pelosi, understood economics, this would be a no-brainer. Thirdly, the bill explicitly states that the tax rate would be 30 percent (tax-exclusive) on used goods or services, not any more.

She says: “A national sales tax would be a burden for middle class Americans, but a boon for the wealthy. Families with children would lose their current tax deductions, and seniors would essentially be taxed twice.” Actually, if you look at the monthly rebate under the FairTax as a deduction, which it essentially is, then the more members of the household, the more money you get as a rebate. Not losing anything there.

In contrast to the ignorance portrayed here, seniors, unlike under the FairTax, are already double- and sometimes triple-taxed on their earnings. First, everybody has to pay both their payroll taxes (Social Security and Medicare) and income taxes based on their base income, not their adjusted income – basically a tax on a tax. Second, everything that anybody buys, including seniors, has a 22% to 25% hidden cost of the corporate taxes and compliance (accounting and penalty avoidance) that every business passes onto their customers in the form of higher prices. Third, everybody that sells their home (unless they use one of the loopholes – which costs time and money to figure), pays a capital gains tax. Approximately 81% of seniors own their homes.

Not only will people be able to save and/or invest their PRE-TAX money and make money instead of losing the time-value of their payroll taxes, the hidden costs of their purchases will be gone, and prices will go down. When seniors go to sell their home, no longer will the smaller condo cost them that extra 15% to 28% in capital gains taxes. That sounds pretty pricey to downgrade – not so with the FairTax. To top all that off, throw in an extra bit of income that will come every month in the rebate. If that’s not enough benefit, I have more. Let’s just toss in the fact that the FairTax plan makes sure that the Social Security benefits indexing formula is adjusted so that benefits will increase to the extent, if any, that the sales tax results in higher tax-inclusive prices. Don’t forget; the income tax imposed on investment income and pension benefits or IRA withdrawals will be repealed, the estate and gift tax will be repealed, and the older citizens of this country will be happy in the fact that their children and grandchildren will no longer be laboring under the burden of the IRS and the income tax. There is no legitimate argument against the vast benefits for all of us, especially seniors.

They babble: “The… plan would make it harder for middleclass families to make ends meet. A national sales tax would undermine the American value of prosperity. For example, cars that cost $20,000 would cost an additional $6,000 under this proposal. Just wait until the car dealers hear about this proposal. Prescription drugs that cost $100 would now cost $130. New homes, insurance premiums, brokerage fees, and gasoline would all be heavily taxed to replace revenue brought in by the current tax system.” It is absolutely amazing to me what people can manipulate others with when they are trying desperately to hang on. Can you feel your power slip? That must be the problem. Stop LYING to people Ms. Pelosi and Mr. Rangel. You conveniently leave out the fact that before any sales tax is imposed on the people of this country, the current hidden taxes will be gone, in the form of lower prices; approximately 22% to 25%. This is a huge point. Please realize that after-sales-tax prices will be about the same they are with our income tax system. You say that is all well and good, BUT don’t forget that you won’t have any federal withholdings of any kind. All in all, the average tax-paying American will save 25% every year. Personally, I could use 25% more than I make. Could you?

She exclaims: “It would wipe out our system of progressive taxation. A national sales tax would undermine the American value of fairness.” At first glance, the national sales tax wouldn’t be progressive. Unfortunately, a lot of people only give it a simmering glance, instead of actually learning about the entire plan. By itself, a national sales tax would be regressive. There is no denying that issue. However, the FairTax, a more comprehensive and well-researched plan adds, among other things, a monthly rebate to everybody’s income and taxes away the payroll tax, making it progressive.

The distribution of the FairTax is fairer than the present tax law because it only taxes consumption above the poverty line, assuring each family to spend tax-free for their basic needs. This is accomplished by providing a rebate to each family equal to the taxes paid on the purchase of essential goods and services as determined (as has always been) by the Health and Human Services Poverty Level. The rebate would be paid monthly in advance to every family by the Social Security Administration. Before you speak up about the cost of a system such as that, don’t forget that the SSA consistently mails millions of checks every month to Social Security beneficiaries with no problems.

Because of the convoluted tax code, I can not tell you exactly, but the current effective tax rate for an American citizen is somewhere between 0% and 60% with hidden taxes (for comparison’s sake). Under the FairTax, the absolute maximum tax rate someone could pay, even without deductions or loopholes, is 23% (tax-inclusive to compare to the current system), and you would have to be off-the-scale in income earning power for that to happen. Even better though, the poorest citizens (with no other family members), making $1.00 in income would have a negative effective tax rate of about -2,000%. That is extreme, but it shows you the progressiveness of the system, and the fairness at the same time.

She glorifies: “The American people should be aware that the Republicans’ primary tax agenda is a new national sales tax.” Amen! I guess she does have one thing right, although she forgot to mention the other supporters in her own party. I hope they are not offended. I would be!

These examples show great things about the tax system, for individuals. However, I haven’t even begun to tap into the immense benefits for the country and our entire economy. I’ll save that for later. In summary, how about getting rid of the absolute power to take everything you own and make, making the country smarter via pre-tax spending on education, higher wages, lower prices, more jobs, saving trees, getting more useful bills passed in Congress, a boom in investments, more exports, bringing outsourced jobs back to the US, and lowering interest rates – all national interests that the FairTax help.

Mr. Rangel and Ms. Pelosi, please get down from your pedestal and support this bill. If you really want to keep your power, get with what the people need and want. Really, you would find that more people would support you if the facts were presented, correctly. Stop trying to manipulate people. We’re not puppets. It is time for change to the FairTax. Find out what the facts are by going to www.fairtax.org and www.myfairtax.org.

The Federal Tax Code Must be Replaced With a Fairer and Simpler System

2005-05-04T17:44:00.000-07:00

by Herman Cain, New Voters Alliance (Some of his comments to the tax commission)

I. Introduction
The current income tax system cannot be reformed. It creates disadvantages for multinational businesses, domestic businesses, individuals, and our government.
No amount of tinkering with a portion of the tax code is going to fix it. It is too complicated. It inflates the costs of U.S. goods and services to other nations. It is too unfair and inefficient. It discourages people from working harder to achieve upward economic mobility, which destroys hope and opportunity.
The current tax system needs to be replaced. It can be replaced with a national sales tax, also known as the FairTax (H.R. 25 and S 25).
Several commissions over the last twenty years, including the one I served on in 1995 (The National Commission on Economic Growth and Tax Reform), have all concluded that a replacement tax system should satisfy six principles.
First, it should promote economic growth by reducing marginal tax rates and eliminating the tax bias against savings and investments.
Second, it should promote fairness by having one tax rate and eliminating all loopholes, preferences and special deductions, credits and exclusions.
Third, it should be simple and understandable. Simplicity would dramatically reduce compliance costs and allow people to truly comprehend their actual tax burden.
Fourth, it should be neutral rather than allowing misguided officials to manipulate and micromanage our economy by favoring some at the expense of others.
Fifth, it should be visible so it clearly conveys the true cost of government and so people would not be subjected to hidden changes in the tax law.
Sixth, it should be stable rather than changing every year or two so people can better plan their businesses and their lives.
In remarks made in March, 2005 before the President’s Advisory Panel on Federal Tax Reform Federal Reserve Chairman Alan Greenspan stated, “Many economists believe that a consumption tax would be best from the perspective of promoting economic growth particularly if one were designing a tax system from scratch because a consumption tax is likely to encourage saving and capital formation.”
Consider the compelling advantages of replacing the current income tax code with the FairTax.
• Gross Domestic Product would increase 10.5 percent in the first year and level off in succeeding years at approximately 5 percent annually.
• Consumer prices would decrease an average of 22 percent on goods and an average of 25 percent on services by eliminating the corporate taxes and compliance costs currently imbedded in the costs we pay for goods and services.
• A single national sales tax rate on all new goods and services of approximately 23 percent would be revenue-neutral and would replace the current annual tax revenues of nearly $2 trillion.
• The annual amount of tax avoidance, according to IRS estimates, is nearly $300 billion. This amount would not escape the FairTax.
• The annual cost of compliance with the tax code is estimated at over $250 billion. In addition, businesses and taxpayers spend nearly seven billion hours each year filling out their IRS forms and many more calculating the tax implications of business decisions.
• The annual amount of tax loss due to illegal activity is estimated between $500 billion and $1 trillion. Under the FairTax, those engaged in illegal activities would no longer avoid paying their fair share.
• Imported goods would be treated the same as domestically produced goods. This means U.S. businesses would be much less likely to locate their plants overseas.
• All taxpayers would have an equal voice, not just people who can afford tax lobbyists and skilled tax accountants.
• The FairTax would effectively untax the poor, due to its rebate provision.
• The FairTax does not punish those who work second job to improve their family’s economic situation.
• The FairTax untaxes education, by allowing parents to save and invest for their children’s futures.
These advantages of a national sales tax on consumption have been well researched, analyzed and documented by some of the most respected business people, economists, and academicians in the country. Hundreds of thousands of citizens are now actively supporting a change from an income tax to a national sales tax on consumption. The FairTax will unleash the full potential of the U.S. economy, and the potential inside businesses and individuals to pursue economic freedom.

II. Description of Proposal
The FairTax is a non-partisan proposal that abolishes all federal income taxes, including personal, estate, gift, capital gains, alternative minimum, corporate, Social Security, other payroll, and self-employment taxes, and replaces them all with one simple, visible, federal retail sales tax.
The FairTax dramatically changes the basis for taxation by eliminating the root of the problem: Taxing income. The FairTax taxes us only on what we choose to spend, not on what we earn. It does not raise any more or less revenue; it is designed to be revenue neutral. The FairTax is a fair, efficient, and intelligent solution to the frustration and inequity of our current tax system.
Collection Methods

Retail businesses collect the tax from the consumer, just as state sales tax systems already do in 45 states; the FairTax will simply be an additional line on the current sales tax reporting form. Retailers collect the tax and send it to the state taxing authority. All businesses serving as collection agents will receive a fee for collection, and the states will also receive a collection fee. The tax revenues from the states will then be sent to the U.S. Treasury.

The FairTax is not new – most Americans come into contact with sales taxes daily, since 45 states currently use them to collect state revenues. It is easier to switch from an income tax to the FairTax system than it is to switch from gallons to liters or from feet to meters! Of course, those who depend on the structure and complexity of our current system (e.g., tax lobbyists, tax preparers, and tax shelter promoters) will have to find more productive economic pursuits. However, everyone will have enough advance notice to adjust to the new system.

Under the FairTax, everyone will have to think about taxes in a different way. Income – what we earn – will no longer have to be documented, measured and kept track of for tax purposes. The only relevant measure of our tax liability will be the amount we choose to spend on final, discretionary consumption. Tax-related issues will suddenly become a lot simpler and more straightforward than they used to be. The aggravation and anxiety associated with “April 15th” will disappear forever after passage of the FairTax.

Under the Fair Tax, job creation will boom. Residential real estate will boom. Financial services will boom. Exports will boom. Retail will prosper. Farming and ranching will prosper. Churches and charities will prosper. Civil liberties will be enhanced. In short, it is difficult to imagine all the far-reaching, positive effects of this change from taxation on income to taxation on consumption
The future stability of our nation’s economic infrastructure, and the future for our children and grandchildren, will be determined by the political will and courage in Congress to be aggressive with solving the big issues such as the tax code mess. The 92-year-old income tax code thwarts the natural, individual motivation of citizens to use their God-given talents to pursue happiness and their respective dreams.
Conversely, the FairTax allows all Americans to own all the returns on their sweat equity as the fruits of their labor. Ownership lets people realize their dreams and opportunities and is the key to the greatest nation on earth remaining the greatest nation. We have a moral obligation to protect our Founding Fathers' vision and to protect the unalienable right of ownership for our grandchildren.
It's our unalienable responsibility.

Ownership of Choice

2005-05-02T19:06:00.000-07:00

A lot has been said about President Bush’s use of the word “ownership” regarding Social Security reform. Well, it also applies to tax reform. If I recall correctly, we have a higher percentage of home ownership today than at any other time in American history. But home ownership is only the beginning.

With tax reform, specifically a consumption tax like the Fair Tax, Americans will have more money in their bank accounts. Without sounding materialistic, the only limit to what the individual can purchase is limited only by their bank account and personal desires. Sure, you can use credit to get more “stuff”, but that’s not all that I’m talking about.

An average family (usually considered to be a family of 4) making $50,000 a year will have $7,500 more spendable income. I don’t know about you, but we don’t bury money in a mayonnaise jar in the backyard. Our money goes to paying the mortgage, bills, car insurance, doctor bills, lights, phone, car loan, gas for the car, cable, clothing, and groceries. And of course, we do like to eat out once in a while, maybe see a movie, and take the occassional vacation. If you are like us, money gets tight sometimes. There is little room left for savings. And if there's an unexpected expense, forget it! Whether you are saving to pay off bills, put a child through college, put a downpayment on a house, or even take a vacation, it’s hard when you are living from day to day.

Here’s where the Fair Tax comes in. Take a look at your paystub. Look at the amount of money you take home. Now there are three other items I want you to look at. See the line that says FICA? And FICA Regular? You might recognize as Social Security and Social Security Disability. And Withholding? That’s what is withheld for your Federal Income tax. Add those three figures up. Let’s pretend that they total $350.00 each payday.

Now, imagine a day when those don’t appear on your paystub. What happened to that $350.00? Now look at your take home amount. It should be $350.00 more than it used to be. Wow! An extra $350.00? What’s the catch? There’s no catch. The Fair Tax bill was passed and signed into law by the President. You now have more money to spend.

That’s great so far. But, what about Social Security? What if I become disabled? What happens then? Well, let me ask this first and I promise I’ll answer your question. What are you going to do with that $350.00? Well, I’ll tell you what I would do. I’d take that money pay some bills, maybe make a mortgage payment, a car payment or something like that. Maybe I’ll just go and buy some clothes. Oh, the hot water heater needs to be replaced; I can do it now instead of waiting until it actually quits working (that unexpected expense, remember?). Maybe I’d put it into the bank and let it draw interest for awhile. Then maybe I’d take a vacation. Or pay off the car.

When you spend money, the retailer will collect a tax. They already collect state taxes, so it won’t be much more than just some more code written into the software program that calculates the tax. Tax will be collected if you buy a new item, whether it’s clothing, a house, a car, furniture, or a service such as dry cleaning. If you buy used, well, no tax will be collected.

I haven’t forgotten your question about funding Social Security. The taxes that are collected by the retailer will be sufficient to fund the Federal budget at it’s current levels, including Social Security and Social Security disability.

As it stands now, money is taken from your paycheck to fund the Federal budget and you have no say in how that money is spent. Under the Fair Tax you decide how much tax you pay by what you buy. You see, the Fair Tax is a consumption tax. You control the amount of tax you pay by what you buy. If you are Bill Gates or Teresa Heinz you have the money to buy a fully loaded, brand new Hummer if you choose to, and to pay the tax on it. If you are a middle American like most of the rest of us, maybe you want a new car, but can only afford to pay $25,000. Okay, you’ll pay tax on $25,000. If you choose to buy a used car for $25,000, you will pay no tax. That’s right, no tax. A consumption tax like the Fair Tax doesn’t care what how much money you have or what your tax bracket is (there will be no tax bracket), everyone will pay the same tax rate no matter what your income is.

Think of the person earning minimum wage. They will have more money to spend. Instead of slaving away barely making ends meet, the “working poor” won’t have Federal taxes taken from their paycheck. They get it all. Sure, they will have to pay taxes at the grocery store, but so does Bill Gates. The days of Teresa Heinz paying an effective rate of 12% income tax will be over. She will pay the same amount of tax as the single parent flipping burgers, waiting tables, or stocking shelves at the local grocery store who is barely making ends meet. How can it be more fair than that?

Getting back to President Bush’s concept of an “ownership” society: you will own your own money and you will own the freedom to spend the money you earn the way you choose to spend it. It’s not just about owning material things, but that’s part of it. You may save money to buy a house, or a car, or artwork. Ownership can be intangible: It might be a dream to start your own business or to go to college. It might be your dream to put your child through college. Your dream might be just to get out of debt: pay off the credit cards, the car, the house. This is ownership at it’s greatest. You own the right to make choices on what you do with your money.

How can it be better than that?

Trouncing Francis Volpe

2005-05-02T10:09:00.000-07:00

In a recent article (April 12) in The Sentinel Online titled "Some 'big' ideas are less than grand" this guy named Francis Volpe made a mistake that happens too often in the mainstream media -- he wrote without doing his research. Lest I be accused of the same thing, let me refer you immediately to www.fairtax.org.

Volpe assumes that because he has seen support espoused only by conservatives that FairTax is a conservative issue. Not so. He just hasn't looked in the right places. It's a bipartisan issue with growing support from both parties.

Volpe is quick to show his ignorance. He writes,"In return for getting the federal tax withholding added back to your net paycheck, everything you buy will cost 23 percent additional, under the Linder plan." That is simply not so. This guy is either a very poor researcher or an out-and-out liar.

Truth is, with the FairTax, embedded taxes in products and goods will go down 20% to 30%, depending on how much the manufacturer/wholesaler/retailer has passed along to the consumer of the product. After those are removed you pay the tax.

In the meantime, what you have is your entire paycheck to pay it with. The FairTax, you see, gets rid of ALL the taxes we're used to paying -- income taxes AND employee taxes. It gives every single person his or her total paycheck, or, in the case of the elderly or infirm, their total benefits check. Social security and medicare are fully funded by the FairTax. This is all much more significant than our sloppy columnist would have you believe.

Continuing his walk down the path of deception, Volpe writes,"Imagine those folks who lined up outside of stores a couple of weeks ago to be the first on their blocks to grab a Sony PlayStation Portable, the new hand-held device that lets you play video games, watch movies and listen to your MP3 music files.

One of these from a local store costs $299, plus $17.94 in state sales tax. The day the Linder plan goes into effect, it costs $385.71. "

"Figures don't lie, they say, but liars can figure." The Sony Playstation Volpe refers to as costing "$299, plus $17.94 in state sales tax" already had $65.78 hidden taxes in it, assuming Sony paid only 22%that they embedded in the cost (materials and their own employee taxes) -- chances are it was actually more. But using the 22% figure, the actual cost of the Playstation would have been only $233.32. That's the price you would add the FairTax on, not the inflated price he came up with.

Volpe says, "In my last two-week paycheck, my federal tax payment was only 40 percent more than the $68 price difference above. And I have a lot more stuff to buy before my next paycheck." With FairTax he would have the ENTIRE paycheck to work with. If he decided he wouldn't mind buying that Sony from a previous owner, he wouldn’t pay tax on it at all.

Only new goods are taxed under the FairTax. And everyone gets a rebate so they don't pay any taxes on things they buy up to the poverty level. That means the poor pay no tax at all. And each person with a valid social security number gets $178 a month rebate.

"Consumption taxes also let wealthier people escape taxes on big chunks of their income, since they have way more money than they can spend," Volpe says, forgetting that the wealthy buy BMWs instead of Hondas, mansions instead of houses, Kate Spade handbags instead of Penneys' brand on sale, caviar and champagne instead of sardines and beer – all taxed by the FairTax. People who evade taxes, drug dealers, illegal immigrants, 40,000 foreign tourists annually, and others who now get a free ride would finally pay taxes.

Volpe, obviously no admirer of George Will but an avid reader of the conservative columnist nevertheless, continues: "The thing that really cracked me up is that Will asserts the consumption tax will do away with D.C.'s lobbying culture. Well George, you're pretty well connected in the political realm, so I'm surprised you don't know two things:

"There are more things on a lobbyist's mind than tax breaks. They're seeking favoritism for federal contracts, provisions in legislation that favor clients while sticking it to their competitors, and far, far more."

I'm delighted to hear that, Volpe. That means the lobbyists won't stand in the way of the FairTax, then. In fact, if that's all they want they should be cheering us on. After all, with a broader tax base, the economy booming from overseas investments as well, there'll be more money for Congress to pass out in entitlements.

You have to be either stupid, lazy or a liar to write about FairTax the way Volpe did. But what do you expect from mainstream media, after all?

Check www.fairtax.org, see what you think.

Interesting Discussion on the FairTax Online

2005-04-30T08:29:00.000-07:00

Kevin Hassett, Resident Scholar at the American Enterprise Institute, published an article on TCS (Tech Central Station) the other day titled, "Tax Reform 101." His major points are: Consumption is a better base than income, a value added tax is a consumption tax and consumption tax proposals are just VATs.
FairTax enthusiasts will immediately see what caught my attention and led me to the online feedback area. What follows here is the feedback as it has developed over the past four days:
Ken Re: But in the real world: Message: While I'm in favor of a consumption tax the type of proposal described here scares the excrement out of me. In the real world of politics, such a scheme would almost certainly evolve (quite rapidly) into something closely resembling the current income tax system, with a VAT or national sales tax piggybacked on it.

The only way I could support a federal consumption/sales tax would be if the constitution were ammended to remove Congress' authority to tax income. Without removing this temptation, the 'purely' redistributive tax on wages would likely prove to be an irresistable temptation to legislators whenever the public complained about the level of the sales/consumption tax. In the end, we'd probably have a VAT extracting sufficient revenue to support current government spending, with a wage/income tax to boot.

Assuming that redistribution were required (after all, why would Paul support anything that didn't include his getting some of Peter's meney?) there are safer ways to accomplish it. One way would be to send every household a monthly check equivalent to the tax that they would be paying on some basic income level, e.g., twice the poverty level. Not only would the government not be taxing people who consumed less than the threshold, but would in fact be paying them a stipend.

Dietmar: Re: In the real world: Message: Redistribution is only required if you're a socialist. In a really free society, socialists could voluntarily donate much of their income for redistribution. Micheal Moore suggests 70% as a good number.
I kind of like the VAT idea because it means that everybody who consumes something has to contribute. Liberals hate it though because that would mean that even illegal immigrants would be paying taxes when they buy their cell phones, cars, etc.

Veritas: Re: But in the real world: Message: Good post, but I'd also exempt the courts from ruling on it as well and mandate any increasesbe left to direct voter approval.

Sunnye Re: But in the real world: Message: Judging from what you have said, each of you wants the FairTax.

It repeals the income tax and the embedded taxes in products and services (retailers pass along the taxes they pay to the consumer embedded in the price of the products they sell).

FairTax taxes only new goods and services, not used ones. It provides a $178 a month rebated to every social security card holder so that no one pays tax on goods up to the poverty level, thereby exempting the poor.

It would make the USA the only nation in the world that doesn't tax productivity, increasing our appeal and strengthening our trade in International markets.

The VAT is just another embedded tax, added to the employee taxes and corporate taxes businesses already pay and pass along to customers. That's why it didn't work in Europe.

Learn more about FairTax at www.fairtax.org

TJ Jackson Re: But in the real world: Message: Sounds good but I wouldn't exept anyone at any level. If all pay all feel the same pain. It makes it harder to raise taxes and promotes more effective government.

Scott Kwilinski Re: VAT Message: I've always preferred a pure VAT so the government can get out of the business of knowing everything about everyone's income. The cost of enforcement is astronomical. Every financial institution has to generate reports for every customer and the government for even miniscule amounts. A simpler tax code leads to simpler enforment and the total drag on the economy is less. Also with a VAT all this IRA, 401K, College fund, Health Savings Account junk becomes moot. Save at no cost. Get taxed on spending. Very simple.

Sunnye Re: VAT Message: Well, the VAT is more complicated than that. It's imposed on top of the income tax, and new taxes are added at each stage of product development instead of at the end. Those taxes, along with the FICA taxes and corporate taxes the manufacturers and middle men pay are tacked on to the price of the product and passed along to the consumer.

The best solution to all this is a national retail sales tax that gets rid of the income tax, corporate taxes, etc. and taxes only the final new product at the point of sale. It's called the FairTax.

Check it out at www.fairtax.org or www.us4fairtax.blogspot.com

TheOneLaw: Two major problems with VAT Message: The first problem is psychological because every individual must feel that they are being treated fairly.

The article states that 'Since a VAT is like a sales tax, and since poor people on average spend almost all of their income, poor people would face a significant tax hike if the U.S. adopted a VAT.'

I do agree that people who have less money, and in turn spend less money, should pay less in taxes. This is, by definition, already built in to an individual consumption tax. But everyone, rich or poor, must pay the same rate on every new product and every service that they purchase. If you start to provide exceptions or you provide any form of rebate then one group feels that they are getting something from the government(other citizens) for nothing and the rest feel like they are getting shafted. No matter what controls are written into the code the tax percentage will grow and more exceptions will be added by legislators trying to show preference to their group for every possible excuse known to man (like it is now).

For everyone to feel that the taxation system is fair we should choose an consumption tax that taxes each individual's consumption of new products and services equally. Then at the same time we must attempt to equalize the per capita spending for government provided social services to the local level. Equal taxation of consumption and equal per capita spending would provide the fairest and most non-political re-distribution of wealth.

The second problem with a VAT is that it only taxes legal businesses. A very large portion of our economy is in the black market which yields very high profits to the people providing these products and services but these people do not pay any income taxes. Whether you want to try to police these black market products and services that these people are providing does not matter in this discussion, they will not recieve benefit from that income until they spend it and most of this spending will be legal and they will have to pay the consumption tax.

A proper Individual Consumption tax has many benefits:

- Eliminates all other forms of taxation that politicians use to reward groups they like and punish those groups that they do not like.
- Promotes true fairness in government treatment of citizens.
- Rewards saving and investment.
- Promotes Caveat Emptor (buyer beware and choose purchases carefully).
- Punishes Opulence and luxury spending by those who cannot afford it.
- Promotes recycling and conservation of resoures by not taxing used products.

If the United States (or any other country) adopted an individual consumption tax and equalized per capita government social spending each citizen would be treated as fairly as possible by the government. It would lead to a booming economy, high investment from abroad, but also a marked advance in civilization (and I don't think I am overstating the possibilities).

As citizens of the United States we should stop trying to gain advantage for ourselves and 'our group' over another and instead just try to treat everyone that is not trying to hurt others equally, and it will benefit everyone.

Thanx,

Kevin

Sunnye Re: Two major problems with VAT Message: Kevin,
You just described the FairTax.
In addition, however, FairTax gives a rebate to every social security card holder in the US so that no one pays any tax at all up to the poverty level. The poor are therefore exempt from paying taxes.

It makes the US the only country in the world that doesn't tax productivity. Think how desirable that makes us in international trade. All those jobs lost coming home!

Do look into it in detail at www.fairtax.org or www.us4fairtax.blogspot.com

TheOneLaw Re: Two Major Problems with VAT
Message: Sunnye,

I have been interested in the FairTax idea for a few years now and have followed the discussion closely but do not agree with all of the FairTax proposal. You wrote that the 'FairTax gives a rebate to every social security card holder in the US so that no one pays any tax at all up to the poverty level' and that is the one aspect of the FairTax that I disagree with. The problem with the rebate is that it adds complexity and opens an opportunity for politicians to change in the future to the benefit of their preferred group. As I wrote in the comment that you responded to, every citizen must believe that they are paying something for the government services they are recieving or they will never stop asking for more government and we will be back in the same situation we are now.

With a fixed rate individual consumption tax (sales tax)those that have less money to spend (the poor) would pay less in taxes but would still pay the same percentage as someone that has significantly more money to spend. The person who consumes less pays less and the person who consumes more pays more and everyone pays something for the government at the same percentage of consumption. This would be the best way to treat all citizens equally.

Thanx for your feedback,

Kevin

Although I responded to this, Kevin has not posted it.
Here it is:
Thank you, Kevin, for discussing this with me.

I find in talking to people all over the country about the FairTax, two things always come up: first, how can we best help the poor and two, will people stop giving to charities. I have been surprised (and dalighted, actually) that almost everyone seems to care about the disadvantaged. (That's evidenced, of course, by Americans' generosity in emergencies.) So I really don't see people feeling that they're getting shafter, especially since they, too, get the rebate. Everyone does who has a valid social security card. Equal taxation of my son, a severely retarded and disabled adult whose income is less than $12,000 a year, would be punishment. Having all his benefits tax-free gives him a chance.

Trying to get Congress to equalize per capita spending will effectively kill any reforms you try to pass. That's another issue that needs to be battled in another forum. Like adding amendments to a bill, you can kill a proposal by adding peripherals to it. And that's a fight that definitely should not be fought along with thte tax issue or we'll never get anywhere. And that alternative is to keep what we have.

Of course, we can always change Congress at the voting booth.

The people who produce black market products have to eat, sleep, and dress. They have to have transportation (and most of them prefer the most expensive transportation of all). They have to purchase the tools and materials to either produce, package or sell their products and with the FairTax, in every case they would be paying the tax. They may get away with some, but certainly not the $300 Billion a year that the IRS can't touch and that doesn't count the money the FairTax would bring in from 40 million foreign tourists a year and who-knows-how-many illegal immigrants. I suspect we'd have a black market (we always have had for one thing or another) but it would be significantly smaller than the benefits gained by using the FairTax.

The main problem with the consumption tax, in my mind, is that it simply doesn't get rid of the income tax. It's one more tax added on to what we already have. Even if you reduced the income tax rate, you still have the rules and the fact that the IRS is not controlled and not accountable to anyone. The IRS has severely abused it's privileges and there's no reason to assume they would ever change their ways.

The other problem I have is making the poor pay taxes at all. They need a chance to get ahead.

One great thing about the FairTax is that it does tax the rich more than the rest of us. They buy more expensive homes, cars, furnishings, clothing, vacations -- everything -- because they can afford it. The social stigma of second-hand will always be there and you can depend on the rich taking great pride in buying new things because those who make less money can't afford to. Why else would anyone ever want a limousine? It's that kind of thinking that plays straight into the FairTax coffers.

You say, "As citizens of the United States we should stop trying to gain advantage for ourselves and 'our group' over another and instead just try to treat everyone that is not trying to hurt others equally, and it will benefit everyone" and I agree. But that is not human nature and above all, we have to deal with human nature. So let's make the best of it and pass the FairTax. The FairTax comes closer than any other proposition on the table to doing what you suggest.
Sunnye
The discussion also runs under another heading, "Tax reform 101"

Whooper Re: Tax Reform 101 Message: In order to discuss tax reform one must correctly frame the issue. It is this: how to provide revenue for the operation of government. It is not how to stimulate the economy; it is not how to raise revenue it easily; it is not how to raise revenue painlessly. Second, one must address how to raise revenue fairly. This involves identifying the beneficiaries of government. In the process of the latter one better defines the purposes of government. For example if the purpose is to transfer wealth then fairness is thrown out the door. In which case stimulating the economy, easy and painless will win. If the purpose is to provide infrastructure then fairness will dominate and lead one to the conclusion that a progressive income tax is the fairest. It targets those who accumulate wealth from use of infratructure and nature's resources.

Sunnye Re: tax reform 101 Message: The FairTax is revenue neutral -- that means it funds the US government at present levels because it taxes everyone fairly and recovers the $300 BILLION a year the IRS says it can't get to.

FairTax is fair because it imposes a visible tax on only new goods and services. Pre-owned and used goods are not taxed. The poor pay no taxes at all because everyone gets a 'prebate' at the beginning of each month -- $178 per social security card holder -- to assure that no one pays taxes up to the poverty level.

Prices go down by 20% to 30% because the income tax, employee taxes and business taxes are repealed by the repeal of the income tax. Walmart has promised to reduce prices by more than 20% as soon as passage of the FairTax is announced.

Learn more at www.fairtax.org or www.us4fairtax.blogspot.com (to comment)

Nat Re Fair Tax National Sales Tax Message: I'm surprised there's been no mention of a national sales tax yet. There are a number of advantages to such a scheme. For one thing, in a democracy it is essential that the citizenry be aware of as much as possible if the people are to be able to make informed choices. With a sales tax, and only with a sales tax, everyone will be aware of just how much tax he or she is paying. Further, there is absolutely no government intrusion in private life--no forms to fill out, no need to keep track of income and expenses beyond one's own personal requirements. A VAT hides the tax and increases the wholesale cost of goods. A sales tax minimizes that cost, making US made goods more competitive. Because a sales tax is out in the open, legislators can't increase it without the public knowing about it. Everyone who buys any new good or service pays the tax, so the entire underground economy gets covered.

The Fair Tax proposal includes a 'prebate' that's sent to every registered household each month in anticipation of the sales tax they'd have to pay if they spent at the poverty level. This makes it progressive and does it automatically, without any bureaucratic rule making. There are a great many benefits to this particular, much studied, proposal which can be found at http://www.fairtax.org and I encourage study at that site!

Nat.

John F. Re Fair Tax National Sales Tax: Message: I think Nat said it very well. A national retail sales tax, of the type proposed by the Fair Tax people, has many advantages over an income tax or VAT. To my mind, the primary advantage is that the tax is visible to every buyer at the time of purchase.

In Europe, where the VAT is common, it is impossible for the consumer to reliably differentiate tax increases levied quietly by the government from the effects of inflation. I, for one, do not wish to provide politicians with the temptation of a hidden tax that they can ratchet up at will.

The Fair tax does relieve the tax burden on poverty-level households, but it does not re-distribute income, which I count as a plus. Income redistribution is a socialist theory which has only acted to dis-incentivise the more productive members of society, leading to a smaller pie for all. Another name for income redistribution is 'fairness'.

John F

So the discussion goes on. If you'd like to join in, the article is at http://www.techcentralstation.com/042605B.html. Just click on the feedback bar at the bottom of the piece to get to the feedback forum.

Book Review: America's Best Kept Secret by Al Ose

2005-04-28T08:31:00.000-07:00

Even if you already know and support the FairTax, this book is a must-read.

First it describes how the FairTax came about, a question that comes up often in discussions! This is no fly-by proposal. On the contrary, it is the result of a 10-year study by major economists from universities like Stanford, Harvard, Rice, MIT, and more. The book names names: Who paid for the study and why, what they're doing now and what they plan to do.

Americans for Fair Taxation has a lot of information on their website but this book has even more. Here you'll find a collection of articles, charts (rebate calculations,comparisions of all kinds, estimates, costs, etc.), letters, studies and results.

There's a great chapter on the "Impact of the FairTax on Interest Rates" that will make everyone sit up and take notice,

There are sections on how the FairTax will impact businesses like home builders, financial services, mining, oil and gas, and more -- even timber-related industries!

Most amusing and delightful is "The Twelve Days of a FairTax Christmas" beginning on page 56 and written by a FairTax staff writer.

FairTax, by giving every worker his/her entire paycheck, makes every day Christmas Day.

In short, this book tells the reader who needs the FairTax and why, who are the people behind it, what the experts say about it, gives the impact of the FairTax on the economy and various organizations and businesses and chronicles the history of hearings already held on the subject.

If you think you know all there is to know about the FairTax, this book will prove to you that you don't.

If you don't know anything about FairTax (and if you're a taxpayer you owe it to yourself and your family to find out), this is a reliable, complete source of information

2005-04-27T22:04:00.000-07:00

The Manipulative and Powerful

Part I of II

Herman Cain’s new book coming in May, titled “They Think You’re Stupid,” is a great way to capture the politicians’ take about the constituents of this country. Soon, they will have to wake up to the fact that we are watching. I would say the reverse is true, but it is not. Politicians, especially on the left, are not ignorant; they just want to maintain their power. What a waste. There are so many more things in life worth striving for.

Liberal politicians know that the more people need them, the more they can control the citizens and their money. For example, we have now seen that the leftist politicians are fighting tooth and nail to keep their hands on YOUR money, like the FICA taxes that are taken out of your paycheck every week. They know that if the government no longer had that power, they could no longer use the phrase “If you elect them, they will take away your Social Security.” What a shame that would be; I’m not getting it anyway. Isn’t Social Security my retirement account? Not even close, especially since the government isn’t saving or investing anything, because it is going towards paying the current treasury deficit.

Another thing that politicians like to do is to not take a stand on anything, until they absolutely have to. That is why the people of this country need to continually let their representatives know what they are thinking. Just today, Mr. Kerry (Remember him), said "Where's the president's plan? We've been wasting these months on private accounts without any real discussion of solvency." Never mind that the Executive Branch of the US government does not legally come up with a bill. When did the legislative duty of the Congress escape the halls of the Capitol? Why does the other party dislike Bush’s “ownership society” ideas so much? It’s because they want to have ownership: ownership of YOUR life and ownership of YOUR money.

Social Security policies are certainly not the only place this comes into play. Many politicians are gripping tight to the idea that control can come from manipulating the current tax code. The lobbyists in Washington have a noose around the necks of the politicians because of the money that they “donate” every year, for giving their clients certain tax breaks and loopholes. That’s fine, right? No, because that puts more of the burden on you, for the excessive spending of the government.

So what do the politicians do to control the tax code? They continually tweak the code and tell the poor that they are looking out for them, when they do it. There is a plan to end all that. It is the FairTax. The FairTax plan is the single best tax reform policy ever to come across the floor in Washington. It is literally the most researched tax reform plan to date, with more than 75 legitimate economists recognizing it as the best plan.

Although they know that it is a great plan, most politicians still want to keep that control, but disguising it by telling everybody that the plan is horrible. On September 23, 2004, Rep. Rangel (D), Rep. Pelosi (D), Rep. Clyburn (D), and Rep. Spratt (D) released a report stating that the FairTax, among other false notions, would be a vast increase on middle-income taxpayers, particularly families with children, because it would repeal all tax deductions and credits that benefit families, including the child credit, and eliminate all progressivity from the tax code. Not only is all of this downright inaccurate, but they are intentionally misleading the people of this country; especially the most vulnerable – low-income families. Well, they must have a better idea, right? Wrong! They don’t have any suggestions, but continue to manipulate the poor and uneducated who don’t realize what or who they are really voting for.

Let us delve deeper into their report, the next time around, in the next few days. In the meantime, please visit www.fairtax.org, do your independent research, and contact your Congressperson, very soon. But remember, a national sales tax will not be fair, unless it is the FairTax.

Flat Tax = VAT = FairTax? No Way!

2005-04-27T08:41:00.000-07:00

A value added tax (VAT) like they have in Europe is the same as the FairTax and they are the same as the flat tax, you say? The three are synonymous?

Not on your life.

It's easy to confuse them at first glance; all three are consumption taxes. That, however, is where the similarity ends and there the danger begins.

The flat tax, as proposed by Sen. Armey and his supporters adds a consumption tax to the present income tax system. Even if the income tax should happen to be reduced significantly, the system would still be in place with all its rules and regulations, paperwork and time wasted filling out forms.

The Value Added Tax is quite another matter still. It's another hidden tax, like the ones embedded in prices by the income tax structure we have now.

Under our current tax structure, each entity that handles a product adds a portion of the taxes it pays to the price -- an estimated 20% to 30% of the prices we pay for products. The VAT is levied at each stage of production, so as products move through the various stages of production and distribution, a company pays taxes on only the value it adds. And that's on TOP of the taxes -- employee taxes, etc. -- the manufacturers and retailers already add to prices. France, Germany and England are examples of countries that tried that and discovered what a drag it was on their economies.

Another downside to the VAT is that it's invisible, like the embedded taxes. The tax burden is buried deep in the price of products. When a consumer buys a product, s/he doesn't know how much of the price is really a passed-along tax. As a result, the VAT becomes very easy to increase.

The FairTax, unlike the flat tax and the VAT, is visible, simple and gets rid of the income tax. It taxes only new products and services so you know exactly what you're spending on taxes. You get a rebate each month, which means you're not taxed at all until you begin spending above the poverty level. FairTax broadens the tax base and strengthens the US position in international trade by making US the only country that doesn't tax productivity.

The elderly no longer are taxed three times on their social security benefits and social security is strengthened because the bills, S 25 and HR 25 specify that social security funds are directed into a trust.
With the flat tax and the VAT, the middle class and poor are super-taxed and the evasion loopholes for the rich are still in place in the income tax code.

With FairTax, everyone pays the same. The wealthy buy more expensive cars, homes, clothes, vacations, so they pay more tax. The poor get a rebate (as do the rich) but pay no tax, so they can save and make their way up. Everyone wins.

But remember: The FairTax by any other name is not as sweet.

2005-04-26T20:30:00.000-07:00

The Fair Tax: The Great Equalizer Part 2

One of the things that liberals take greatly to heart is that the wealthy (aka the Evil Rich) don’t pay their fair share of taxes. The Evil Rich, cry the liberals, have the funds to pay professionals to do their taxes and find loopholes and tax havens to shelter their money. This is true, at least to a certain extent. It would certainly explain why Teresa Heinz Kerry (if she’s using Kerry this week) paid less in taxes last year than I did (she made considerably more than I did, by the way, but paid a lower percentage). Ms. Heinz is not the only one; most of the Evil Rich hire tax professionals to do their taxes for that very reason. And, by the way, the Evil Rich are not the only ones to pay professionals. I have paid a professional to do my taxes for the last three years. I want to pay the very least in taxes that I legally can. Most of my friends also pay professionals, and we are not wealthy by any monetary definition.

I don’t know about you, but when I have extra money I put it into a Mason jar, hermetically seal it and bury it in Funk and Wagnall’s backyard. Oh, sorry, I think I was channeling Johnny Carson for a moment. No, I don’t bury it in the backyard. I don’t put it under the mattress, or in a cookie jar, or anything like that. I either spend it or put it in the bank. In either case, it goes into the economy.

If I spend it, it goes to buy clothes, food, gas for my car, pay bills, or maybe I’ll replace something in the house, like the stove or hot water heater. If I bank the money, it doesn’t go into the bank with a sticky note on it saying it belongs to me. The bank makes a notation that I deposited that amount of money into my account. It’s a promise that if I want that money the bank will give it back to me. If I’m lucky I’ll also get a little bit extra as interest. The bank’s way of saying, “thank you for letting us use your money.”

The bank takes the money that I deposited and puts it with the money all the other bank customers deposited and gives it to other people. Sometimes as loans, sometimes to other customers making withdrawals, sometimes to their employees as salary.

Now, back to how the Fair Tax is an equalizer. If I decide I need another car I go to the dealership and pick out the car I want and they’ll tell me how much the car costs including tax. Now, under the Fair Tax plan, I have two options. If I can afford to buy a new car, I’ll pay tax on it. (Under the Fair Tax, tax will only be charged on new items sold by the retailer to the individual.) If Bill Gates wants another car, he’ll most likely buy new (you think?). He and I will pay the same tax rate on our cars. He will probably buy a much more expensive car than I will. The bottom line (so to speak) is that we will pay the same rate, even though the tax rate on his car will be much higher than mine. If for some reason we pick out the same car, we’ll pay the same rate. Uh, oh…we pay the same rate. Is that fair? Yeah, it is…because we’re buying the same car. If he buys a fully loaded Hummer and I buy a bare bones Toyota, we’ll still pay the same tax rate. See the difference? The dollar amount paid in taxes will depend on the cost of the car.

We both have another option. Either or both of us could decide to buy a used car (my personal favorite option). In this case, neither of us will pay taxes because the first owner has already paid the taxes on the car. If the car costs $10,000, there is no tax, the cost of the car is $10,000 (I’m sure you will still pay dealer prep and that kind of thing, but you will not pay sales tax on the car).

Getting back to the tax havens and loopholes that the Evil Rich have access to that you and I don’t, well, they won’t need them because they won’t need to shelter their money from the IRS. But, they will pay the same tax rate on whatever they buy. Just like you and I would do under the Fair Tax. Not only you and I and the Bill Gates of the world, but anybody who makes a purchase. That includes tourists from other countries, illegal immigrants, and the underground world where people don’t have traditional jobs with paychecks and deductions from those paychecks. The drug dealer would pay the same rate of sales tax for his tricked out Hummer as the cop who buys a Toyota.

Can it get any fairer than that?

Tiny Nations Home To Trillions

2005-04-25T06:53:00.000-07:00

If the government was to enact the FairTax, all of this money would come home to the United States. In addition, the evaders that take advantage of the system will finally contribute to the services of this country. This is an example of making liars and cheaters out of normal people.

(Christian Science Monitor) This story was written by David R. Francis.
--------------

Although they have only 1 percent of the world's inhabitants, they hold a quarter of United States stocks and nearly a third of all the globe's assets.

They're tax havens: 70 mostly tiny nations that offer no-tax or low-tax status to the wealthy so they can stash their money. Usually, the process is so secret that it draws little attention. But the sums - and lost tax revenues - are growing so large that the havens are getting new and unaccustomed scrutiny.

For example: When London's Tax Justice Network (TJN) reported a month ago that rich individuals worldwide had stashed $11.5 trillion of their assets in tax havens, it caused a fuss in Europe. "Super-rich hide trillions offshore," blazed a British newspaper headline.

Although that report received little notice outside Europe, there are rumblings of concern in the United States. That's not surprising. Nations lose an estimated $255 billion in tax revenues a year because of the havens, according to TJN. The US alone probably loses $60 billion a year, a tax expert estimates.

The loss hits not only prosperous industrial countries, but also developing nations. As a result, dozens of church groups and other nongovernmental organizations concerned with world poverty are joining tax reformers in what will probably become a major political battle. They aim to stem the outflow of money from poor nations into tax havens - an outpouring that may exceed today's global foreign aid of some $60 billion a year.

"If we are serious about reducing poverty, one of the first things we need to tackle is an international financial system run by the rich, for the rich, at the expense of the poor," states David Woodward, director of the New Economics Foundation, a London think tank.

Corrupt officials in poor nations, illegally, and multinational corporations, mostly legally, siphon huge amounts of money into bank accounts and shell companies in 70 tax havens, such as the Cayman Islands, Bermuda, and Jersey.

"It's going to be the next major issue," forecasts Lucy Komisar, a New York journalist writing a book on offshore banking. She compares the drive against tax havens with the civil rights movement of the 1960s, in which she participated, and the feminist and environmental movements of more recent decades.

Ms. Komisar helped organize a meeting on Capitol Hill April 7 to get an American branch of the TJN going. Representatives of several members of Congress, the AFL-CIO and a few other unions, several prominent tax research groups, and the United Church of Christ attended. About a dozen well-known activist groups were also present, including Public Citizen, Greenpeace, and the National Council of La Raza.

By cracking down on capital flight and corruption in developing countries, "we wouldn't have so much poverty in the world," says Robert McIntyre, executive director of Citizens for Tax Justice. He offered at that meeting to find funding for the TJN group in the US and recruit a paid director.

Not everyone sees it this way. The Center for Freedom and Prosperity in Washington, for example, sees tax havens as "an escape hatch for overburdened taxpayers." It relishes "tax competition" between nations. The center also argues that bank secrecy in countries like Switzerland can protect the money of those who face persecution by repressive regimes.

The tax-haven numbers in the TJN report were calculated by a British research firm from conservative sources - such as Merrill Lynch's "World Wealth Report" and the Boston Consulting Group's "Global Wealth Report." The trillions of dollars reported don't include money parked in tax havens by companies - probably also a massive sum.

There are about 3 million shell companies (set up largely to duck taxes) in offshore tax havens, Komisar reckons. These tiny tax havens hold 31 percent of total world assets and 26 percent of the stock of US multinationals.

"As our economies have globalized, our tax systems remain nationally based and measures that should have been put in place decades ago to improve international tax cooperation have not been put in place," says John Christensen, international coordinator in London of TJN. "So the tax burden has been shifted from those who can afford it to middle- and low-income households, and from businesses to working people and consumers."

In the late 1990s, industrial-nation negotiators reached an agreement to pressure tax-haven countries to stop facilitating money laundering, drug dealing, and tax evasion. The deal was championed by the Clinton administration. But it was squashed by the new Bush administration, keen for tax cuts.

Then came 9/11 and a recognition that terrorists and drug dealers use the same international finance channels as tax dodgers. So the Bush administration "has become less strident in its support for bank secrecy and other nondisclosure policies," notes Mr. McIntyre.

Now, a pioneer opponent of tax evasion through tax havens, Sen. Carl Levin (D) of Michigan, has joined with Sen. Norm Coleman (R) of Minnesota to sponsor the Tax Shelter and Tax Haven Reform Act. It would enable the Treasury secretary to designate a tax haven as "uncooperative" with Internal Revenue Service investigations. Though not a panacea, the bill, soon to be reintroduced in the current Congress, would give tax investigators a weapon: Income from such designated tax havens would lose some tax advantages.

Coming Soon To A Congressional Committee Near You

2005-04-24T18:06:00.000-07:00

Ever heard of a "refund loan facilitator?

What about an "enrolled agent?"

Well, folks, those are -- guess what -- new jobs defined in a new piece of legislation before the US Senate. It's called S. 832, "The Taxpayer Protection and Assistance Act of 2005, a bill to amend the Internal Revenue Code of 1986 to provide taxpayer protection and assistance, and for other purposes."

Now that doesn't sound so bad, does it? Except the average taxpayer is going to look at "for other purposes" with an "uh oh" reaction. And that reaction is an appropriate one.

On first impression you might think "Oh, the government is going to protect the US taxpayer? From the IRS? After all, they do have the right of search and seizure if they think you've paid them too little or not at all. Or maybe they're going to protect the taxpayer from prosecution for making mistakes because of an incomprehensible tax code?

No such luck.

S. 832, a bill that in itself is evidence that Senators and their aides have no idea of what their constituents need and want, expands the tax service by requiring education, testing and licensing of tax preparers. It calls for the establishment of "clinics" for tax preparation for the poor.

That's not so bad, you say? After all, tax preparers need to know an awful lot, especially because in many cases if they make a serious mistake, we go to jail. That's true, they do need careful traning, but the current code is so unwieldy and contradictory, and it's changed so often (like in this bill, for example) that no one can actually learn it.

Of course it adds another layer of bureaucracy (and cost) to the IRS, creating the office of "Director, Office of Professional Responsibility." And nevermind that it adds a few hundred more pages to a tax code that is already 60,000 pages long. The IRS already costs the taxpayer billions of dollars a year -- this bill just adds to the burden.

The bill also establishes clinics where tax preparers make out income taxes for people who shouldn't have to pay taxes in the first place -- the working poor. It requires all tax preparers to take training in the complicated tax code and to continue that training. The tax preparer who doesn't work pro bono for the poor (at the cost of the US government) will, of course, pass those training fees along to the taxpayer.

A "refund loan facilitator" is the person who sends the prepared tax form to the IRS via e-mail. Presumably the working poor don't have computers.

Specifically, the bill contains provisions for return preparation clinics for low-income taxpayers, clarification of enrolled agent credentials, regulation of income tax return preparers, regulation of refund anticipation loan facilitators, and taxpayer access to financial institutions. The provisions regulating income tax return preparers state that currently unlicensed preparers will have to take an initial competency exam. Thereafter, they will be able to maintain their eligibility through continuing education. There are penalty provisions for failure to comply with these regulations. The proposal also directs a public awareness campaign to inform the public of the requirements that any compensated preparer of tax returns must follow.

Bill Clark, a self-described tax preparer and avid FairTax supporter, says, "One of the things that has bothered me about it, it does not seem to apply to IRS personnel who answer tax questions over the phone. As a tax preparer, I would have to be "licensed" to give advice whereas the IRS phone critters (temps in some cases) would not. And we all know how accurate their advice is."

"Also," he adds,"while increasing the operating cost of the IRS, it would encourage tax preparers to increase their fees for being 'IRS certified' (even though this isn't really a certification). Thus increasing the overall cost of compliance. (Yeah I ain't no dummy, my fees would go up!)"

So this bill is wrong on many fronts. It solves no problems; it creates some. Most important, though, the bill increases the burden of the income tax system on society. Poor people should be exempt from paying taxes to give them a chance to work and save until they reach a decent income level. How does that work? Families save for educations so they can get better jobs. The current tax structure very effectively holds them down.

We don't need S.832, we need S 25 (the FairTax bill), which kills the income tax and gives a rebate to the poor so that they pay no taxes at all.

Please inform yourself about the FairTax. There's an immense amount of information at www.fairtax.org and a www.us4fairtax.blogspot.com. If you'd like to talk about it and ask questions, sign up at the FairTax national roundtable at http://groups.yahoo.com/group/nationalfairtax/ and ask your questions.

This is important. With your help we can get rid of the income tax and fund the US government, social security, medicare, veteran's benefits, etc. with the FairTax.

The President has called for reform: Help us do it.

The Fair Tax: The Great Equalizer

2005-04-23T19:57:00.000-07:00

When Sunnye invited me to post on this blog, I wasn’t sure I was up to her calibre of writing. But decided that all I had to do was speak from my heart about something I am passionate about: The Fair Tax.

I began looking through the 50 Reasons I Support the Fair Tax and decided that #26 is well worth writing about and brings in two of my other passions, Immigration reform and Social Security reform. But, I promise I will stay off my soapbox and not speak to the others except as it applies to the Fair Tax.

There are approximately 290 million Americans. I say approximately because there are births and deaths, people being hired and fired, and people emigrating to and immigrating from all corners of the world every day. Of those approximately 290 million Americans, only about 110 million workers fund government programs such as Social Security and Medicare.

There is something in the vicinity of 51 million tourists who visit the US. While they are visiting our fair country, they spend money. Hotels, car rentals, housing, food, souvenirs, clothing, tickets to theme parks, museums, sporting events, and so on. Pretty much the same things American citizens spend money on everyday. The main difference is that tourists don’t live here and so don’t generally contribute to funding the American government through payroll deductions.

Add to the millions of tourists visiting the US, the tens of thousands of people who live “below” the radar of our current tax code by not having traditional jobs where taxes are taken from their paychecks. The group that you would probably think of first is the criminal element. Burglars, drug dealers, car thieves, muggers, identity thieves, and prostitutes would pay their “fair” share simply by making a purchase at their local Wal-Mart or Circuit City. You don’t suppose that drug dealers file an income tax return do you? And if they do, I’m reasonably sure that they wouldn’t report their full income. By instituting the Fair Tax, every time a drug dealer bought a new car, jewelry, clothing, food, he (or she) would pay as much tax as you, the do.

How about the day laborers who are so often illegal immigrants? They are usually paid in cash, often under the table and no taxes are deducted from their wages. Like the criminals in the previous example, cash-paid day laborers would pay their “fair” share of the tax burden when they purchased food, goods, or services.

Under the Fair Tax, it is the consumer who decides how much tax they will pay. Everyone will pay the same rate. There will be no loopholes or deductions that are available to the wealthier members of society; they will pay the same rate as the couple struggling to get by on minimum wage. If Sam Gotrocks wants to buy a new car, he will be taxed as the same rate as Joe Lunchbox who buys the economy car. If Joe wants to buy a “used” car, he will pay no tax at all. The original owner will have paid the tax for him. Imagine buying a car only a year or so old and not paying taxes on it.

Talk about an equalizer! The Fair Tax is just that! It doesn’t discriminate. The Fair Tax doesn’t care whether you are wealthy or poor, black or white, legal or illegal, working or not. Everyone pays the same tax rate.

Here's a link to the Fair Tax Act petition. From there, you can review the site and get more information.

GREENSPAN WARNS ON DEFICITS

2005-04-22T06:49:00.000-07:00

By Neal Boortz

Reserve Chairman Alan Greenspan was up on the Hill yesterday testifying in front of the Senate Budget Committee. In his remarks, he voiced his concern about the budget deficit. For those of you in or out of government schools, the budget deficit is the amount of money the United States overspends every year.

At any rate, Greenspan is concerned. He says if the deficits go unchecked, they "would cause the economy to stagnate or worse." The Fed Chief also said "The federal budget is on an unsustainable path, in which large deficits result in rising interest rates and ever-growing interest payments that augment deficits in future years." So now we know the problem....but what is ths solution?

Greenspan's remarks will be used to advocate raising taxes. Naturally, since we have a deficit, we need to get the money from some place. Right? Wrong. The entire problem with the deficit has nothing to do with taxation. The problem is excessive government spending. Think of it in terms of your family...if you spend more money than you take in, what do you do? You cut spending. But you're not the government.

Politicians in both parties...and Republicans in particular, love to spend money. The size of the federal government has doubled in the last 10 years under Republican Congressional control. President Bush is the biggest spender in the history of the Oval Office. Spending is being increased, not cut. And it's not likely to ever happen. The Democrats like to tax and spend, the Republicans like to borrow and spend.

By the way, there is a way out of this. If we ditched the income tax altogether and instituted the FairTax, revenues would likely increase because the economy would be unshackled and no one could avoid paying it.

More Than 50 Reasons You'll Love FairTax

2005-04-22T06:46:00.000-07:00

INDIVIDUALS AND FAMILIES

1. Keep ALL of your paycheck.
FairTax replaces the entire federal income and Social Security tax systems, including personal, gift, estate, capital gains, alternative minimum, Social Security/Medicare, self-employment, and corporate taxes.
2. No fear the IRS will come after you for making a mistake – income tax is gone.
3. FairTax funds the US government at current levels, including social security and medicare.
4. You get a rebate at the beginning of each month ($178 per social security card owner) so that you pay no tax up to the first $24,000.00 you spend.
5. FairTax is a consumption tax. You pay tax only of purchases of new items and services.
6. The poor pay no income tax, thanks to the “prebate.”
7. Pay no tax at all on pre-owned items.
8. Reduces prices 20% to 30% by removing taxes passed along to consumers by businesses: 7.65% for earnings taxes, corporate and other taxes businesses pay. WalMart has promised to cut prices when the FairTax goes into effect.
9. Families can spend or save – or both. Their choice.
a. The average family making $50,000.00 a year will have $7,500.00 more a year in discretionary income.
10. You can set up any kind of savings or investment retirement account without worrying about taxes or government rules.
11. College tuition becomes a tax-free expenditure from tax-free income.
12. No more paying tax preparers, spending time collecting data to comply with tax laws. (Americans spend an estimated $250 - $600 BILLION annually on compliance efforts. That’s about $1,000.00 to $2,000.00 annually for every man, woman and child in the US since businesses embed their tax costs into prices.
13. It’s simple, easy and predictable, as opposed to the current 60,044 pages of tax code.
14. Never have to float a loan to pay your tax bill.
15. The more you earn, the more money you have in your pocket.
16. Lower income workers can become homeowners easier than ever because savings are tax free and therefore accumulate faster.
17. The income tax exports our jobs, rather than our products. The FairTax brings jobs home.
18. Mortgage interest rates will come down approximately 2%, creating a real estate boom and allowing homeowners to refinance at lower rates.
19. No death tax. Farms and businesses can be passed down through families without penalty.
20. Families can provide financial assistance to each other without tax penalties.
21. It encourages families to buy health insurance and puts the health-care system on a direct pay basis. Getting rid of third party pay brings health costs down.
22. Individuals and businesses can give freely to churches and charities without worrying about exceeding an allowed limit.
23. It makes April 15 just another day.
24. Eliminates the regressive payroll tax. Now everyone is taxed a minimum of 7.65% on our first dollar of wages up to $90,000.00 (FICA cap).

SOCIAL SECURITY AND MEDICARE

25. It funds Social Security and Medicare at a level equal to or more than the present.
26. All 290 million Americans and 51 million foreign tourists find Social Security and Medicare with their purchases. Today only 110 million workers fund these programs via deductions from their paychecks.
27. The wealthiest Americans, now exempt from FICA taxes, will now contribute to social security even if most of their income is from investments.

THE ECONOMY

28. FairTax makes the United States the only country in the world that doesn’t tax production.
29. Eliminating the capital gains tax increases business investing.
30. Business owners can plan better since they no longer have to consider tax implications.
31. By eliminating the $3 compliance cost per $1 in payroll and income taxes that business owners now have to pay, it makes it possible for business owners to raise salaries and/or invest more in their companies.
32. American products become more competitive overseas.
33. American products become more competitive with imported goods.
34. Encourages foreign investment in the US. America will be the most attractive tax-free haven in the world for business.
35. US companies and individuals now operating in foreign countries will find it cheaper and more productive to return to the US.
36. Those who hold taxable high-interest bonds will enjoy a windfall profit, since those bonds will no longer be taxed.
37. Federal Reserve rates will be based on consumption rather than future earning estimates, stabilizing inflation prevention.
38. FairTax reduces production costs for farmers and other subsidized businesses, leading to a reduction of subsidies (and Federal controls) and a reduction in the Federal budget.
39. Tax preparers and accountants can move into more productive financial fields in an expanding economy where they can add to the standard of living and earn more money.

CHURCHES AND CHARITIES

40. Churches and non-profits no longer have the expense of filing tax returns and paying for social security and medicare for employees.
41. Churches and charities regain their First Amendment rights to engage in free speech without fear of losing their tax-free status.
42. FairTax protects Americans from IRS unreasonable searches and seizures.
43. It restores the Fifth Amendment rights, guarantees the right to due process by negating the need for it.
44. FairTax restores individual privacy. The government no longer knows where you work, what you earn and what you are doing with your income.
45. No income tax means you don’t have to prove your innocence from accusations of the IRS that you misinterpreted tax law.
46. The government no longer requires a marriage clarification for tax purposes.
47. It eliminates the need for courts to decide which divorced parent gets to take the tax deduction for children.
48. State budget revenues increase because states, counties, school districts and municipalities no longer have to pay FICA taxes.
49. Eliminates administrative costs paid by states when they collect state sales taxes because states can piggyback their tax collection onto the national tax collection and be compensated ¼% in an administrative cost give-back. Retailers also get a kickback for collecting FairTax.
50. FairTax eliminates campaign donations for “tax favors.”
51. Eliminates Congressional wrangling over tax cuts, the tax code, etc. giving legislators more time to solve pressing issues.
52. FairTax saves 300.000 trees a year. The IRS sends out 8 billion pages of forms and instructions annually.
53. Since it taxes only new items, FairTax encourages the purchase of pre-owned taxes, cars, clothes, furniture, homes, etc. Recycling is environmentally friendly.

Thanks to Kenneth J. Van Dellen and friends, authors of 50 Reasons For The FairTax

Mortgage Deduction Maximized Under the Fair Tax

2005-04-21T20:02:00.000-07:00

By Merrill Bender

In the arena of tax policy and tax reform the income tax deductions for Mortgage interest seems to be cast in stone and never to be touched. This is the one tax deduction every homeowner knows to include in his tax return and a benefit that the President has asked his tax reform panel to keep. There is only one tax reform package that meets this goal and then maximizes it - The Fair Tax Legislative package.

The actual benefit has diminished under the archaic income tax code. As income tax brackets have lowered and interest rates have lowered so has the amount of dollars you get back from your mortgage interest deduction. The Tax payer in a 25% federal tax bracket faithfully files a return on or before April 15th to get a deduction which only gives him back $250 of his own money back per $1,000 spent in Mortgage interest. When upper tax brackets used to be 50% to 70 % Americans would get back even more. However, the 7.65% Americans pay out in payroll tax provides no deductibility or return at all.

In addition, American families still have to pay the mortgage principal out of after tax dollars. For many middle class Americans that includes a 25% federal income tax and a 7.65% payroll tax for a total federal tax bite of 32.65%. On a $100,000 mortgage at 6% a family might get back $1500 with a mortgage interest deduction but you get no deduction for the principal paid. You pay that with after tax dollars.

There is a Tax Reform package in Congress that would maximize the Mortgage deduction in a totally new way with added benefits for families and home ownership. Under the Fair Tax, American workers get 100% of their paychecks with no payroll tax or income tax taken out. The 32.65% they had subtracted each week is now in their pockets to help pay the principal on their mortgage or any other important family needs. You end up with the income tax equivalent of a 100% deduction of principal and interest by replacing the income tax and the IRS with the Fair Tax.

The Fair Tax reform package is well documented and researched on the Fair Tax website http://www.fairtax.org/. It has been reintroduced in the 109th Congress as HR25 and S25. The Fair Tax legislative package first eliminates the current income tax system on American families and American business. Elimination of hidden business taxes will first cause prices to drop 22 to 25%. The Fair Tax than adds in a federal retail sales tax of 30% (equivalent to income tax of 23%). American consumers will pay about the same as they did before but take home a much larger paycheck. The Fair Tax is revenue neutral, bringing in the same revenue as current income taxes, Social Security taxes and Medicare taxes and estimated to grow the Economy 10.5% in its first year.

If you want tax reform that gives you more take home pay and a maximized Mortgage deduction for interest and principal than call your Congressmen and Senators and tell them you support the Fair Tax Legislative package HR 25/ S25. For more information visit http://www.fairtax.org/ and read the FAQ section.

One Reason For The FairTax

2005-04-21T15:44:00.000-07:00

"The income tax is bad because it has robbed you and me of the guarantee of privacy and the respect for our property that were given to us in Article IV of the Bill of Rights. This invasion is absolute and complete as far as the amount of tax that can be assessed is concerned. Please remember that under the Sixteenth Amendment, Congress can take 100% of our income anytime it wants to. As a matter of fact, right now it is imposing a tax as high as 91%. This is downright confiscation and cannot be defended on any other grounds.

"The income tax is bad because it was conceived in class hatred, is an instrument of vengeance and plays right into the hands of the communists. It employs the vicious communist principle of taking from each according to his accumulation of the fruits of his labor and giving to others according to their needs, regardless of whether those needs are the result of indolence or lack of pride, self-respect, personal dignity or other attributes of men." T Coleman Andrews, Commissioner of the Internal Revenue Service from 1953 to 1955

The Best Plan? - Absolutely

2005-04-19T18:27:00.000-07:00

Federal Reserve Chairman Alan Greenspan said March 3 that some form of a consumption tax -- such as a national sales tax -- could spur greater economic growth, but he cautioned that the government would face significant problems making the transition to such a system.

President Bush, on more than one occasion after his reelection, has announced his support for overhauling the current tax code. He didn’t say it specifically, but the FairTax is the very best way to do just that. Mr. Greenspan, President Bush, and many article writers have mentioned a national retail sales tax. However, the FairTax is the only sales tax legislation currently before the Congress. A sales tax, like many people see it would be regressive. However, the FairTax is a form of the national retail sales tax that is nowhere near regressive and is absolutely the best way to reform our current tax system.

The Chairman’s comments about the transition are to be commended. Nonetheless, there is no way the fear of change should discourage our leaders from doing the right thing.

The current tax code has been grossly manipulated to reward elite interests and compliance has become increasingly difficult and expensive. The current tax system is incomprehensible. It is beyond reform. It simply has to go. The federal income tax is extremely unfair to wage earning Americans and the average citizen. Your voice to your leaders has become increasingly imperative.

This government appears far more anxious to control citizens than to protect them. The more laws, the more uncertainty that permeates private lives and the more difficult it becomes for citizens to keep their affairs in order. Between 1981 and 1993 more than 9,000 subsections of the tax code were amended. In June 1997, the National Commission on Reform of the IRS said the code's complexity placed a severe burden on citizens.

The FairTax Act, a bipartisan bill sponsored by John Linder (R-GA) and Collin Peterson (D-MN) would remove the burden of the income tax and other federal income-based taxes.

The FairTax is fair to all Americans, and simple to understand. The FairTax bill represents an idea whose time has come. National polls show that more than two-thirds of Americans want fundamental tax reform, and we need support for the FairTax from the leaders of our country.

Here are the key facts about the FairTax:

1. All Federal income taxes are eliminated, both for individuals and corporations.

2. All FICA taxes are eliminated, both for individuals and corporations.

3. All Federal inheritance taxes are eliminated. What you earn and build during your lifetime will not be confiscated by the government.

4. The IRS is eliminated. As with items 1 and 2, the institutionalized cost of compliance, both for corporations and individuals, will be eliminated. The IRS has a "corporate culture" of its own that puts it into adversarial position with every citizen. It cannot be reformed or transformed. It must be eliminated.

5. The Federal government raises its revenue through a tax on retail sales of all new goods and all services to individuals, estimated at 23%. The individual gets to decide, through lifestyle purchases, how, where and when to pay taxes. The "rich" cannot avoid taxation through sheltering. Every citizen gets to experience the cost of government in a direct, visible way, the share of which increases as the level of purchases increases.

6. There is a monthly rebate check to every family for taxes paid on purchases up to the poverty level. This offsets any taxes paid by the poorest among us.

According to the Tax Foundation, Americans spend 10.2 billion man-hours filling in forms and paying their taxes each year. That amounts to almost 5.1 million full-time workers doing nothing but tracking income and preparing tax returns. Most small businesses spend seven times more to prepare their taxes than they actually pay in taxes. Nationwide, the cost of compliance with the tax system is upward of $250 billion per year.

While a 23 percent retail sales tax appears high at first, consider the following facts. Most individuals already pay 15.3 percent of every dollar earned in payroll taxes for Social Security and Medicare. However, many of us pay a lot more. Middle-income workers must forgo 27 percent of their paychecks to pay federal income taxes. When you add state and local taxes, the average American loses more than 42 percent of his or her paycheck in taxes.

The effect is compounded because corporate and payroll taxes affect the cost of every purchase we make, from a hamburger to a house to a hotel room. Dale Jorgenson, former chairman of the Harvard University economics department, estimates that under the FairTax, prices will fall 20 percent to 25 percent in the first year after adoption and may be reduced further as companies reflect decreased compliance costs.

In order to ensure that low-income individuals are not unduly burdened, the FairTax gives them relief by simply "untaxing" them. Every household will receive a monthly rebate equal to the tax on spending up to the federal poverty level, as determined by the government.

We are losing jobs because of our tax system. The tax on corporations causes the prices of our goods and services to go so high that we can no longer compete in the international marketplace. We all want products that are less expensive. Countries with lower corporate tax rates can make items at a lower cost.

One thing is incorrect about what Mr. Greenspan said, and that is that a consumption tax and income tax should be used together. That is absolutely not true, and would have detrimental consequences for our country. We need to get rid of the income tax completely to prevent further atrocities. By letting an income tax stay, we would still be allowing unlimited tax increases and spending by the government.

I recommend that you become fully informed about the FairTax bill through several websites, including www.myfairtax.org, www.scrapthecode.com, http://linder.house.gov, and, most importantly, the Americans for Fair Taxation's website at www.fairtax.org. I also encourage you to urge the congress and senate to support the FairTax bill, as it is in everybody’s very best interest. However, you may not know that the Congressman from Kentucky’s 4th District, Mr. Geoff Davis cosponsored the FairTax bill in February, and then withdrew his support in March. Let him know what you think about his lack of support for the bill. He can be reached at 1405 Greenup Avenue, Suite 236, Ashland, KY 41101, 606-324-9898, or by fax at 606-325-9866.

Tell The President's Panel Your Tax Plan

2005-04-19T15:06:00.000-07:00

DEADLINE APPROACHING: PROPOSALS TO REFORM THE TAX CODE DUE APRIL 29TH

Today the President's Advisory Panel on Federal Tax Reform, reminded interested parties that the deadline to submit ideas for reforming the tax code is fast approaching. Proposals should be submitted by April 29, 2005.
Guidelines for proposals are attached.

"At our seven public meetings that were held all over the country, we learned about the dismal condition of our tax code," stated Senator Connie Mack, Chairman of the President's Advisory Panel on Federal Tax Reform. "We
are now reviewing specific proposals for reform. We look forward to continuing to receive ideas and input from across the country. We will also hold public meetings in May to discuss options and alternatives that would
make our tax system simpler, fairer, and more productive."

"It is important that we hear from Americans about the kind of tax system they want," said Senator John Breaux, Vice-Chairman of the Panel. "Now is the time to send in your ideas to improve our tax system."

This is the Panel's second specific request for comments. The Panel received thousands of comments describing complexities and burdens, unfair aspects and distortions in the current tax system, in response to its first request.

Information on how to submit comments as well as details on the format for comments are available at www.taxreformpanel.gov/contact/. Comments submitted in connection with this second request should be received by the Panel no later than April 29, 2005. All comments submitted will be made available to the public.

The President's Advisory Panel on Federal Tax Reform was established by President Bush on January 7, 2005. President Bush has charged the bipartisan panel with recommending reforms to the tax code that will make
the U.S. tax system simpler, fairer and more growth oriented.

Further details are available on the Panel's website at www.taxreformpanel.gov.

###

Guidelines for Tax Reform Proposals

The Advisory Panel will recommend to the Secretary of the Treasury revenue-neutral policy options for reforming the tax code.

As directed by the President, these options should:
Ø simplify the tax laws
Ø share the burdens and benefits of the Federal tax structure in an appropriately progressive manner while recognizing the importance of homeownership and charity in American society
Ø promote long-run economic growth and job creation by encouraging work effort, saving, and investment to strengthen the competitiveness of the
United States in the global marketplace

The Advisory Panel is soliciting comments from interested parties regarding specific proposals to reform the tax code. Comments may include proposalsto replace or comprehensively reform the existing tax system or proposals to reform particular aspects or elements of the current tax code. To assist the Advisory Panel in evaluating and comparing specific proposals for reform, supporters should provide the following information:

I. Description of Proposal. Proposals for comprehensive reform should include a description of the design of the proposal's components, including the following:

Ø the tax base (income, consumption, hybrid)
Ø exemptions, deductions, credits and exclusions
Ø tax rate(s)
Ø distribution of the tax burden (including provisions for relief for
low-income individuals)
Ø treatment of charitable giving
Ø treatment of home ownership
Ø collection method(s) and
Ø treatment of businesses

Proposals to reform particular aspects or elements of the current code should include a specific description of the proposed changes and an explanation of which components of our tax system would be altered.

II. Impact of Proposal Relative to Current System. The description of the tax reform proposal should include an explanation of how it compares to our existing system in terms of the following factors:

Ø simplicity (including transparency and stability)
Ø fairness
Ø economic growth and competitiveness
Ø compliance and administration costs

III. Transition, Tradeoffs and Special Issues. The description of the tax reform proposal should include an explanation of any special issues or considerations, such as the tradeoffs that would be required, favorable/unfavorable treatment of particular industries or sectors within the economy, or the impact of transition from our current system to the proposed system.

As noted above, all options recommended by the Advisory Panel must be revenue neutral. The Advisory Panel invites commentators to provide information regarding the expected revenue impact of the proposal and, if possible, the assumptions made in estimating the revenue impact.

Proposal descriptions for comprehensive reform should be limited to 10 pages
(excluding a one-page summary) of double-spaced written text in 12 point font. Proposals for reform of particular aspects or elements of the current tax code should be limited to 5 pages (excluding a one-page summary).

Submissions should be received by Friday, April 29, 2005.

FairTax To Speak To President's Tax Reform Panel

2005-04-19T08:43:00.000-07:00

From Genie at Headquarters:

We will have a chance to speak and make our case in front of the Presidents tax panel on May 11th.

In DC.

Date is now confirmed.

It will be Leo Linbeck (Chairman of the board) representing the FairTax. If you have not had the chance to hear him speak before, you are in for a treat!

There may be other groups presenting the case on their plan but we do not know who yet.

All grassroots members of FairTax are encouraged to attend.

For details and gathering information please contact heather@fairtax.org or call her at 1-800-FAIRTAX.

FairTax = No Trade Deficit

2005-04-19T08:32:00.000-07:00

The FairTax is the answer to this problem. The faster we get it passed, the quicker the problem will be solved.

By MARTIN CRUTSINGER, AP Economics Writer

WASHINGTON - The U.S. trade deficit, exacerbated by surging imports of oil and textiles, soared to an all-time high of $61.04 billion in February.

The Commerce Department said Tuesday that the February imbalance was up 4.3 percent from a $58.5 billion trade gap in January as a small $50 million rise in U.S. exports of goods and services was swamped by a $2.58 billion increase in imports.

The surging trade deficit is leading to an increase in protectionist pressures as American textile and clothing manufacturers are lobbying the administration to limit imports of Chinese textile and clothing goods to ward off a flood of products now that global quotas have expired.

For February, imports of textiles and clothing from China rose by 9.8 percent even though America's overall trade gap with China actually narrowed to $13.9 billion, down by 9.2 percent from a January deficit of $15.3 billion. The improvement reflected an increase in U.S. exports to China and declines in other import categories outside of
textiles.

For the first two months of this year, the trade deficit is running at an annual rate of $717.2 billion, a full $100 billion above the record imbalance of $617.1 billion set for all of 2004.

Trade deficits of this magnitude have raised worries among economists about America's ability to continue to attract the foreign financing needed to cover the shortfall between exports and imports. If foreigners decided to hold fewer dollar-denominated investments such as stocks and bonds, it could trigger steep declines in U.S. stock prices and a sharp increase in interest rates.

Critics point to the soaring deficits as evidence that President Bush's free trade policies are not working and have instead
contributed to the loss of 3 million American manufacturing jobs since 2000.

The Bush administration argues that the deficit primarily reflects the fact that the U.S. economy has been growing at a much faster pace than the economies of its major trading partners, pushing up imports while dampening demand for U.S. exports. Treasury Secretary John Snow was expected to use a Saturday meeting of finance officials from the
Group of Seven major industrial countries to once again lobby for Europe and Japan to pursue more growth-oriented policies.

The U.S. dollar has been declining for three years, a fact that should help narrow the trade deficit by making imports more expensive to American consumers while making U.S. exports cheaper. However, economists say the dollar needs to fall further to deal with the widening trade deficit, and they are predicting a further increase in the trade gap this year.

The record February deficit of $61.04 billion surpassed the old record of $59.4 billion set last November.

Imports of goods and services rose by 1.6 percent to an all-time high of $161.5 billion.

Demand for foreign petroleum products shot up 10.3 percent to $18.2 billion, the second highest level on record, surpassed only by $19.6 billion in imports of petroleum last November.

The February increase reflected higher prices as crude oil climbed to $36.85 per barrel, compared to $35.25 in January, offsetting a drop in the volume of oil imports. Analysts said America's foreign oil bill is likely to climb even further in months ahead, reflecting further increases in global oil prices.

Exports were up by $50 million to a record $100.48 billion in February, reflecting increases in shipments of drilling and oilfield equipment, civilian aircraft and pharmaceutical products. These gains offset declines in sales of U.S.-made cars and auto parts and food.

The administration, at the urging of U.S. textile and clothing manufacturers, has begun investigations into whether to re-impose quotas on Chinese imports of various products to protect the domestic industry from market disruptions following the removal of global quotas that had restricted shipments to the United States for more than three decades.

Economists Nationwide Endorse The FairTax Plan.

2005-04-19T08:19:00.000-07:00

The plan includes HR 25/S 25, repealing and replacing the income and payroll taxes with a progressive national sales tax, as well as
HJRes 16, repealing the 16th Amendment.

Houston : Over 75 economists nationwide endorsed the FairTax in a letter delivered to the House, Senate, Treasury, tax reform panel and the President today. Tom Wright, executive director of FairTax.org, stated, "Nearly seven months ago an idea was born in the mind of a FairTax supporter who is an economics professor at the University of Virginia's College at Wise. He wants the broad public to know just how many economists have examined and recommend the FairTax plan. That idea became a project that has finally come to fruition. Over 75 economists, one of whom is a Nobel Prize winner, have now endorsed, specifically, the FairTax HR 25 and S 25, in writing. We call this a direct validation of our more than $22 million in academic and market research completed over the past 10 years. This economist endorsement letter was delivered to the offices of every single tax aide on Capitol Hill this week. We also made sure the President, his tax panel, and Treasury Secretary Snow had a copy. This letter further evidences the fact that Americans realize the inefficiencies of the current system and see the FairTax, HR 25 and S 25, as the proper replacement."

David L. Kendall, Ph.D., Professor of Economics and Finance from the University of Virginia's College at Wise, stated, "I support the FairTax and I asked other economists to join me with their support for a very simple reason: The FairTax offers Americans substantial and very real advantages over the income tax system we have now. Our federal income tax system is inefficient, far too costly, and simply not the best way to pay for government. I think all Americans are dismayed, outraged, and disgusted that our federal tax code contains millions of eye-glazing words spread across more than 60,000 pages. We all know it's a disgrace, and we all know it must be changed. Like most economists, I know that our income tax system slows economic growth, discourages work, and encourages current consumption over saving, saving that is needed to spur economic growth, which creates more jobs. Most economists agree that a consumption tax is less costly and more efficient than an income tax. Simply put, that's why I support the FairTax and that's why other economists endorsed my letter."

Tom Wright added, "The income and payroll tax systems are job-destroying travesties. Not only does the American public have the political will to replace them, the FairTax plan is viable (ask Texas and Florida), historically proven (ask the Phoenicians), acceptable (ask American voters), and now, endorsed by economists nationwide. The FairTax offers long-needed simplicity, efficiency, and fairness to all Americans by eliminating the income and payroll taxes. FairTax.org with a membership and supporter base of almost 600,000 strong is dominating the tax reform battle with thousands of American taxpayers' voices demanding relief."

Laurence Kotlikoff, Ph.D., chair of the economics department at Boston University, and co-author of The Coming Generational Storm, has stated, "Our tax code is a mess for a reason. Special interests pay for special favors. And with thousands of pages and counting, there are plenty of places for our politicians to hide the kickbacks. Meanwhile, all the exemptions, deductions, exceptions and special provisions reduce the tax base, which means higher tax rates and smaller incentives for individuals and companies to produce income. And whether the tax breaks are set in fine print or spelled out in bold type, they generally favor the rich, making our tax system less progressive than is generally believed. No tax system is perfect, but ours is so awful that fundamental reform is the only option. Fundamental reform is not just a necessity, it's also an opportunity to stop taxing income and start taxing consumption. My colleagues and I have been studying income and consumption taxation via computer simulations for some time now. We've found that switching from taxing wage and capital income to taxing consumption can significantly improve economic efficiency and growth. What's more, it can make our tax system much more progressive and generationally equitable. Fundamental tax reform is long overdue. Consumption taxation is the way to go."

Tom Wright thanked the volunteers who organized the effort to inform economists and asked for their input on the FairTax legislation by stating, "FairTax.org is a grassroots organization. Nearly 50,000 really active volunteers across the country are rallying behind the FairTax bill for various reasons. We thank Dr. Kendall and his efforts on behalf of the FairTax legislation and the economic principles it encompasses. HR 25/S 25 is the answer for our income and payroll tax burden. It is open, accountable, simple to understand, and fair to all Americans.

"No loopholes, no exceptions, and no American pays any federal taxes, hidden or obvious, up to poverty level consumption. This letter is an historic milestone for the FairTax concept. It coincides nicely with Federal Reserve Chairman Greenspan's comments and the good words by esteemed economist Milton Friedman when testifying before the President's tax reform panel in favor of consumption taxation. We believe after more than a decade of work, over $22 million dollars and hundreds of thousands of volunteer actions, our time is coming and the American people are fast becoming ready for the full tax replacement alternative, the FairTax.

Please view the letter in its entirety at http://www.fairtax.org/eco_endorsements.html or you may request a copy of the letter by fax or e-mail by calling Gloria Garza at 1-800-FAIRTAX #106 or e-mailing gloria@fairtax.org.

The National Retail Sales Tax Alliance says:

2005-04-19T08:12:00.000-07:00

When the income tax was instituted in 1913 the tax form was four pages long and you would had to have earned more than $300,000 (in 1994 dollars) to be even required to file a return. In 90 years this is what it has come to...
The average tax burden borne by Americans in 2000 was 33.5%
In the year 2000, the 1040 form was 70 lines long and had 117 pages of instructions.
Individuals and businesses waste nearly $200 billion a year filing their taxes. We bear this burden through higher prices and lower wages.
The IRS prints some 280 instruction forms to explain how to complete nearly 480 tax returns.
The tax code is so large that each year the IRS mails enough pages of forms and instructions to circle the earth nearly 28 times.
The number of IRS employees has more than doubled in the last 30 years.
Half of all filers hire someone else to do their taxes.
Believe it or not the solution is simple - REPLACE the entire income tax system with the FairTax!

The FairTax is a NATIONAL RETAIL SALES TAX; in other words, you would pay your federal taxes whenever you purchased a product or service. The FairTax means that the federal government would no longer withhold federal taxes from your paycheck - you get to keep more of what you make. You would no longer need to file federal income tax forms - the federal income tax system would be abolished. And under the FairTax all families will receive a monthly tax rebate check. Check www.fairtax.org to see a list of Frequently Asked Questions from the FairTax website.

SNEAK-A-TAX

2005-04-19T08:08:00.000-07:00

by Herman Cain
April 15th marks a national springtime ritual that has nothing to do with April flowers. It's the official due date to file our federal returns for taxes we know about and those we never see coming until after they hit us.

Sneak-a-taxes are taxes buried in the 9-million-word tax code mess.

Some of these sneak-a-taxes start out as temporary, but Congress conveniently forgets to end them. Or maybe they just pretend to forget.

Consider the withholding of income taxes. Congress enacted automatic withholding in 1943 as a way to fill the U.S. Treasury coffers each month and mask the true cost of federal spending. Congress explained to the public that, since the United States was busy fighting World War II, automatic withholding was necessary to fund the war effort in a timely fashion.

Congress also promised that withholding would end as soon as the war was over. That war ended 60 years ago.

Automatic withholding is a sneak-a-tax. When you receive a refund check, it means yougave the government an interest-free loan. Many workers have more taxes withheldthroughout the year than they will owe on April 15th to avoid writing Uncle Sam a check or incurring an underpayment penalty. They then seem overjoyed that theyreceive a big refund check from the U.S. Treasury. We are so conditioned to celebrateour sudden windfall from the government that we forget that it is our money in thefirst place. [Ed note: and money you would have earned interest on had you placed it in a savings account.]

The alternative minimum tax is another sneak-a-tax that should have been repealed years ago. The AMT laws were enacted in 1969 by a Democratic-controlled Congress to sock it to the so-called rich. The AMT is a calculation that assigns an alternate tax amount due if your regular income tax liability is not as high as Congress would like it to be.

It is simply an unfair way of forcing people to pay more taxes, even if they follow all the rules and mandates in the convoluted tax code. Each year, the AMT bandit holds up more and more of the so-called rich.

In 2004, anestimated 2.6 million taxpayers fell prey to the AMT. By 2010 33 million, or an estimated one-third of all taxpayers, will be subject to the AMT. All because youand your spouse worked hard enough to earn at least $75,000, which in 1969 was considered rich.

The AMT does not consider inflation, a family's decision for both spouses to work, nor the promotion you received because you worked a little harder last year. The AMT punishes people for investing, working harder and growing their small businesses.

More sneak-a-taxes include corporate income taxes, which lead to higher consumer prices, the double taxation on dividends and corporate earnings, taxes paid on Social Security benefits, raising the maximum income subject to payroll taxes, lowering the maximum limit for certain taxable deductions, limiting the equipment expensing amount for small businesses, and the many taxes, fees, and surcharges hidden in your monthly phone bill.

In fact, one of the most ridiculous sneak-a-taxes is the Federal Excise Tax. The Federal Excise Tax, which is figured at 3 percent of your phone bill, was enacted in 1898 to help pay for the Spanish-American War. That war ended 107 years ago.

The federal tax code is filled with bandits, loopholes and limited deductions. Mostpeople can't afford to find all the loopholes and deductions, but the tax-code bandits find everybody.

The only solution to locking up the tax-code bandits and making sure they never escape is to first repeal the 16th Amendment to the Constitution, which gives Congress the "power to lay and collect taxes on incomes, from whatever source derived."

Second, we must replace the federal income tax code with a national sales tax, also known as the FairTax.

Under the FairTax, all citizens will see an increase in their personal incomes and intheir ability to save and invest for their future and their children's futures.

Credit must go to President Bush for bringing long-overdue debate on overhauling the tax code mess to the forefront of the national political agenda. But Congress will not take action without a vocal and persistent demand from the voters in betweenelections, and not just on election days.

Let's put the tax code bandits out of business. Ask your members of Congress to replace the tax code with the FairTax. If they say no, or do nothing, then it's time to replace them.

And that will not be a sneak attack.

Herman Cain is chief executive officer of T.H.E. New Voice, Inc. and New Voters Alliance, and host of the nationally syndicated radio talk show The Bottom Line with Herman Cain. He is past chairman of the Federal Reserve Bank of Kansas City, and past chairman and CEO of the National Restaurant Association.

Who's Regressive? Not the Fair Tax

2005-04-19T08:02:00.000-07:00

by Howard Johnson

In a recent article by Robert Reich, “It’s the Wages Stupid” he suggests that a consumption (national retail sales) tax must always be regressive because it would hit people in the lowest income bracket hardest.” First, he is only partially right. To be accurate, those in the lowest income brackets spend “most all” of their income on “necessities” so they can’t save.

(The FairTax gives a pre-rebate to everyone to offset the payments made in taxes up to the poverty level, currently $24,000. This makes FairTax PROgressive.)

Saving and investing are luxuries that only those with disposable income can afford. Is it really wage increases that are needed? I would suggest that it is the income tax system in America that is keeping wages low and causing the savings crisis in America.

Flat Tax or Value Added Tax Is NOT the Same As Fairtax

2005-04-19T07:50:00.000-07:00

Does the Flat Tax have a chance of passing during Bush's last years in the White House? mary>>

I hope not, Mary, because the flat tax isn't the FairTax. Some differences:

The flat tax does NOT repeal the income tax; Fair Tax. does.

The flat tax, because it is in addition to the income tax, has the same loopholes, breaks for the wealthy and for lobbyists. The Fair Tax has no loopholes; eveyone gets 100% of their paycheck.

With the flat tax. withholding continues since the income tax is still in force. With Fair Tax individuals don't file and businesses deal only with the sales tax, no employee taxes.
The flat tax imposes the same tax burden embedded in prices of goods and services that we have now. The Fair Tax un-taxes wages, savings, investments and increases productivity.

A flat tax would be an improvement over the current system but it would still be open to manipulation by special interests; with the Fair Tax everyone pays the same and can control their tax liability. All taxes are rebated on spending up to the poverty level.

The flat tax taxes exported goods and doesn't tax imports; the Fair Tax makes US the only country in the world with no tax at all on productivity. Jobs will return to the US and we will look great to foreign investors.

The flat tax should reduce interest rates 25 - 35 percent but is neutral toward savings and investment (better than the income tax which is biased against investment and savings). The Fair Tax reduces rates by 25 - 35 % and is favorable to investment and savings.

The flat tax retains the IRS and the annual tax return fiasco. The Fair Tax gets rid of it.

The flat tax would have a positive effect on jobs but does not repeal payroll taxes. The Flat Tax repeals FICA taxes, payroll taxes, social security taxes, medicare taxes and self-employment taxes. Because these costs are embedded in prices, prices are expected to go down from 22% to 30%. It escalates the creation of jobs by attracting foreign investments.

The flat tax lower rates and improved simplicity of returns should improve compliance but the Fair Tax, by taxing everyone, makes compliance mandatory therefore adding revenue from drug dealers, tax evaders, foreign tourists, illegal aliens etc. to the tax base. Government income will be at least the same it is now and possibly a good deal more, which could lower the rate of the Fair Tax in the second or third year.

In the flat tax, business components are hidden as they are with the income tax and could still be embedded in prices. With the FairTax everything is visible and easy to understand and no taxes are withheld.

And yes, we can pass this in the next year or two if everyone helps. A letter to your Congressman asking him or her to support the Fair Tax would make a HUGE difference. The grassroots effort has grown to 10,000 supporters signed up and on individual state email lists and it's growing every day.

Like anything worthwhile, it needs support. But, Mary, they really thought women would never vote, didn't they! The Fair Tax -- if everyone will help -- can pass, too. And its a win/win situation for all.

What The FairTax Means To Seniors

2005-04-18T15:27:00.000-07:00

It’s “in” to be “old.”

The pre-boomer generation now sports grey hair and grandchildren.

Senior citizens are the larger portion of the overall population, too. In 1970, those over 65 years of age were 9.8 percent of the population. By 1995, seniors were 12.7 percent of the population. 13 years from now, seniors will account for 13.3 percent of the population and in 2020, they will account for 16.5 percent.

Seniors, ready to rest more and work less, often rely on incomes conbined of benefits from social security, government or company retirement programs and investments. They still have to pay income taxes. How much better to have 100% of each benefits check to keep each month, tax free. FairTax would make that happen.

Under the FairTax senior citizens, like everyone else, will receive a cash rebate at the beginning of each month. Therefore those with the lowest incomes will pay no tax at all. In fact, the Fair Tax is the only tax plan, including the current income tax regime, that completely "untaxes" the poor.

Income tax on social security will be repealed. The income tax imposed on investment income and pension benefits or IRA withdrawals will disappear. Pension funds, IRAs, and 401(k) plans had assets of over $9 trillion in 1998. An income tax deduction was taken for contributions to many of these plans, and all beneficiaries and owners of these plans expected to pay income tax on them upon withdrawal. Not if we pass the Fair Tax — once the income tax is gone, taxes on savings go with it. In other words, the hard-earned savings of seniors will be accessible, tax free.

Repeal of the corporate and individual income tax, and the estate and gift tax will have a substantial positive impact on the stock market. Seniors who own stocks either directly or through mutual funds, Individual Retirement Accounts, 401(k) plans, or otherwise, will experience significant gains. More seniors own stocks than any other age group. In addition, unrealized capital gains that would have been subject to the income tax when realized will no longer be taxed.

Newly constructed homes will be taxed, but formerly owned homes will not be. Currently, equity payments on homes must be paid from after-income-tax earnings (i.e. principal payments are not deductible). The purchase of existing housing is thus subject to the income tax. All owners of existing homes will experience large capital gains due to the repeal of the income tax and implementation of the FairTax.

Estate and gift taxes will be repealed. The need for small businesses and farmers to engage in expensive estate planning involving attorneys, complex estate freeze transactions, and expensive life insurance plans in anticipation of future estate and gift tax liability will disappear. The “death tax” will be repealed. Heirs will no longer need to sell the business or farm out of the family or borrow heavily, putting the business at risk, in order to pay the estate tax.

The Fair Tax will make the economy much more dynamic and prosperous. Consequently, federal tax revenues will grow, spending will be under less upwards pressure, and the deficit will decline. Budget pressure on entitlement spending, already significant, will become much more pronounced once baby boomers start retiring in 2010. The economic growth caused by a consumption tax will make it substantially less likely that federal budget pressures will result in Medicare or Social Security benefits cuts.

Seniors, able to live more comfortably in their last years, will be happy to know that their children and grandchildren will no longer labor under the yoke of the income tax and will know that they can leave the fruits of their lives to the next generation without fearing punishing taxation.