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)
You have been asked a number of times to point out where in the letter from the 75 economists do they make the ridiculous claim that employees will keep 100% of their current income, or that prices will stay the same (on average) with the FairTax as they are right now.
You keep changing the subject everytime you are caught in a misrepresentation. Perhaps this technique should just be called "pigdogging" in the future in order to conserve bandwidth.
"I wish the folks with all this NRST fervor would wake up and realize that our country is on-track for one really outrageous economic trainwreck if we don't fix Social Security, and pretty much fix it now."
While we are wishing, I wish that all the FairTax bashers would realize that maintaining Social Security on a payroll tax base ensures the trainwreck that you are concerned about. Privatization actually makes the insolvency problem worse in the near term.
There is only one proposal that I am aware of which takes the Social Security system off its dependency to payroll taxes.
That's like asking you where in your letter to Boortz/Linder you made the ridiculous claim of accusing them of swallowing your grandmother's false teeth.
What a "Robbing" you do by making false accusations and then claim you've asked about the false accusation "several times" merely to use that additional falsehood as a pretext to bash and berate. Or maybe that should be called a "GaGaing"?
Dear phil_will1,
"There is only one proposal that I am aware of which takes the Social Security system off its dependency to payroll taxes."
I guess in your perspective, that's a good thing.
From my perspective, it isn't.
At least, by maintaing Social Security through payroll taxes, it's possible to actually point out the coming "insolvency" of Social Security, because it sorta looks, in some ways, like a pension system. A chunk of money gets taken out of my check, and out of the employer, and supports the pension system. I know it's not a real pension, but it looks like it, and that's largely how folks understand it.
However, one of the effects of the NRST that is negative in my mind is that Social Security and Medicare will then come out of the general consumption tax, rather than out of the specific payroll taxes.
I view that as a big negative, in that to me, it seems to better hide the coming trainwreck.
"Privatization actually makes the insolvency problem worse in the near term."
That's true, especially, if we chose to privatize, the faster we went. That's why I say, we're going to have a trainwreck, no matter what.
The question is how bad it will be.
No privatization means that either the system will have to be ultimately abandoned in the decades ahead, to the great detriment of lots of old people, or it will have to be maintained through truly confiscatory tax rates (In terms of an income tax, how about a 30% payroll tax [15% per side] just to cover Social Security?).
I don't know which will be more unsustainable - letting old folks starve to death, or taking away an additional 15% off the top of folks wages (or adding an additional 15%, exclusive, to the NRST - with state sales taxes, we'll have an overall sales tax on some items of 50% or more).
Faster privatization means more pain in the relatively short-term, but it also means getting to a better place faster. Slower privatization means that we spread the pain over a longer stretch, and it takes longer to get to the final destination.
Frankly, I prefer faster to slower, in part because although it will be ugly in the short-term, it will require high political will for a shorter time.
One benefit, though, of privatization now (whether fast or slow) is that the President and Congress will be forced to deal with the fact that they're both currently spending the existing Social Security surplus on stuff that is not going to provide a real return to future recipients.
I saw one proposal where all the government would do is take the existing surplus, on an annual basis, divide it proportionately by all payroll taxpayers, and dump it into private accounts. This isn't exactly a real move to privatization, and its material positive impact would be pretty limited.
But it would point out the absurdity of the idea of "transition costs" to a completely-privatized Social Security system, by exposing graphically that Congress is just pissing away the existing annual surpluses in additional federal spending.
I certainly agree that privatization will hurt in the short-term. But the end result provides some very positive things. Here are a few off the top of my head:
- Instead of the 6% - 7% of GDP that is collected and turned over to the federal government from payroll taxes, that 6% - 7% would be directly saved and owned by the individual worker. Thus, this part of GDP goes from being re-distributed by the government to being invested by workers in productive assets, be they bonds, equities, etc.
- Privatizing Social Security would reduce the federal government's take of GDP to the low teens, as a percentage of GDP. At that level, a broad-based consumption tax starts to become much more practical, as some of the problems that folks like me cite start to recede as the needed tax rate declines from 30% down to less than 20%, and perhaps even lower.
- In the long-term, workers who began their careers under this system would have much higher retirement incomes than they would have even if it would have been possible to maintain the solvency of the old system.
- Out of necessity, more workers would become knowledgeable about financial assets, and would be more knowledgeable how government policies affect them and their assets.
- Just as we've seen a growing "investor class," and the positive political effects thereof, we would magnify that effect by turning all workers into investors.
I guess to me, this is a far more important issue. Perhaps that's because the so-called "trust fund" is scheduled for insolvency a few years after I'm scheduled to retire, and the system will have entirely failed by the time my kids are old enough to retire.
I know that it isn't as sexy an issue, and the only reasonable paths to fixing it of which I'm aware will cause pain. So, it's a tough one, politically.
But that doesn't mean it should be the highest economic/tax policy priority for us.
sitetest
Once again you are misrepresenting what both Jorgenson AND his model said and you draw your own "spun" conclusion from those misrepresentations.
That's going to come back to bite you in the long run I'd think. Economists other than Jorgenson have looked at the FairTax and as time goes on their views will come to the fore. Your continued insistence that Jorgenson is the only economist involved is simply untrue - and you probably know that.
You are hopeless.
Takes one to know one, I guess.
You have to laugh at how he quotes himself. As if he himself is a valid source. LMAO!
I doubt that he ever thought about that ... Squirrels, you know, have "unusual" resasoning powers.
but you do know the Dr. is completely behind the Fair Tax.No he isn't. Jorgenson has his own tax plan, he ran from the fairtax as soon as the check cleared.
Why waste your time with a political hack like RobFromGa. The clown knows your right, but insist on playing dumb.You like to make unfounded snide remarks about members behind their backs...Were you saying something about dumb?
Shame on you for your dishonesty AND your cowardice.
"Shame on you for your dishonesty AND your cowardice. "Bite your tongue, Looey. You are the epitome of both.
Bite your tongue, Looey. ...You'd like that.
You are the epitome of both.Shame on you for your dishonesty AND your lying.
I'll stop commenting on you behind your back when you stop commenting about me behind mine...If you don't like it you shouldn't have started it...
They why direct the comment at me. Why not direct the comments at the instigator?
I'm shocked, shocked, Looey - that you would do such a thing.
the main obvious fact is that workers cannot keep 100% of their current gross salaries and that prices remain the same (on average) when the FairTax is added.and in #237
The FairTax movement relies on this 23% price reduction for their claims that selling prices will drop by on average 23%, so that when the 30% FairTax is added the prices will be the same on average as what we are paying now.
Right and wrong. I agree there isn't a pay raise (free money) under a NST. There is also no pay cut. Dale is right. He is also right by saying there would be a reduction in prices. He is comparing income taxed as a percentage of income to income taxed by consumption
I'll use my mother who is self-employed as a Realtor as an example. I think self-employed people are the best example because they are a business where the employer and employee are the same person.
Assume, in 2004, her business income is $100,000 and she had no business expenses (just to keep the example simple). After the adjustments for half of FICA taxes paid, the standard deduction(again to keep it simple, I understand that if she had a larger itemized deduction her tax burdern would be less) and personal exemptions(1), she would have a taxable income of $85,261. She would owe $18,504 in federal income tax and $13,578 in FICA taxes. Her after tax net would be roughly $68,000.
To get the $68,000 now, she had to charge a 10% commission on $1,000,000 ($100,000). If she paid no income or FICA tax, she could charge a 6.8% to get the same amount of money she gets now. Her price is lowered and and she would get to keep 100% of her 6.8% commission. She is not getting a pay raise. She is not getting pay cut.
She would collect a 30% sales tax on her commissions
$68,000 + 30% sales tax= $88,400
In this example, she could charge even more and prices would still be less than they are now.
This example also assumes no savings from reducing the size of bureaucracy and compliance costs.
They why direct the comment at me.If you ignore name callers they go away from lack of attention. If you respond, it feeds the fire.
I also think that there is a difference between me having all the supporting paperwork in my office in the case of an audit, and having to give all this info to the new IRS-like organization up front.What is the difference between keeping the documentation "in case of an (IRS) audit" now and keeping it in case you are audited by a new tax enforcement authority? You said you needed it anyway( "Of course I want the list"). No additional savings, no additional costs, same paperwork. What's the problem?
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