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.