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.