Posted on 09/02/2005 11:01:09 AM PDT by pigdog
Comment: 50 Reasons I Support the FairTax (How many reasons can you give for supporting the present IRS tax system?)
Those Who Know the Facts Love the Fair Tax www.fairtax.org
FairTax and Individuals and Families (Family-friendly tax reform)
1. It allows workers to keep 100% of their pay, with nothing withheld the IRS or for Social Security and Medicare payments.
2. It is revenue neutral with the present income tax system, funding the federal budget at current levels.
3. It shifts the tax to consumption. Records show that consumption is more stable than income, therefore the tax revenue stream is likely to be a more stable and predictable amount.
4. It is progressive, a “prebate” of the tax amount up to the poverty level is given to everyone. This means that those spending below the poverty level have a net gain because the “prebate” exceeds the amount paid in taxes. (Under the present system the working poor pay the payroll tax even if they get a full refund of income tax withheld.)
5. It doesn’t tax pre-owned items – clothes, cars, homes. Only new items are taxed when sold by a business to an individual.
6. It is expected to remove an average of 22% of the cost of American made goods by removing the built-in payroll tax (the other 7.65% of earnings that employers pay), corporate income tax, and other business taxes that are now passed to consumers as an “embedded" tax of approximately 22% due to the cascading of income and payroll taxes paid by U.S. employers, at every step of production, to the U.S. Treasury. Competition will cause prices to fall by approximately that amount, on average.
7. It allows families to save more for home ownership, education, and retirement. An average family making $50,000 will have $7,500 more spendable income.
8. It removes the need for formal accounts of the 401(k), IRA, HSA, etc., varieties. Anyone, rich or poor, will be able to set up any kind of savings or investment account without regard to taxes or the government. No special knowledge of tax law is necessary.
9. It makes educational tuition a tax-free expenditure of tax-free income.
10. It eliminates the income tax and the IRS. Members of Congress and the public overwhelmingly agree that the current internal revenue code is cumbersome, intrusive, coercive, and inefficient.
11. It eliminates 90% of the cost of compliance. American families and American businesses waste an estimated $250 – $600 billion per year (and countless hours of time) doing the paperwork necessary to comply with the current tax code. That is roughly $1,000 – $2,000 annually for every man, woman and child in the U.S. (Businesses typically pass their tax bills and compliance costs on to the consumer, i.e., individuals and families.)
12. It’s simple, unambiguous, and certain, the opposite of the current tax code, 60,044 pages and counting.
13. It assures that no American will find, at the end of the year, a need to get a loan to pay taxes as an alternative to penalties, interest, or cheating.
14. The broader tax base comprises everyone spending money in the U.S., including the ten percent of our economy (an estimated $1 trillion) that today is underground or under the table. Under the FairTax, the illegal drug dealer will pay his tax just like the rest of us when he buys his sunglasses, BMW, and other items, as will those who work for cash and undocumented immigrants, all of whom receive government and societal benefits.
15. It encourages work by letting workers keep 100% of their earnings and giving a rebate, in addition, making the notion that “the more you work, the more money you have”, a reality, unlike the current system where welfare is lost when you go to work, so the first dollars earned after taxes just offset what a welfare recipient is currently receiving in assistance, so working is perceived as disadvantageous.
16. It allows more of the lower income families to become home owners by allowing a second job income above their current income (all tax free) to be applied to a mortgage. Money for down payments for homes is also saved totally tax free, causing it to accumulate faster.
17. It has the result that all lending in America will be at the equivalent of today’s tax exempt interest rates, which are 25%-30% less than today’s taxable home mortgage interest rates. This will create a huge boom in housing purchases and allow existing homeowners to refinance and reduce their cost of homeownership substantially.
18. It allows families to retain farms and businesses in the hands of those who built them through the elimination of the death tax.
19. It allows families to give tax-free assistance to one another by eliminating the gift tax.
20. It gives individuals (and businesses) the right to donate as much as they want to in a given year to charitable causes, without concern for exceeding an allowed limit on giving.
21. It encourages individuals to self-insure, making the health system more direct-pay (no 3rd party pay), thus bringing costs down.
22. It puts an end to the anxiety for honest taxpayers that begins soon after January 1 for most of use, culminating in wondering whether we’ve claimed everything we legally could and nothing we shouldn’t, all without raising questions at the IRS. It makes April 15 just another day. (Perhaps it will be a holiday after the FairTax is enacted!) FairTax and Social Security and Medicare
23. It eliminates the regressive payroll tax that hurts the poor. Currently, every one of us is taxed a minimum of 7.65% on our first-dollar of wages up to $90,000 (the cap for FICA, not Medicare), if we earn that much. It provides funding for Social Security and Medicare at a level equal to or greater than the present.
24. It provides that all 290 million Americans and 51 million visiting tourists fund Social Security and Medicare with their purchases. Today only 110 million workers fund these programs via deductions from their paychecks.
25. It assures that the wealthiest Americans will be voluntarily helping to fund social security with every last dollar they spend above the poverty level. Today, earnings are subject to FICA taxes only up to $90,000. The wealthiest Americans therefore do not pay into the system above that amount. If their earnings are from investments, no earnings fund the Social Security system.
FairTax and the Economy
26. It increases investment in business by eliminating the capital gains tax.
27. It allows for better planning by businesses, because they no longer have to consider tax implications for everything they do.
28. It makes higher employment or better compensation possible in the small business sector, where today it costs approximately three dollars in compliance costs to pay one dollar in payroll and income taxes.
29. It makes American products more competitive overseas by removing the embedded tax from them, thus lowering the prices of our exports, which compensates for low foreign wages.
30. By making our exports more competitive overseas, it lowers our balance of trade deficit and increases employment at home.
31. By removing the embedded tax from them, it makes American products more competitive with imports here, compensating for the low cost of imported products from which taxes have been removed before exportation to the U.S.
32. It encourages investment in companies located in the U.S., thus providing a home for money already in the U.S. and attracting more. The U.S. will be the most attractive tax-free haven in the world for doing business.
33. It encourages repatriation to the U.S. of money held by U.S. individuals and companies now in foreign countries, with no tax consequence. American companies will return from offshore and overseas.
34. It results in a windfall profit, likely to be invested in job-making businesses, for many of those holding taxable corporate high interest bonds at the time of passage of FairTax, since the bonds will not be taxed under FairTax. (Currently, a higher interest rate is usually paid to entice investors to buy the corporate bonds rather than go with the lower interest, but tax free, municipal bonds.)
35. It results in Federal Reserve rates being based on current consumption, which is rather stable, instead of future earnings, which are less predictable, resulting in surer inflation prevention.
36. It reduces production costs for farmers and other subsidized businesses, leading to a reduction in subsidies, thus reducing the federal budget.
37. It moves many individuals now providing tax advice (return preparation, advice, accounting, planning, and records maintenance) into an expansive economy where they will be producing goods and services. There they can add to the standard of living of all Americans and likely earn more than they do currently, instead of shuffling paper for the government (and not contributing anything economically to society).
FairTax and Churches and Non-profit Organizations
38. It frees churches and other non-profit organizations from the expense of filing tax returns and paying their half of Social Security and Medicare payments for employees. There will no longer be any 501(c) (3), 501(c) (4), etc., non-profit tax status, because there will be no more tax to be exempt from.
39. It restores to churches and non-profit organizations the 1st Amendment right to engage in free speech, without fear of losing their tax-free status. FairTax and Rights and Freedoms
40. It restores the 4th Amendment, protecting against unreasonable searches and seizures, from which the IRS presently is exempt.
41. It restores the 5th Amendment, which guarantees the right to due process. Under current systems the IRS has their own courts with their own set of rules not included in the 5th.
42. It restores individual privacy. The government no longer needs to know where you work, what you are earning, and what you are doing with it.
43. It relieves citizens of the risk of facing the shift in burden of proof that is so common with the current system, i.e., the taxpayer is guilty unless innocence can be proved, but even the IRS staff sometimes gives conflicting interpretations.
44. It eliminates the need to have a "marriage" clarification declaring who you live with, as that no longer has any bearing at all on a state or federal sales tax.
45. It eliminates the need for courts to decide which divorced parent gets to take the tax deduction for children.
46. Without FICA to pay, most states, counties, municipalities, and school districts will see a large increase in their state budget revenues, additionally lowering the overall tax burden (State & Federal) for most Americans.
47. It eliminates the administrative costs incurred by states in collection of state sales taxes because states will piggyback the state tax collection onto the national tax collection, for which they are compensated by the FairTax ¼% administrative cost give-back. (Retailers receive an equal amount for collecting the FairTax.)
FairTax and Politics<\b>
48. It cleans up a major flaw in campaign financing, eliminating campaign donations for "tax favors".
49. It eliminates wrangling in Congress over tax cuts, the tax code, and who is or is not paying a fair share of the tax bill, providing more time for debate on more productive issues.
FairTax and the Environment
50. It’s good for the environment. Reportedly, the IRS sends out 8 billion pages of forms and instructions each year. Laid end to end, they would stretch 28 times around the earth. Nearly 300,000 trees are cut down yearly to produce the paper for all the IRS forms and instructions. Also, since it taxes only new items, it would encourage buying tax-free pre-owned cars, clothes, furniture, houses, etc. Reuse is good for the environment, too.
Kenneth J. Van Dellen (with help from friends)
"If a business went to Home Depot and bought some goods from Home Depot they would pay the tax at Home Depot which sells to both consumers and businesses. And they would keep their receipts and they'd use the value of those receipts as a credit against paying the tax in the future. So they would not be taxed and we would not ask the Home Depot to make the decision whether or not to raise the tax from them. Any business-to-business transfer will not be taxed at all."Rep. John Linder
Testimony before the Ways & Means Committee
July 28, 2005
"Great idea, but the govt will never return that much of our freedom. Our leaders have us right where they want us--shackled to their monstrously bloated spending programs."
“I discussed the importance of abolishing the income tax because of its tendency to form a habit of servility in the souls of a people that accept it. Servility of soul is bad not only in itself, it is also an open door through which will soon walk the abuses of ambitious government power. Leaders who find themselves with governmental power over a servile people will be quick to conclude that such a people exist to serve them.”
Alan Keyes “The Power of the Purse”, WorldNet Daily, August 27,1999
"Its great for me. I can retire overseas and pay zero taxes on my US investment income."
Can anyone verify that? I don't think that is true, unless you revoke your US citizenship.
It certainly would be true of the FairTax.
"As has been stated many times, the repeal amendment could set a transition period of several years to phase out the income tax..."
So you want a period of several years in which we have both an income tax and a sales tax? Could it be that the reason that you want that is that you know it would kill the FairTax politically by validating the very fear you pretend to address?
Dear Mind-numbed Robot,
"Then you have seen how they manipulate the present system. Your working against changing it is confusing, to me."
"Meet the new boss, same as the old boss."
Look, a lot of these guys, congresscritters, are nice guys. But, they didn't get to Washington because they're self-sacrificing, selfless, ego-less martyrs. They got there in part because they manipulate the system better than the other guy.
You think that by changing the location of the tax collection tollbooth that these fellows are going to stop manipulating the system.
I know that should that result actually occur, they would all be swept away from power. Their very survival depends on manipulating the system. They manipulate the current system, and will manipulate a new system.
And I'm not willing to say that the manipulation of the system is all bad. It is always a result of politics, and to a great degree, that's actually a good thing.
One might say that the politicians of the small states manipulated the Constitutional Convention so that even the tiniest state got equal representation in the Senate with the largest state. One may make arguments to support that manipulation, but let's face it, those arguments are after-the-fact arguments, derived to support the raw politics of the situation - the very good, very adept, very manipulative politicians from states like Maryland, Delaware, and Rhode Island knew that no new constitution would fly at home if the large states would control everything.
Now, we enshrine that compromise as being almost the necessary outcome of the application of High Principle, but it originated in the raw, dirty, nitty-gritty needs of politicians trying to stay in power with their constituencies. I think it worked out pretty well. It's amazing that political deals often do.
But that's the nature of politics.
And changing how you collect 1/5 of GDP isn't going to change that fact.
"Since you seem to share our opinion, I am at a lost as to why you don't want to neuter them."
Well, I just don't see how this neuters them. They will have a nice new system, nice and shiny and clean, just waiting for their fresh graffitti, to write all over it, leave their mark, manipulate in much more fundamental ways to meet their constituencies needs(betcha there's an exemption for ethanol used as fuel within 24 months).
Nothing inherent in this system neuters them in any way at all.
But, while we give them this shiny new toy, we don't really take away the old one. We put the income tax in the closet, and for a few years, folks will give them grief if they try to take it out. But folks have short memories. The politicians count on it.
Also, folks like to complain. Bitterly. Most people are filled with joy by having something about which to complain bitterly. And folks will complain bitterly about the 30% sales tax. And how they have to pay it on food. And health insurance. And clothing. And new houses. And their mortgage payment.
And taking the time to explain to folks things like "broadened tax base" and "no increase in general price levels" will only go so far.
And, promising goodies to the middle and lower classes, the politicians will eventually take the old toy out of the closet, but JUST FOR THE RICH PEOPLE!! And we know that they'll be telling the truth, right?
You wanna neuter these guys?
Repeal the 16th amendment first.
Cut the size of government first.
You say, well that's politically infeasible.
You may be right.
But that doesn't mean that your preferred vehicle of "neutering" these guys will actually accomplish the task.
I just don't believe it will. I've worked around these folks, up close and personal.
"There are technical reasons why it is best not to try to amend the Constitution first,..."
No there aren't. Not any at all. Please cite them specifically. I don't want to hear that it would be easier or faster. I want to know the "technical" reasons.
"After all this discussion, I would assume that you know that the Fair Tax does not tax the entire GDP."
I didn't say it did.
However, to collect approximately 20% GDP will require approximately a 30% sales tax on the proposed tax base.
It is reasonable to assume that if we need to collect half of that percentage of GDP, say, 10%, we will likely need a sales tax of about half of 30%, or about 15%.
As well, if we need to collect only about 4/10 of that approximately 20% of GDP - or, in other words, about 8%, we would only need 4/10 of the original 30%, or about 12%.
Getting the federal government down to 8% of GDP probably isn't achievable in my lifetime. Even 10% would be very tough.
But those are the proper goals.
"As I have said before, the advantages of the NRST seem so obvious to me it is hard to imagine opposition."
Almost by definition, the immediate advantages of the NRST seem slight. After all, it's revenue neutral.
The potential immediate disadvantages are large.
What's intriguing is the possible long-term advantages.
But although they intrigue me, I'm not persuaded that they would occur.
That's in part because those who tell me about the long-term advantages have not been accurate about the short-term impacts. Thus, if they didn't understand accurately the actual short-term impacts, I have no confidence that they have any understanding of long-term effects.
sitetest
"So there is already one built in loophole? How many more will follow?"
Boy, THERE'S a reason to support the current system if ever I heard one. The FairTax might have "loopholes"!!!
We certainly can't have that, can we, AR??
AR, you are aware that CCH tallies the current system at more than 60,000 pages of "loopholes", right?
Just as an FYI, the FairTax is a consumption tax. Education is not considered to be an item of personal consumption. It is treated as an investment. From a taxation standpoint, it certainly is closer to an investment than it is to consumption.
Next I guess we will hear that investments should be taxed under a consumption tax also, that exempting investments is a "loophole".
Next I guess we will hear that investments should be taxed under a consumption tax also, that exempting investments is a "loophole".And you don't think that's possible.
As you know some investments would be taxed. Interest earned (or paid) over a predetermined percentage with changes monthly would be taxed and so would any fees for investing.
Dear phil_will1,
"Could it be that the reason that you want that is that you know it would kill the FairTax politically by validating the very fear you pretend to address?"
Could it be that I'm trying to pre-empt the argument that would run like this: "Oh, if we repeal the 16th amendment, then some elements of a transition, which might require the authority granted by the 16th amendment, would become unconstitutional! Oh, heavens no! We CAN'T repeal the 16th amendment first, because we NEED the 16th amendment during the transition!"
As far as I'm concerned, the income tax can end at midnight, and the NRST can begin at one second after midnight.
But if folks think we need a transition period, I'm merely pointing out that we have the ability to make one.
As well, my understanding is that there are large numbers of transitiion rules already contemplated in the NRST legislation. It may be that some of those transition rules may require a constitutional transition period for them to actually be constitutional. I don't really know.
If not, let's NOT have a transition period. Just make the amendment say, "After one year from the ratification of this article," and align the start-date of the NRST to be the day after.
It must really suck for you that you feel the need to impute evil motives to anyone who disagrees with you. The folks I've known like this were friends who got sucked into cults like the Moonies and the Scientologists.
Your assumption of evil motives on my part adds nothing to the debate except distrust of you.
sitetest
Too, too phunnie, Looey. Check post #78 before running your mouth off. It's been posted for a long time.Well? Let's see it big mouth Phunniehog. Where do your 75 economists say that employees would get 100% paychecks and 20% (or any percent) price reductions?...Oh wait they said there'd be no withholding...well DUH! Withholding from what amount?Perhaps you just to read phaster???
Never mind what pinhead economists say show us in the law where there's any mention of what employees would get.
Garcia yard service: Well Juan I have good news. You won't be paying income taxes anymore, you won't have to file a tax return, reciepts will be worthless, the government won't force me to do withholding, you'll still be getting your 100% takehome like always, and there's a bunch of people promising you'll have lower prices to pay for everything... that's produced in this country....before the new 30% tax is added on.
Juan: But wait. Why won't I get my paycheck including the withholding?
Garcia: Because the government is adding a 30% tax to our service and if I don't take it from you I have to raise my prices the amount of the tax...It's called competition Juan.
The bill is already written. There is no room for the lobbyists to help "draft" it, the drafting is over.
Your suggestions concerning the existing system are what YOU see as improvements but it leaves in place the system that nourishes the lobbyists. Do you think they will repent? Do you think they will pack their bags and go home?
Why not instead put in a new system that accomplishes all that you suggest and much more. The prebate takes care of all the things you think will be brought up as special cases.
The biggest, but not the only, objection to the FT seems to be fear of what the politicians will do to it and the continuing existence of the 16th amendment. I don't understand the preference to keep a system that it is obvious the politicians can manipulate, they have been doing it for 70+ years to the tune of 60,000 pages of incomprehension, as opposed to a straight forward, uncomplicated, new start.
The FT does not immediately repeal the 16th amendment but it does neuter it. It eliminates its power and its entire staff.
If we are going to refuse to move for fear of the politicians then the left has already won.
"As well, my understanding is that there are large numbers of transitiion rules already contemplated in the NRST legislation."
Your understanding is incorrect. There is only one transition rule and that is for a credit for inventory which has the imbedded taxes of the old system built in.
"It must really suck for you that you feel the need to impute evil motives to anyone who disagrees with you. The folks I've known like this were friends who got sucked into cults like the Moonies and the Scientologists.
Your assumption of evil motives on my part adds nothing to the debate except distrust of you."
"Evil motives" is your characterization, not mine. I merely pointed out that we approach this from totally opposite perspectives. As a FairTax supporter, I want to see the most politically practical approach taken to ensuring that a sales tax replaces - permanently - the horribly antiquated and inefficient tax system we now have. As an opponent of the FairTax (and an apologist for the current system), you want to see the most political roadblocks put in the path of the FairTax that can be constructed. "Evil" in this context is very subjective and not relevent to the discussion. The fact that we have different motives, however, is very relevent.
And you think that is the end of it? If by some freak happening this bill passes, it will not be before it is severely amended. And if it should become law, there will be amendments every year on the table the lobbyists will be fighting for. The idea that K-street lobbyists simply go away is absurd. All laws are modifiable.
Actually, 90% of the arguments would go away if you guys were just honest.
I could be wrong, but I think the "fair tax" is a Trojan Horse intended to trick Americans into accepting a "Value-Added-Tax", which will NOT replace the income tax we already have.
This makes me curious to know just who is financing the "fair-tax" movement. I would not be surprised if the money comes from George Soros, for example.
"But I also think the K-Street lobbyists would 'help' draft any so-called 'Fair Tax' to exempt 'necessary' goods and services from that tax.
Isn't baby-formula a 'necessity'?
Isn't telephone service a 'necessity'?
Isn't heating oil a 'necessity'?
Isn't "etc" a 'necessity'"
Your concerns are precisely the reason (one of them, anyway) that the FairTax rebate or PCA was developed.
You can check other threads to see that there are those on FR who propose an exemption approach to keeping the FairTax from being regressive, rather than the rebate mechanism of the FairTax. Like those who deny the enormous savings in compliance costs, the exemption proponents refuse to acknowledge the complexity and subjectivity that that approach would endender. Nothing like denying the obvious, right?
If you check those threads a little further, you will see that FairTax supporters universally oppose any compromises along those lines. The FairTax bill AS CURRENTLY WRITTEN is picking up momentum and support as we speak. Although the exemption approach clearly has its advocates, they seem far outnumbered by those who understand the benefits of a much simpler and fairer approach. Yielding on this point would lose us more support than it would garner, if my experience is any basis for evaluating that.
Therefore, yielding on that point would not seem to make sense from either a political or economic perspective.
No one denies there is savings, however some of us actually look at how the numbers are obtained and what they actually mean, and how dishonestly they are represented by fair taxers.
After I do my expense reports for the month, someone will need to provide the paperwork on every transaction (including whatever documentation they are going to require to substantiate the purchase) in a massive database and send that off to the government to get the refund.
I assume you don't mean expense report in the normal sense of tallying expenses to submit for reimbursement or deduction from taxes. With the NRST there are no deductions so you won't be keeping an expense report as such. What you will be keeping, and I assume you already are, are the receipts for all the NEW or RETAIL goods and services you use in your business. Don't you keep that now in addition to mileage, depreciation, meals, entertainment, travel, etc.? Aren't you already doing all that you say the NRST will require of you? If not, how do you keep your books? How do you know whether you are making money? How do you pay your taxes now?
As far as the massive data base necessary for this, this being something requiring much less than you do now, you must be bigger than Wal-Mart.
With the NRST all you do is take the receipts you have for the taxed expenditures, notice the tax that is already figured and printed neatly on the receipt and labeled as the sales tax, add the taxes paid, and submit a form to the government for rebate. You do much, much, more than that now.
It will be intrusive because these bureaucrats will have every single transaction for every single business in America to examine and potentially analyze/audit. Much more intrusive than the present system.
What do you have to keep now? What do you have to report now? Do you report interest you earn on savings, even checking, accounts? Does the bank send the IRS a 1099 with all your pertinent data on it? Do you report what interest you paid on your house and to whom you paid it? Does the mortgage company report the same to the government? Do you tell them when you bought your car, how much you paid, how much you drive it for business and how much is just commuting to work and back and how much is for personal use, do you write down your mileage every morning and again when you return? Do you note what you did that day so that you can properly account for your mileage?
That is just a very small part of a myriad of things you are required by law to do under the present system. Own any business property? Are you an active or passive investor? What about the expenses and depreciation on that?
It seems to me that simply keeping receipts for the retail items and services you use for your business is child's play compared to that.
For Joe Sixpack all of this is no big deal. For a business, where you are expecting them to save money in compliance costs, I don't see the savings or the additional freedom.
It is hard for me to consider this to be anything other than argument for arguments sake rather than a serious discussion. If I have once again failed to see something please point it out to me.
Thank you for posting Linder's remarks. I said that earlier and since Rob says he never sells to other than businesses I concentrated on the business to business procedure.
"I could be wrong,..."
That is very true. Not only COULD you be wrong, but you ARE wrong.
"...but I think the 'fair tax' is a Trojan Horse intended to trick Americans into accepting a 'Value-Added-Tax', which will NOT replace the income tax we already have."
If you check out the prior tax reform threads, you will find that FairTaxers are among those most vehemently opposed to a VAT. That opposition, in part, derives from your concerns about having a VAT in addition to the current system. One of the most vocal and frequent FairTax opponents is a VAT supporter (at least sometimes).
"This makes me curious to know just who is financing the 'fair-tax' movement. I would not be surprised if the money comes from George Soros, for example."
CTJ/Citizens for Tax Justice and ITEP/The Institute on Taxation and Economic Policy are liberal think tanks funded by George Soros, Barbara Streisand, Ben & Jerry and other well known liberal financiers. They have consistently opposed the FairTax and have published "studies" which have been used by liberals in congress to oppose our proposal.
http://www.ctj.org/itep/
http://www.ctj.org/
Do you have any concerns about the FairTax which are based on facts, rather than speculation?
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