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Sunday, June 17, 2012

How does FairTax become Law?

THIS IS MY LAST ENTRY FOR THE SUMMER. TAKING TIME OFF TO ENJOY LIFE AND THE GRAND KIDS.

FOR THOSE FIRST-TIME VISITORS; IT IS BEST TO START AT THE BEGINNING > > > > > > > > > > >



Observations:

Like many kids from the 60's, I smoked cigarettes because that was the way to show your defiant and rebellious individualism. Young people have a difficult time finding who they are and where they fit in among their peers in society. Smoking was cool, a step toward being an adult, or so we were led to believe by media advertising (curse the Marlboro Man & Joe Camel). I tried to quit several times but never had the personal commitment to divorce myself from the habit. Then on February 3rd, 2002 I quit cold turkey, threw a half a pack in the trash and haven't had one since. No gum, no patch, no hypnosis, no help from my wife or friends. How did I do it? I had no choice. That morning I awoke in a hotel room with the same deep smoker's cough I've been tolerating for many years, but this time I couldn't stop coughing and I couldn't breath. A frightening experience that made me change my life. Sometimes a hard slap in the face is needed to get a person's attention. Perhaps the same for our nation?

Our country is about to have a frightening financial experience that will change most of our lives for the worse if we don't do something about it soon, very soon. If we wait until its a crisis, I fear a hasty and wrong decision.  FairTax Dave


THE POWER TO SUCCEED


So, what can you do to help FairTax become reality and ultimately save our country?
1- Spend a little time with the Constitution. It's the most marvelous document ever written about the governing of a nation and it's people. Help your kids understand it's importance.
2- Visit the FairTax website and read (or watch) the 50 FAQs. Then explore the many investigative reports, white papers and important information contained within.
Send this website to your friends on Facebook
3- READ the BILL. We already talked about this. Go ahead, you can do it.  Dare to be smarter than those elected to represent you in Washington.
4- Pick up "The FairTax Book" and read it. You may also want to read "FairTax: The Truth" and other publications. Warning; there are some books out there that tell lies about FairTax. It's OK to read them to learn their spin, but you may want to be grounded in the truth first.
5- Now that you have studied FairTax it's time to get in the game. Talk with your family and friends, share FairTax with your social groups, get involved, teach what you have learned to those important to you.
6- Contact your Congressman and Senators by mail, e-mail, phone call, in person at a Town Hall meeting or in their office. Let him/her know you support FairTax and ask them to do the same. Always be polite, but never compromise your beliefs. Besides, you may find out you know more about FairTax then they do. (If so, recommend www.fairtaxdave.com to them).
7- Join the revolution. Go to www.fairtaxnation.com to find a FairTax group near you. If you can't find one, start one of your own. FairTax Nation will be thrilled to help you get started.
8- Send a message to your friends on Facebook and Twitter to visit www.fairtax.org and www.fairtaxdave.com  Spread the word. FairTax is the right way to get our country back.

Even if all you do is talk with your neighbor, or put a FairTax bumper sticker on your car, or wear a FairTax hat or tee shirt to the Mall, or put a FairTax sign in the window of your business, or make a donation to FairTax; you will be supporting a worthy cause that will benefit the future of all Americans, including your kids and their kids... and their kids.

"Nobody made a greater mistake than he who did nothing because he could only do a little."   Edmund Burke

OK, so you like the promise that FairTax offers to you, your family and your friends, your employer or your employees, your community and your country. But you still have doubts FairTax will ever become law; and if it did, will FairTax really work? Knowing what we've learned so far and making some realistic assumptions, let's explore what might happen.

Demand an open debate and floor vote on the FairTax
The most common reply I receive after presenting FairTax to a group of interested and concerned citizens is, "FairTax looks great, but Washington will never let it happen." That was my initial reaction, too. But then I looked at the numbers. What is required to make FairTax the law of the land are the yea votes of 218 Congressman and 51 Senators (no super majority needed), plus a President's signature. Sounds easy, but we know the difficulty in getting Washington to act, it's like herding cats. Face the facts; many of our politicians don't have the courage to do the right thing; they prefer compromise over principle. Indiana just fired an over-compromising six-term Senator in a recent primary proving once again; the people have the power to replace those who do not represent their wishes.

"All compromise is based on give and take, but there can be no give and take on fundamentals. Any compromise on mere fundamentals is surrender. For it is all give and no take."   Mahatma Gandhi

Currently there are 68 Representatives and 9 Senators that outwardly support the FairTax by co-sponsoring Bill HR-25 and Bill S-13. (You can find their names at www.fairtax.org). A similar number in both houses oppose the FairTax. You can probably guess who the opposers are; the usual suspects that put politics before people, personal enrichment before sworn duty... and resort to Class Warfare, the Race Card, lies and deception instead of facts to advance their arguments. But the majority of our lawmakers are sitting on the fence not wanting to take a position. "We the People" must force the issue by putting their re-election prospects in jeopardy if they refuse to act favorably to the peoples interests.

"A people that values its privileges above its principles soon loses both."  President Dwight D. Eisenhower

FairTax does not support any politician or political party, however, FairTax is the ultimate litmus test when it comes to exposing a politician's true core principles.  How can anyone in Congress not support the principles on which FairTax was built? Unfortunately, those who stand to benefit the most from FairTax (the poor, the elderly, and the young liberals) are the same who continually vote the opponents of FairTax into office. Yes, I'm talking about those who blindly vote for Democrats. If they would pressure their elected officials to support the FairTax (or replace them with someone who will) it would make it easier to pass into law. If not, we will need a whole lot of conservatives in Congress. Elections do have consequences.

Transitioning America to the FairTax

Many think changing from an income tax system to a consumption tax system would be complicated and require several stages to phase in. The by-product of such thinking would add a new tax revenue stream (consumption) while never removing the old one (income). This is the problem with Herman Cain's "9-9-9" plan; it assumes after a year or two of 9% Corporate tax, 9% income tax, and 9% consumption tax, Americans would be ready to switch over to the FairTax. (Notice, two-thirds of the 9-9-9 tax will be embedded in the prices you pay for goods and services, which means you pay 9% sales tax on that embedded tax). If history is any indication, 9-9-9 will grow to 20-20-20 before the income tax would ever get repealed, and FairTax would never become law, and the IRS would never be terminated. The only major federal tax ever repealed was the income tax to fund the Civil War, and the main reason Congress was forced in 1872 to repeal it was because it was called "The Civil War Tax". Americans are not stupid. To promote an interim plan while the citizens get "comfortable" with the FairTax is an insult to all of us. Its not that difficult to understand. Folks, we don't need a bridge, we need the FairTax. 

"America will never be destroyed from the outside. If we falter and lose our freedoms, it will be because we destroyed ourselves."
President Abraham Lincoln

FairTax is so simple even a 7th grade student can figure it out, and so is the transition which should not be difficult or take more than six months to complete. The following is my scenario of how FairTax could be quickly transitioned into law after open debate in both houses of Congress under the watchful eye of C-Span and the American public. It is important to note; FairTax supporters will not tolerate any revisions or earmarks to the FairTax Bill. FairTax is the most examined, studied, analyzed and scrutinized piece of legislation in our nation's history. It's been in Washington since 1999. It needs no creative distortions from Congress. We should and must insist on a full and open debate in both Houses of Congress on the merits of Bill HR-25 / S-13 as written without amendment or additions. If it passes we get our country back, if it doesn't pass we will know who to vote out of Congress in the next election.

"There are no easy answers, but there are simple answers. We must have the courage to do what we know is morally right."  President Ronald Reagan

Winter/Spring of 20?? - FairTax Bill HR-25 is passed in the House by more than 217 votes and Bill S-13 is passed in the Senate by more than 50 votes, as written without amendment or additions. The President signs FairTax into law the following week with much fanfare and urgency because the public demanded it and the national debt is much worse than it is now.

However, before FairTax can be enacted into law there are several organizational and logistical changes that must be accomplished before December 31st. Among them are:

1- Verification of Social Security numbers and the registration of persons and families in America who qualify for the prebate.
2- Educate the State Sales Tax Administrators on the rules of collecting the FairTaxas well as all public and private sector services/businesses. Also, inform the American public of the details in the pending transition. An informed public is vital.
3- Reprogramming of retailer's Cash Registers to record the national sales tax on a printed receipt will be easy.
4- Restructure the U.S. Treasury to begin the phasing-out of the Internal Revenue Service as well as the creation and staffing of the Excise Tax Bureau and the (National) Sale Tax Bureau.
5- Establish the U.S. Treasury and State Cooperative Administration for the purpose of coordinating tax collection at the State level.
6- Amend all existing Treaties, Tariffs and Trade Agreements with other countries as required to comply with the FairTax.

"The income tax created more criminals than any other single act of government"  Senator Barry Goldwater

In the last quarter of the year some strange events could occur caused by uncertainty; such as families hoarding in fear of a major price increase, and businesses reducing their inventory to reduce their tax liability. Hoarding would cause an increase in products sold at the same time businesses are trying to reduce their inventory levels. Although great for certain Retailers, this could cause a shortage of some products resulting in a panic run on some stores and temporary price increases. The opposite could also happen; families postpone purchases and save all they can in hopes prices would be better under FairTax, or in preparation in the event prices go up. If this happens some businesses could end the year with unexpected taxable inventory. Then again many families will go on about their business looking forward to having more of their earned money (100% of their paycheck plus their prebate) without concern about any perceived or imagined consequences of transition.

Most likely there will be a mix of these three attitudes, to what degree depends on how well the government and the Media educates (or misleads) the American citizen. Furthermore, include the year-end holidays and Christmas shopping, and it becomes any one's guess how Americans will react. But no matter what happens it will be a minor short term up or down blip in our economy. If America reacts by spending (hoarding), it will be a great 4th quarter boon for the economy. If America reacts by saving (conserving), it will be a boon in the upcoming 1st quarter. Either way, our businesses, our government and our citizens win.

"This country will not be a good place for any of us to live in, unless we make it a good place for all of us to live in"   President Theodore Roosevelt

January 1st at 12:00:01 FairTax becomes law and all forms of federal income tax vanish.
January begins with the first prebate payment appearing in your bank account or on your Debt/Smart Card or in your mail box between the 1st and the 5th of the month. Your first paycheck has no income tax or payroll taxes withdrawn, meaning you have more cash in your hands. And so does your next paycheck, and the next. Prices at the store haven't changed because Retailers are using their inventory credits. Major Retailers such as Wal-Mart, Starbucks, Best Buy, McDonalds, Sears, Purdential, Krogers, Mobil, as well as all banks, utilities and municipalities will be ready for the transition on day one. (over 75% of retail sales in America are through major Retailers). You will actually have a lot more money left over at the end of January which you will probably put in your savings account, or use to get current with your creditors. 

February, March, April, May are the same as January, except some prices could rise due to the mix of products with and without embedded taxes passing through the supply pipeline. Thankfully you have your prebate plus extra money in your check to cover any price increases.  This predictable rise and fall in the prices (think of it as a pig in a python) is expected to be flushed out within the first 6 to 9 months depending on product shelf life, then competition should drive the prices back down to normal. April 15th will be an exciting day for Americans because it will be the last time they ever file an Income Tax Return. (Wouldn't surprise me if they made it a national holiday.) The hundreds of extra dollars you saved each month are building up, just looking for a beautiful day and a good reason to spend some of it.

"A simpler tax code would reduce the considerable resources devoted to complying with current tax laws, and the freed up resources could be used for more productive purposes."   Alan Greenspan

June, July & August is more of the same; more money, less stress, plus more Help Wanted Ads posted in the newspaper than Auctions and Foreclosures. Prices are returning to their previous levels. Americans are starting to make expenditures to repair or remodel their homes, replacing their old appliances, upgrading their vehicles, taking a nice vacation, enlarging their charitable contributions, paying down some bills and improving their lives. In doing so they stimulate the economy by spending and investing their money in their chosen pursuits of happiness.

September, October, & November experiences a sharp increase in construction as new manufacturing and distribution companies locate (or relocate) in America to take advantage of the 0% Corporate Tax rate. Empty structures and office spaces are being sold or rented, new small businesses are popping up everywhere. Also, home starts are up with more people qualifying for a new home purchase. Free enterprise is alive and growing in America... again.

"Capitalism is our only moral system. All other systems take advantage of man's rights and liberties."  Ayn Rand

December 31st marks the end of the first year under FairTax. A measurable amount of the $12 to $14 trillion of off-shore tax sheltered funds have returned to the United States in the form of business investments. Exports have grown at a healthy rate; the world is taking advantage of the 15% to 19% reduction in the price of American made goods. There are more jobs and more confidence in the American economy. Unemployment is dropping significantly and GDP is exceeding expectations. Christmas in America will be the best it has been in years... and the next year will be even better.

You ain't seen nothin yet ! GDP is predicted to be 7% to 10% each year for the next decade as more and more manufacturers set-up-shop in America and more American products reach foreign markets. FairTax is the answer to competing globally and paying off our enormous debt. More Americans will have an honest chance to earn a decent wage and live a rewarding life. Just as important, America will once again be the economic leader of the world.

"We have it in our power to begin the world over again."  Thomas Paine

Admittedly, I have painted a rosie picture that is over-simplified, but who's to say I'm wrong? I have yet to see any credible evidence that would indicate anything less than solid sustained economic growth. Alan Greenspan warned in 2005 of potential difficulties switching from a complicated income tax to a simple consumption tax, but he didn't say it was impossible. In fact, when asked how many years would it take for the off-shore tax sheltered money to find its way back to the USA, Greenspan replied, "I don't know, but it would be measured in months not years." Each industry should be able to prepare for and adjust to the FairTax rather quickly. Even those in the tax industry will find other businesses that need their skills. FairTax does much more than simplify taxes, maximize prosperity, and level the playing field. It transfers the power to control from Washington back to the States, and to "We the People".

Of great concern about a rapid transition is the fear of change causing panic on Main Street and Wall Street. An informed citizenry with more of their own money in hand will not panic, they will spend. Which may lead to another concern... inflation; too much money chasing too few goods. Yet another fear is the cost of energy escalating due to increased consumption resulting from more prosperity and manufacturing in the USA. (America will not reach it's full potential if we don't have a vibrant energy independence policy, regardless of the tax code). Also, EPA regulations and other government restrictions on growth must be eliminated or relaxed. Fear is no reason not to do the right thing. Look, as I told you before, if a dummy like me can figure this out, so can the people you hang around with or the ones we send to Washington, they just need to study the FairTaxAfter all, this is America! We can do this.



Thanks for visiting my website. Enjoy your summer.   FairTax Dave

Monday, June 4, 2012

#4 Authorize States to Collect the Tax

Observations


FairTax boasts of being simple, fair, efficient and transparent. When tax laws become so complicated to the point of being incomprehensible, citizens have less trust in government and a greater feeling of helplessness. They're also more likely to cheat on their taxes or not file taxes at all. Tax non-compliance (Tax Gap) is estimated to be over $400 billion annually. Those of us who pay our taxes paid $3,110 more (in 2006) to cover those who chose not to pay their taxes. That's definitely not fair. On top of that, add the underground economy at $1.2 trillion who operate illegitimately as well as legitimately on a cash-only basis thereby escaping paying income and payroll taxes. Recently, fraud amounting to $4.2 billion was discovered in the Immigrant Tax Identification Number (ITIN)  program. The ITIN is issued by Social Security to illegal immigrants working in our country with the intent to collect income tax from them. WHAT??? Can't they see the irony in this? What part of "illegal" don't they understand? They should be assisting ICE in issuing Deportation orders. Instead, ITIN is being abused by participants claiming children, nieces and nephews living in foreign countries as dependents. That is blatant theft! Wrongfully tolerated by our government. ITIN and many other fraudulant wasteful programs intertwined with our tax code would be immediately eliminated by the passage of the FairTax Bill. 
The opposite is also true, when tax laws are few and simple to understand, logical in design, transparent to all, and applied equally to everyone, citizens rarely try to scam the system. Oh, there will always be some idiot who will try, but it is difficult to cheat when everyone knows the rules. State Sales Tax is a perfect example of voluntary taxation with limited violations. Remember, under a consumption tax system, the tax is included in the retail price. The only way it can be removed is with the Retailer's consent. Therefore, it is the Retailer who risks the penalties for tax evasion; a loss of profit, a fine, and a possible prison sentence. In addition, under a consumption tax system, revenue is directly connected to the success of the economy. The more retail sales in America, the more tax revenue collected for the federal government. This makes removing road blocks to success a paramount objective of the United States Congress, as it should be.

FairTax restores the original intent of our Constitution; Federal Government funded by prosperity.  FairTax Dave


THE POWER OF TRANSPARENCY


T. Coleman Andrews, Commissioner of Internal Revenue (1953 - 1955) said this;
"The income tax is bad because it has robbed you and me of the guarantee of privacy and the respect for our property that were given to us in Article IV of the Bill of Rights. This invasion is absolute and complete as far as the amount of tax that can be assessed is concerned. Please remember under the 16th Amendment Congress can take 100% of our income any time it wants to. ...I believe that a better way to raise revenue not only can be found but must be found because I am convinced the present system is leading us right back to the very tyranny from which those, who established this land of freedom, risked their lives, their fortunes and their sacred honor to forever free themselves..."

Bill HR-25, Title II, Section 201, Subtitle A, Chapter 4 dictates the national sales tax will be collected at the State level. This allows the States to use existing sales tax administrations to collect national tax from the same familiar business sources. It also eliminates the need for tax collectors at the federal level, in other words; no IRS required. Although to make it work will require a revenue collection relationship between the federal government and each of the 50 States. U.S. Treasury Agents working cooperatively with State Tax Administrators to ensure accuracy and honesty in the collection of the national sales tax.

FairTax provides three options to each State regarding tax collection;
1- Collect the national sales tax using the State Sales Tax Administration.
2 - Commission a neighboring State to do the tax collecting, or
3 - Concede the tax collection duties to the federal government. 
It is safe to assume most of the States, if not all, will choose the first option to take advantage of the tremendous transfer of power and the considerable financial rewards as a result of collecting the FairTax.

Title II, Section 201, Subtitle A, Chapter 2 provides business credits and refunds for business related items that were purchased with tax included, as well as bad debt credits, intermediate and export sales credits, insurance proceeds credits, etc. It is strongly advised to those who own their own business to read Chapter 2 for a clear understanding of the business credits.

"A wise and correct course to follow in taxation and other economic legislation is not to destroy those who have already secured success but to create conditions under which everyone will have a better chance to be successful."   President Calvin Coolidge

Here is a summary of the logistics required to collect the FairTax. The pricing formula for producers and suppliers (non-Retailers) is Price = Cost + Profit (no embedded taxes). Business credits eliminate embedded taxes and are provided in two ways;

FairTax simplifies business in America
1 - Tax-exempt Identification Numbers will be issued by the State to all qualified businesses for the purpose of purchasing materials, components, sub-assemblies, intellectual property, etc. necessary to produce a product and/or service. This tax-exempt system already exists in most of the States.
2 - Any business can request a refund from the State. The rule is simple, if the use of the item or service purchased is 95% or greater for business purposes, then 100% of the 23% sales tax will be refunded. Lesser percentages refunded for lesser business use. Example: A Machine Shop owner's new CNC Lathe is 100% tax exempt, tax on his Salesman's company car depends on percent of business use, but the owner's new Desk is not exempt.
Note: Employee discounts are taxable. However, regardless of the discount, the tax will be no less than 80% of the tax at the normal price. You may get a bigger discount on the price but you only get a 20% maximum discount on the tax. Go to www.fairtax.org to review the several studies and White Papers on this topic. 

Remember, businesses do not pay taxes, therefore, their prices do not include any tax. This results in a 22% average reduction in the cost to the Retailer depending on the products and/or services purchased. The Retailer's price to the consumer will include the 23% national sales tax. Therefore, the net effect is... prices remain about the same. However, a FairTax economy is subject to the same inflation, shortages and market demands as any economy. Therefore, there are no guarantees that prices will stay exactly the same.  Open competition and the free market law of supply and demand are the ultimate controllers of prices.

Retailers will be the Tax Collectors in America
The Retailer is contracted by law to collect the national sale tax. He has a different pricing formula than Producers and Suppliers; Price = Cost + Profit + Tax. To include 23% sales tax in the sell price, the Retailer adds 30% to his Cost + Profit. So what is the true tax rate, 23% or 30%? The answer is BOTH, it all depends on which side of the Cash Register you're standing. If you're the Retailer its a 30% mark-up, if you're the customer its a 23% sales tax. Opponents try to make a big deal about this, insinuating deception by the promoters of FairTax.
Example, if Cost + Profit = $100:
                    $100 + $30 tax = $130 sell price
                    $30 tax / $130 sell price = 23% sales tax

All consumers purchasing new items and services pay the Retailer's price and receive a receipt which identifies the price and the included tax. A constant reminder of what our government is costing YOU. Retailers are paid for collecting the tax; those with small monthly retail sales (under $4,350) keep 20% of the tax collected up to $200, large retailers (over $350,000) keep 1/4 of 1% or $200 whichever is more, all other businesses between these extremes will receive a flat $200 tax collection fee. 

The Retailer will submit a monthly one-page tax form that begins with recording the Total Retail Sales. Then multiply Total Retail Sales by 23% (this is the tax collected), subtract Tax Collector's Fee and Business Tax Credits, send the balance of collected tax to the State before the 15th. (Some very large retailers may be required to submit the tax weekly).

FairTax eliminates approximately 90% of the reporting imposed by government on businesses. However, all businesses will still be required to report to Social Security the hours and earnings of each employee for the purpose of determining their retirement benefits.

A Sales Tax collection system exists in 45 States. This is nothing new and requires little adjustment to incorporate the national sales tax with the State sales tax collection duties. No special training or costly new government department required. In fact, FairTax results in greater efficiency, higher accuracy and more tax revenue than the current system. For this service, each State will retain 1/4 of 1% of the taxes collected. This is big bucks. In half of the States it represents more money than it costs to administer the existing State Sales Tax program. All States will benefit financially, but more importantly, FairTax by its design creates a front-end direct financial relationship between the States and the federal government, i.e., an open dialog on revenue generation.

"Government does not create wealth. The major role for the government is to create an environment where people take risks to expand the job rate in the United States."   President George W. Bush

HR-25 specifies the States must meet with the U.S. Treasury at least once a year to review operations, propose improvements and share experiences. This is a relationship that currently does not exist. The annual 165 million household and business tax filings that exist now will be replaced by 50 States reporting and forwarding tax collections every month. This puts the States between YOU and the federal government which was the original intent expressed in the Constitution.

The 144,000+ employees of the IRS will no longer be needed.  As stated in HR-25, the appropriations (funding) for the IRS will end three years after the enactment of the FairTax. During those last three years the IRS will be responsible for concluding as many open investigations as possible (the remainder forwarded to the U.S. Treasury) and destroying all closed files on American taxpayers.
FairTax is the only Bill in Congress that actually reduces the size of government by terminating the Internal Revenue Service, currently a $12 billion expense. Title III, Section 301 explains the phase-out of the IRS, and Section 302 establishes an Excise Tax Bureau and a Sales Tax Bureau within the U.S. Treasury. Other regulatory departments in Washington may also see a reduction in staff. The total influence of FairTax may not be known until after it is enacted, but rest assured the affects will be positive because FairTax is built on solid Constitutional principles.  

There you have it, the four actions of FairTax that will effect your life daily; REPEAL, ESTABLISH, PROVIDE and AUTHORIZE. My goal was to dissolve the mystery, articulate the truth and expose the lies. I hope you gained a better appreciation of the benefits of FairTax to you and your country, and why the passage of FairTax Bill HR-25 is so crucial to reclaiming the liberties and freedoms chronicled in our Constitution.

Still not convinced? Does FairTax still look too good to be true? Do this; every time you see some news report on TV involving tax related crimes, injustices or atrocities ask yourself, "If FairTax were the law, would that have happened?"

The next entry will focus on who opposes the FairTax and why.

Monday, May 28, 2012

#3 Provide a Monthly Tax Return

Observations

You hear the word "fair" used quite a lot in campaign speeches; "fair shake", "fair share", "fair shot". But you don't often hear "FairTax" from either side of the political spectrum.  This got me wondering what their definition of "fair" is?  Now, I already know what "fair" means because I went to the source.  Two years ago while visiting my grand kids I asked them "What does FAIR mean?"  I figured they would know because they were always saying "that's not fair" whenever they lost an argument with their parents.  All kids seem to have a built-in compass when it comes to fairness.  That may be the reason they get along better on the playground when their parents aren't involved.  Kids can spot a cheater a mile away and aren't afraid to call it like it is.
My oldest grand daughter was 10 at the time, active in several team sports, she spoke first; "Fair means everyone plays by the same rules" (fair shake, i.e. honesty).  My second grand daughter, three years younger yet in constant competition with her older sister quickly said "Fair means, I get the same" (fair share, i.e. equality).  My grandson (five) had three strikes against him from the day he was born; he's the youngest, he's a boy, and he's out-numbered two to one.  His answer was "Fair means I get some, too" (fair shot, i.e. inclusion). He doesn't care about rules or the amount, he just doesn't want to be left out.
So, there you have it, FAIR means honesty, equality and inclusion, or as our Founding Fathers expressed; ...liberty and justice for all.  But some of our politicians think "fair" means "from those who have money to those who don't" without regard to personal responsibility.  I'll stick with my grand kids' definitions.
 
Does our current tax code meet your childrens' fairness standards?  Do our politicians?   FairTax Dave


THE POWER OF FAIRNESS


Title II, Sec. 201, Subtitle A, Chapter 3 explains the Family Consumption Allowance which is know as a prebate.  Many have a hard time understanding this provision of Bill HR-25 because they try to relate it to Welfare or other Social Assistance programs provided by the federal government.  The prebate is not a hand-out, it is a monthly tax return without all the forms, filings and deadlines.  The prebate is based on the premise that no American should pay taxes on life's essentials.  The prebate is the great equalizer, it un-taxes the poor while reducing the tax burden on the middle class, plus caps the maximum tax on the wealthy.  The more you spend beyond the poverty level the more tax you pay.  Therefore, those of wealth who choose to spend their money will pay more tax than those who choose to be frugal.  And those of limited resources will pay little if any tax.

"The prebate is voluntary.  Those of great wealth will most likely not participate, perceiving the prebate as inconsequential money better left in the U.S. Treasury as their gift to the government.  And those who wish to remain anonymous in our society will also decline the prebate to protect their privacy.  Thus, leaving the prebate program to those most in need of it's purpose... 99% of American families."

Compare the prebate to our current tax code where tax deductions are provided for each member of the family to be subtracted from your gross income before taxes are assessed.  In the FairTax system a tax return is based on the size of your family and the national poverty level as determined by the Department of Heath and Human Services who have been calculating poverty levels for over 60 years.  Welfare, Medicare, Social Security and other social programs calculate their benefits (payments) from the same source.  No need to create a new department within the government to support the prebate program, one already exists. 

No American should pay tax on their basic needs
The tax return is equivalent to 23% of the poverty level for each family size.  (Poverty Level is the average amount of money a family requires to pay for their basic needs, i.e., to survive.)  Based on 2012 figures, a single person would receive $214 each month and a married couple would receive double that amount, $428.  Two singles living together would each receive $214.  $76 is added for every family dependent.  The monthly poverty level for a family of five would be $2,852.  Included in that $2,852 is 23% tax which equals $656.  The prebate is paid at the beginning of each month; that's why its called a prebate, not a rebate.  Each year the prebate amounts will change to adjust for inflation, cost of living.

"Take a moment to calculate the change in your family's cash flow under FairTax.  Add your prebate to the monthly increase in your take home pay (remember, no more taxes taken out of your check).  This totals hundreds and hundreds of your earned dollars in your hands every month for you to choose what to do with it.  Just what would you do with it? ...pay down some bills? ...fix up the house? ...save for a down payment on a better home? ...put money away for college? ...stash cash for a well deserved vacation or new car? ...give more to your favorite charities? ...build a nest egg for retirement?   It's your money, you choose what to do with it."

Bill HR-25 lists three options for method of payment; direct deposit, Debit/Smart Card or mailed check, but that may be reduced to two options in accordance with future changes to Social Security policy.  Of course a person must be of legal age to receive a prebate payment.  In addition there are four qualifications a person and family members must meet to be eligible for a prebate.

1 - You must be an American citizen and be able to prove it.  FairTax has nothing to do with immigration laws, but it does provide an attractive incentive for foreigners, with the desire to stay in the United States, to enter our country legally.  Apply for citizenship, work and live among us for five years, obey our laws, study our history, learn our language, pass our citizenship test and become an American citizen, then as a reward for following our laws, register for the prebate.
Any American can receive a monthly prebate
2 - You, as well as each member of your family above the age of two, must have a valid Social Security number.
3 - You must live in the United States thereby becoming a contributor and participant in our economy.
4 - You must not be incarcerated.  If you are, the Fed and/or State is already providing for your basic needs.  Your family, however, will still be eligible for the prebate.

Do you qualify?  A person's income or wealth has no affect on eligibility.  You can be on welfare or you can be a millionaire, or anywhere in between.  FairTax is about personal spending, not personal income or net worth.  The prebate makes FairTax progressive, meaning those who spend less money pay less tax, and those who choose to spend more money pay more tax, but no one pays more than 23% total tax.  This upsets the "tax the rich" crowd who use Class Warfare to trick the public in believing their poverty is the fault of the rich.  Study after study by our best economists conclude FairTax has a greater positive impact on the poor and middle income classes, but without over taxing the higher wage earners.  Also, under FairTax, wealth will finally be taxed when it's spent.

"I am opposed to millionaires, but it would be dangerous to offer me the position"   Mark Twain

FairTax is non-denominational, non-partisan, and non-discriminatory.  It doesn't matter what place of worship you attend or if you attend any, who you vote for or if you vote at all, what's your age, gender, skin color, ancestry, economic status, level of education, where you live, the life style you choose, or your favorite music or sports team.  If you are an American, have a valid Social Security number, live in America and not imprisoned you qualify for a prebate, period!  All you need to do is register for it.  Registration will be required every year.  Notification of change in family size will be required within a month after it occurs; birth, wedding, divorce, death, etc. are noticeable events in the American society.  These are simple rules to follow.  Break them and you will be fined plus required to pay back any excess prebate payment received.  Committing blatant fraud will be met with more serious punishment and possible jail time.

How will the prebate program be managed? 

FairTax delegates responsibility to the Social Security Administration (SSA) for executing the prebate payment program as specified in Bill HR-25.  SSA has proven to be the most efficient and best positioned Department of government to administer this program. 

"Social Security...is not a dole or a device for giving everybody something for nothing.  True Social Security must consist of rights which are earned rights, guaranteed by the law of the land."     President Harry Truman


Social Security will be bankrupt in less than 20 years
To understand this better let us examine what SSA does now.  6.2% of the money paid in payroll checks (your money from your paycheck) is sent to the SSA Trust Fund (or that's what they want you to think) from which SSA draws to pay benefits to Social Security recipients.  The problem is... this system is BROKE.  More Americans are retiring and living longer.  The American work force is growing at a much slower rate and cannot produce the Payroll Tax needed to support the rapidly expanding obligation to the retired seniors.  The "Trust Fund" contains mostly IOUs from Congress.  Money going in doesn't stay for very long.  SSA is facing real bankruptcy in a few decades or less.  High unemployment, unreported employment, and a "payroll tax holiday" has reduced the revenue even further.  Social Security as we know it is unsustainable.

"For more than 40 years, the United States Congress has shamelessly used payroll taxes intended for Social Security to fund big government spending."     Congressman Mike Pence, IN

FairTax buys time for Social Security to be saved
FairTax changes the revenue source by repealing the Payroll Taxes.  Instead, revenue from the 23% national sales tax goes into the General Fund.  A portion of the General Fund is designated to benefit SSA and Medicare.  (Remember, 23% tax = 14.91% budget + 8.09% liabilities).  The result is a solvent SSA.  Never again will any politician use Social Security payments as a political football.  The only way SSA will go bankrupt is if the General Fund pot becomes empty.  Then our entire country will be busted.  If we don't reduce our debt we will follow the fate of Greece and other countries who over-promised and over-spent to secure political power.  Reforming Social Security should be a vital component of any government debt reduction plan.

FairTax makes it easier for Social Security to reform
As a result of FairTax, the SSA has acquired two more responsibilities.
First, verify Social Security numbers of approximately 140 million American family "head-of-household" and family members.  This is not as monumental a task as you may think.  Remember, they already have your information, they only need to verify it.  SSA has offices in every State who can complete this in a few months max.  This is a terrific opportunity for the SSA to reset their data base, and flush out violators and perpetrators of fraud and identity theft.  Another hidden benefit of FairTax if SSA chooses to take advantage of it.
Second, make monthly prebate payments to 140 million Americans.  Issuing payments is what the SSA does best.  Most are by direct deposit, some by Debit/Smart Card, a few still by mail.  When was the last time you heard of anyone not getting their Social Security payment?

"The Social Security program plays an important part in providing for families, children, and older persons in times of stress.  But it cannot remain static.  Changes in our population, in our working habits, and in our standard of living require constant revision."     President John F. Kennedy

It's also a great opportunity for Congress to resolve the Social Security dilemma.  Those Americans who have contributed most, if not all, of their working lives to Social Security are deserving of every benefit promised.  But those in their 40s or 30s or 20s who have not contributed as much and, after FairTax becomes law, would have the payroll money in their hands to invest in their own retirement plans.  These are positive situations to work with.  The SSA can determine at what age or years or amount of contribution qualifies for 100% of the benefits.  Then SSA can schedule and announce future reductions in retirement benefits for the younger contributors in ways that properly represent their previous payroll taxes paid and their employment history.  Now before you get your knickers in a knot, just hear me out... FairTax has nothing to do with future changes to Social Security, it just provides a golden opportunity to fix the Social Security program in a way that could be fair and beneficial to everyone.  That's better than the sacrifices our government is currently contemplating.

"There are only six things you can do with money; spend it, invest it, donate it, hide it, lose it, or have it taken from you by criminals and governments which, some may argue, are one in the same."

#1 repeals all taxes on income.  #2 establishes a national sales tax to replace the income tax revenue.  #3 provides a monthly tax return to make the system fair for all citizens.  Only one action left, the final piece of the puzzle, how is the FairTax collected?  That's the topic of the next entry; #4 authorize the State to collect the tax.


Here is another excellent book written in 2008 by Neal Boortz and John Linder (with support from Rob Woodall) that exposes the lies lodged against FairTax... as well as the truth about it.
By the way, have you visited the FairTax website www.fairtax.org yet?  Have you copied the HR-25 Bill and begun to read it?  Did you get a copy of "The FairTax Book"?  The facts are there for you to discover.  FairTax is real.  What are you waiting for?

Sunday, May 20, 2012

#2 Establish a National Sales Tax

Observations

I've been pretty lucky to be born in America.  Where else can an individual start with practically nothing, build a career on little more than a High School education, the willingness to help others, and an active curiosity, lose it all and gain it all back, and still be able to live a comfortable life.  (I'm not rich, just blessed).  My wife says there's an angel on my shoulder.  I think its her.  Many pleasant surprises have happened in my life; marriage, daughter and grandchildren are at the top of the list.  And some sobering encounters with reality as well.  Among them are business travels to foreign countries which is not the glory ride everyone thinks it is, but it is an eye opener.  Food can be a delight or a challenge.  Language is not so hard if you speak with your heart and avoid politics.  However, you never get used to poverty, to sub-standard working conditions, to oppressed cultures, to limited opportunities, and to the sadness in the eyes of those who have given up long ago.  The best thing about world travel is coming home, but I worry about how much time we Americans have before our liberties and freedoms disappear like theirs did?

Our children and grandchildren deserve no less than the freedom we had at their age.   FairTax Dave


The Power of Simplicity


HR 25, Title II, Sec. 201, Subtitle A, Chapter 1 establishes the national sales tax rate at 23% for the first year. The following years are subject to Congressional changes, but must be the total of the general revenue rate (14.91%) plus Social Security and Medicare predictions, i.e., the sum of the federal budget and the unfunded liabilities.  It is proposed in several studies the FairTax would grow our GDP at a rate of 7% to 10% each year for the next 10 years.  I am skeptical of such predictions because I'm not smart enough to check their calculations, but commonsense tells me growth should be much better than it is now.  For our country to step back from the cliff's edge of financial Armageddon we must quickly grow our GDP and seriously reduce spending simultaneously.  FairTax is half the equation, a very important half, but only half.  We need leaders in Washington who will make the tough decisions to reverse the irresponsible spending habits of the past.  But we also need a method to guarantee deficit spending will not return, i.e., a Balanced Budget Amendment.  This is beyond the parameters of FairTax, but recognizing there will be a defined amount of tax revenue from FairTax and few avenues to add new taxes (excise taxes), Congress will be forced to stop borrowing and reduce spending... or be replaced.

"The problem is not that people are taxed too little, the problem is that government spends too much."     President Ronald Reagan

Many have challenged the 23% as being too little to meet the revenue demands, but comparisons to the actual income tax revenue collected in the recession years of 2009 and 2010 finds the FairTax would have collected $171 billion and $276 billion more revenue respectively.  Big numbers that represent approximately 5% more collected taxes, not enough to make a huge difference, but more than one might expect.  It should be noted, consumption doesn't make drastic changes in reaction to the sudden rise and fall of the economy.  When a person loses their job it doesn't mean they stop eating, driving, using utilities or other basics of living.  Consumption is a much more stable and predictable tax base than income.  The national sales tax would only apply at the retail level to new goods and all services.  Used items such as tools, appliances, vehicles and homes are not subject to the FairTax (yes, previously owned homes are not taxed, but all services such as Realtor, Inspector, Title Search, finance fees, etc. will include the 23% tax).

America becomes a magnet for manufacturing 
There is no tax on common investments such as stocks, bonds, property, specialized training and higher education.  No, gambling is not an acceptable investment, however, any winnings from a legal gambling source is not taxed.  So if you win the Lotto you get to keep 100% (minus any State tax if applicable).  Tuition for college or trade schools are investments in your (or your children's) future.  Sales of materials or intellectual property between businesses necessary to produce a product or service is not taxed.  Export sales are not taxed because they are not sales to consumers.

"The hardest thing in the world to understand is the Income Tax"   Albert Einstein


Under our current tax code, taxes are considered a "cost of doing business" and passed on in the price.  This creates multiple taxation (remember the 22% embedded tax?).  Under FairTax, only the Retailer includes the 23% tax in the final price.  FairTax would reduce our prices to foreign customers by 15% to 20%.  Products imported from foreign countries are subject to the same 23% tax as American made products.  Aside from Duties, Imposts and Tariffs on foreign goods, neither U.S. or foreign products are taxed until they reach the Retailer.  FairTax levels the playing field by eliminating embedded taxes on exports, and by taxing imported and domestic products equally.  If its sold here, its taxed here, no matter where its made.  If its made here and shipped to other countries, its leaves our country without being taxed.  If you were a foreign company looking to build a new manufacturing plant, where would you build it?  Under the FairTax system, America would be the only place on earth with 0% taxes on manufacturing and a large population of skilled workers with money to spend.

"If duties are too high, they lesson the consumption; the collection is eluded; and the product to the treasury is not so great as when they are confined within proper and moderate bounds."     Alexander Hamilton

With FairTax, prices remain about the same
Prices of products combined with other costs would be less by an average of 22% embedded costs to the Retailer.  Apply the FairTax (23% included tax) and the price to the American customer is about the same as it is now.  Federal, State and local governments are not exempt from paying FairTax because they are also consumers.  Inflation can be a concern, but healthy competition plus keeping 100% of your earnings will temper that, and economic growth will come from U.S. and world consumption of American made products.  I suggest you visit www.fairtax.org and read some of the many white papers stored there pertaining to the economic impact of the FairTax (at the bottom of the "How FairTax works?" page, click on "Need more info? View our research.")

#1 repealed all taxes on income.  #2 established a 23% national sales tax to replace the repealed tax revenue.  If we stopped with just these two pieces of the puzzle we would have a flat tax on consumption, not a FairTax A flat tax will always be regressive, imposing a higher tax rate on those who have little, and effectively reducing the tax rate on those who have more.  The next blog will investigate the monthly tax return called a "prebate" designed to replace the lost deductions and exemptions, and make taxing consumption fair for all Americans.

Sunday, May 13, 2012

#1 Repeal all Taxes on Income

Observations


I use to prepare my own taxes against my wife's wishes, but now I pay a certified tax preparer several hundred dollars each year to do it for us, and I don't check his work.  Here's how it happened. 18 years ago my wife convinced me to let a "professional" handle the taxes because of several out-of-the-ordinary events in our life the previous year (living in two States, selling & buying property, etc) that would make tax calculations complicated for me.  I didn't like spending the money but finally agreed.  She took all the documents to a tax pro her friend recommended and several weeks later we both went to his office to sign our tax return.  After introductions the first thing out of his mouth was,,, "I tried, oh how I tried.  Believe me I tried every trick I could think of to recoup the over payments you made on your past returns, but the IRS would only let me go back a few years.  I'm sorry I couldn't do better, all I can say is whoever has been doing your taxes is an absolute idiot."   My wife smiled and said nothing.  He's been my taxman ever since.
  
In most of my life; stubbornness, ignorance and pride turned out to be expensive.  FairTax Dave


The Power of Principles


Bill HR-25 has been studied by smarter people than me. So the possibility of me missing or misunderstanding a point or two is distinct.  The first slide in the next four blogs identifies where you can find the actions to be discussed, but you are expected to read it to confirm the accuracy and source before you question my interpretations.  I welcome any and all debate with anyone who has read HR-25.  After all, the goal is factual and total truth.  (The first comment this website received was littered with profanity and had no substance or value or civility.  If that's your idea of debate, don't waste my time or yours).

The FairTax Bill begins with a purpose statement, the list of sponsor plus co-sponsors, a table of contents, and a list of congressional findings which bullet-points the reasons to favor the Bill (and worth reading).   Within the first few pages you will find what is shown on this slide under H.R. 25.  Have you copied and read Bill HR-25 yet? If you're having trouble finding it, try www.thomas.loc.gov click on bill number option and enter hr25, click "search, then click on Text of Legislation" and select "Printer Friendly".  The class is movin' on... what are you waiting for?

REPEAL is a strong word, no wiggle room here.  Repeal means terminate, abolish, end, finish, done.  Please note the importance of Title I; income tax, payroll tax, estate and gift taxes are the only taxes authorized by the 16th Amendment.  By repealing them the 16th Amendment would be stripped of any tax validation, but the 16th Amendment would still be alive and potentially dangerous.  So what prevents Congress from creating new income tax laws in compliance with the 16th Amendment after FairTax becomes law?  

Four instruments will be in place to block such shenanigans.   1- Bill HJR-16 is a House Joint Resolution attached to HR-25 that will automatically start the repealing process of the 16th Amendment the minute HR-25 is enacted into law.  2- The Internal Revenue Service will be abolished three years after FairTax is enacted (see Title III, Section 301).  What if Congress doesn't muster 2/3rds vote in both chambers, and 3/4ths of the States fail to ratify?  3- Bill HR-25, Title IV, Section 401 (last paragraph on the last page) is a sunset clause that will end the FairTax in the event the 16th Amendment is not repealed within the seven year time frame.  Congress would then be required to create a new tax system with a new way of tax collection, and without an existing IRS.  4- After living for years without the IRS interfering with your life, would you vote for anyone who opposed repealing the 16th Amendment?

"An unlimited power to tax involves, necessarily, a power to destroy; because there is a limit beyond which no institution and no property can bear taxation,"     John Marshall, Chief Justice of the Supreme Court (1801-1835)

The benefits of repealing the existing income tax code are many, but the consequences are drastic.  Let's look at the benefits first.  On the personal side, anyone in America collecting a paycheck would instantly see an increase in take-home pay.  Federal Income Tax and Payroll tax would not exist.  Therefore, workers would take home 100% of their earnings.  investors would receive 100% of their dividends.  The basic principle we learned as kids, earn a dollar, get paid a dollar, take home a dollar.  Those on fixed incomes would see an increase; no income tax on Social Security and Pension payments, no tax on the selling of property or stocks or other investments, no income tax penalty for withdrawing from an IRA, 401K or other income tax-deferred plan.  In fact, owners of such plans receive a one-time windfall when FairTax is enacted.  Additionally, there are no forms to fill-out, no filing deadlines, and no fears of the government because there would be no IRS involved in your personal, private life.

"How much more of your money would you have?  Look at your pay stub.  How much is the federal government withholding for Income Taxes, and Payroll Taxes (Social Security & Medicare)?  Adjust those numbers to a monthly total.  How would you like to have that extra money in your hands every month? How would your life change?  You earned it, you keep it!"

Federal Estate (death) taxes and Gift taxes are also repealed.  This provides piece of mind knowing 100% of your life's worth can be passed on to those you love.  Think what this means to family business owners, farmers, ranchers, etc. who face a dramatic disruption in their life (beyond the loss of the family leader) when Uncle Sam demands his cut off the top.  Selling the family farm to pay the taxes has been a travesty in our country for far too long.  Also, this is a boost to perpetuating generational wealth which is the American dream promised by our Constitution.  (FYI...State estate taxes are not repealed by FairTax, only Federal estate taxes). 

The benefits continue to businesses; no corporate income tax, no matching payroll tax, no self-employment tax, and greatly reduced compliance costs.
0% taxes brings certainty to American businesses and investors, and makes the USA a magnet for foreign companies as well as returning American manufacturers.  Any honest economist will tell you FairTax creates a long term positive and stable environment for business.  FairTax is the best thing that could ever happen to business in America... especially small privately owned businesses.

Since the beginning, FairTax has been endorsed by the National Small Business Association www.nsba.biz and the National Taxpayers Union www.ntu.org, both strong advocates for smaller government, fewer regulations and a simplified tax code.

FairTax is a JOBS BILL in disguise.  There is nothing to compare with the power of unrestrained free enterprise.  Some economists predict 7% to 10% growth in GDP each year in the first ten years, some are less optimistic, but all predict economic growth greater than our best in recent history.  There are several economic studies at www.fairtax.org  for your examination.  All are based on assumptions that may or may not come true, but all reflect the principles of free enterprise.  None plan for the unthinkable; war... natural disaster... revolution... space invaders... ??? ,because it is assumed we will prevail in crisis.  Americans will always find a way as long as we are free. 

There is a natural concern about the unknown, especially in the business world where a miscalculation could bring chaos and ruin.  Careful and thorough study has been conducted by our finest Economists, yet most business owners and leaders know very little about the advantages of FairTax.  There will be more discussion on the effects of FairTax on businesses in future installments, but in the interim accept FairTax as beneficial to business.  Trust, but verify.  

There is no gentle way to say it, "If you're a business owner or CEO who doesn't support and promote FairTax,  you're shooting yourself in the foot."

By repealing all taxes on income, our country literally changes over night.  (I will attempt a transition scenario after all the FairTax details are on the table).  Citizens have more money and businesses have less costs, and both have no IRS looking over their shoulder.  There are two major changes in our economy as a result, JOBS are created and PRICES go down. 

The findings of a 1997 study by Harvard University (commissioned by AFFT) surmised an average of 22% embedded taxes (costs) existed in all retail prices of products and services in America. This chart identifies sections of our economy and the percentage of estimated tax.  Products and services you consume everyday are underlined and circled.  But take note of the embedded taxes in not-so-frequently purchased items such as services and trades (medical, dentist, insurance, legal) durable goods ( furniture, appliances, technical devices) occasional purchases (clothing, shoes, airline tickets) and major purchases (home, car, recreational vehicles).

"All taxes ultimately are paid by the consumer.  Nobody else pays taxes.  Corporations don't pay taxes.  They collect them, but they don't pay them."     Dr. Milton Friedman, Nobel Prize Winner - Economics

Now, I do not have the credentials to endorse or challenge the data shown here.  But I have been blessed with enough commonsense to recognize embedded costs do exist, created by multiple taxation and numerous regulations in our current income tax system.  Therefore, changing to a single rate consumption tax (only at the retail level) should drive down costs, and competition in a free enterprise marketplace should rein in excessive profits.  But there are no guarantees.  Either you believe in capitalism or you don't.  Either you have faith in the principles of free enterprise or you don't.  Either you believe fair competition controls price or you don't.  Either you shop for the best prices or you don't.

"Wal-Mart is the ultimate example of how capitalism works.  They shop the world over for the best value at the lowest cost so they can sell at a profitable price that is attractive to a large customer base.  If you don't believe in capitalism, stop shopping there."

What a dream come true; more money, more jobs, lower prices...but here comes the consequences.

With no income tax there are no income tax deductions, no tax exemptions, no tax exclusions, no tax exceptions, no tax loopholes, and no depreciations.  No tax credits to influence spending habits, and no special deals for any person or company.  This will have a negative affect on every American family and business.  In our current tax system, the largest deduction for most Americans is the size of the family, followed by interest on the mortgage.  A major assist in growing a business is the depreciation of capitol expenditures.  These must be replaced with something that provides balance and incentive.

Oh, one more thing... There is no tax revenue to fund the federal government.  Around 90% of federal tax revenue comes from taxes on income.  The balance comes from Duties, Imposts and Excise taxes. 

REPEAL, the first piece of the puzzle cannot stand alone.  It has created a few totally unacceptable conditions that must be resolved.  Therefore, in the next installment we will examine the second of the four FairTax actions; #2 Establish a National Sales Tax to replace Income Taxes.