Posted on 02/06/2023 1:27:31 PM PST by Taxman
In my over 30 years of working with volunteers who advocate replacing the income/payroll tax system with a national retail sales tax, one thing that I have noticed is that our volunteers have always been driven by the desire to help our great nation and future generations. None of these advocates are looking to make money or obtain other types of gain for themselves. In fact, most of us have paid our own expenses associated with the effort with no expectation of being reimbursed.
Advocates for the national sales tax come from every religion, every line of work, every economic level. They all recognize that the FAIRtax is vastly superior to the income tax in every measurable way and can’t understand why the people in DC don’t embrace it. After all, they’re supposed to be doing what’s best for us as individuals and for the country as a whole.
Retired Senator Russell Long, who was the head of the Senate Finance Committee for many years, told me that he understood the arguments for the FAIRtax and agreed that it had many advantages over the current income tax. Then with a twinkle in his eye, he said, “Coming to D.C. and telling us that we should replace the current tax system with the FAIRtax just because it is logical and good for the American people and thinking that we will immediately grasp this and do it, well that makes as much sense as going to a monastery to meet girls.”
THE 30% LIE
Now that the FAIRtax is going to be voted on in the House, the establishment is really scared. They are screaming about how bad the FAIRtax is for the American people, and the media is making sure that those screams are being heard throughout the country. They’re focusing on one tiny sliver of the whole story—that everyone is going to have to pay a massive 30% sales tax on everything they buy.
None of these hit pieces include any of the following facts about the FAIRtax:
• We get to keep our whole paycheck and pay taxes only when we make retail purchases of new goods and services.
• We don’t pay taxes on our retirement income because the FAIRtax is only paid when retail goods and services are consumed.
• We can save and invest completely tax free—an unlimited IRA.
• If they mention the prebate at all, it’s portrayed as a massive new entitlement or even a Universal Basic Income plan. They don’t point out that it’s actually a tax refund that makes spending up to the poverty level totally tax free. This means that lower and middle-class taxpayers won’t pay anywhere near 30% of their income in taxes.
• The FAIRtax rate is a 23% tax inclusive rate and at 30% tax exclusive rate because that is the rate needed to replace the revenue generated by the income, estate, gift and payroll taxes it replaces and provide the prebate.
• Tax inclusive means that the amount you pay includes the tax. For example, $100 would be $77 for the product and $23 for the tax.
• Tax exclusive means that the amount is additional to the amount. If you pay $100 then the tax is $30 which is 23% of $130.
• The FAIRtax shows everyone the true cost of government on every retail receipt.
• We are already paying a disguised consumption tax. The only money we can use to purchase goods and services is from our net paycheck—the amount left over after federal taxes are taken out. This means that almost all of us have to earn $1.20 to $1.80 to net $1.00 that we can spend.
• The FAIRtax will bring financial stability to Social Security and Medicare by extending the tax base from just those working for a paycheck to everyone whose spending exceeds the poverty level.
• Even if we pay the same amount of federal taxes because of our spending habits, isn’t it better that we are in control?
• We have no forms to file and no IRS!
THE IMPACT ON LOWER INCOME FAMILIES
Another common myth is that the FAIRtax harms lower income people.
This is easy to disprove.
Present Income Tax
Today, if a family of four earns $3,333 per month or $40,000 annually, each check they receive is reduced by federal taxes. The payroll tax rate is 7.65% or $255 per month ($3,060 annually). In addition, according to the Nerdwallet.com calculator, they will owe an estimated $1,410 in income taxes and this reduces their paycheck by $117 each month. This means that they will owe a total of $4,470 or $372 in federal taxes withheld from their paycheck each month giving them a net check of $2,961.
However, this family, if they file complicated forms, will receive the earned income tax credit. According to the IRS EITC Assistant, this family will be eligible to receive $3,274 in the earned income tax credit which reduces their federal taxes to $1,196 or $99 per month and this increases their paycheck from $2,961 to $3,232 dollars per month.
This means that the family has $37,784. Their effective tax rate is 3%.
Of course, obtaining the earned income tax credit is not simple and often requires low-income people to use a paid tax preparer, like H&R Block.
FAIRtax
Under the FAIRtax, there is no withholding. There are no forms to file and no tax preparers to pay. The family receives the entire $40,000 or $3,333 per month.
A fundamental principle of the FAIRtax is that the family is not taxed on the amount of spending up to the poverty level published by the U.S. Department of Health and Human Services each year. The 2023 poverty level for a family of four is $39,440 per year which is $3,287 per month. When the family makes purchases of new retail goods and services, they will be charged the FAIRtax. The FAIRtax provides the money to pay the FAIRtax, for up to $3,287 per month, by transferring to the family’s bank account a $756 prebate on the first of each month.
$756 is the amount of FAIRtax the family will pay on $3,287 per month of spending on new retail goods and services.
So, at the first of the month, the family has $756 plus their monthly income of $3,333 or $4,089 in their bank account. When the family purchases new goods and services each month, the $756 of FAIRtax that is owed on $3,287 per month of purchases is paid from the family’s bank account. The family has not paid any FAIRtax with their own money but uses the $756 prebate they received in their bank account.
However, if the family spends more than $3,287 per month on new goods and services, they, they will have to pay the 30% tax exclusive rate on the excess amount. If the family spends their entire income of $3,333 per month, they will pay the FAIRtax on only $46 per month, $3,333 minus $3,287. That means they will pay just $13.80 per month or $165 a year out of their own pocket.
The family has $39,835 of net spendable income contrasted with $37,784 under the present system.
This is not a 30% tax rate but a .0041% tax rate on their $40,000 of income contrasted with the 3% tax rate they pay now.
So which is better, paying $1,196 in federal taxes under the income tax, or paying $165 a year under the FAIRtax? Since the FAIRtax is only charged on new retail goods and services, if the family spent $5,000 per year on payments for a used car, they would not pay the FAIRtax on that amount and not have to spend $94.50 per month, or $1,134 (one-eight of the $9,071 prebate). The prebate is their money and they can use it however they choose.
In that case, under the FAIRtax the family making $40,000 has an additional $2,164 ($1,030 less in taxes that would have been paid under the present system plus $1,134 of unused prebate) to spend for their family each year than under the present income tax. Here is a comparison.
CONCLUSION
We now have the opportunity to force all Members of the House to either vote for the present income/payroll tax system or the FAIRtax.
They either support the corrupt income tax and the IRS or they want to get rid of it. It can’t be any simpler than that.
They either believe in being transparent and showing Americans the true cost of their government or they don’t. They either support the largest transfer of power from government to the people, the FAIRtax, or they don’t. If they think that the FAIRtax needs to be changed, then they can propose the change. Don’t condemn the entire bill because it has a “flaw” that can be easily addressed. And don’t think for a minute that there aren’t any flaws in the income tax.
As Martin Luther King, Jr. said, In the End, we will remember not the words of our enemies, but the silence of our friends.
Please stand with us and demand that your representative support a much fairer, much simpler and much more efficient way to fund the government—the FAIRtax! The FAIRtax doesn’t pick winners and losers. Because it taxes spending, not earnings, the FAIRtax lets everyone save for their retirement tax free.
The FAIRtax collects the revenue that the federal government needs to operate but does it in a way that has the least impact on our individual freedom and the least impact on our economic prosperity.
There are no tax returns to file and no records to keep. We pay our federal taxes when we make retail purchases of new goods and services, and there is no need for the IRS. If you sell a used couch or used jet ski online, there is no FAIRtax due on that transaction.
The FAIRtax will allow us to TAKE BACK CONTROL. The income/payroll tax system is broken and no longer working—we can’t repair it but we can replace it with the FAIRTAX!
Join us and TAKE BACK CONTROL OF OUR COUNTRY AND OUR LIVES—NOT WITH BULLETS BUT WITH THE ELIMINATION OF ONE OF THE BIGGEST THREATS TO OUR LIBERTY AND ECONOMIC PROSPERITY—THE INCOME/PAYROLL TAX.
We all should remember Edmund Burke’s warning that applies to our efforts to TAKE BACK CONTROL, “Nobody made a greater mistake than he who did nothing because he could do only a little.”
We should also remember this quote from George Orwell's 1984, which, if we do nothing, may foretell your and your children's future:
“If you want a picture of the future, imagine a boot stamping on a human face—forever.”
WHAT CAN EACH OF US DO?
We can write letters and make calls to our elected representatives and attend Zoom town hall meetings demanding that if they really want to allow Americans to “TAKE BACK CONTROL”, the first step is to eliminate the income/payroll tax system and enact the FAIRTAX! TAKE BACK CONTROL! Help us PASS THE FAIRTAX!
The IRS will be gone and we will pay our taxes when we make purchases.
WE and not the Ruling Class and their minions in D.C. will decide how much federal tax we pay!
WE will know how much tax we and everyone else are really paying because taxes will no longer be hidden from us. It will be clearly shown on every retail receipt.
If you have friends who don’t know about the FAIRtax, send them to FAIRtax.org. Have them watch the white boards under “How It Works” and, if they agree, ask them to please join us.
Then contact your Members of Congress and the President and demand that Congress pass -the FAIRtax—the only fair tax.
Is it hopeless? When confronted with a seemingly impossible problem, remember the statement attributed to the author George Bernard Shaw who wrote, You see things; and you say “Why?” But I dream things that never were; and I say “Why not?”
Isn’t it time for us to ask, “Why not?” HELP BRING ABOUT REAL TAX REFORM AND STOP FUTURE IRS ABUSES
By contributing (investing) $10.40 per month, you help provide a financial base to AFFT. If you can make larger contributions (investments), these will be used not for salaries, as we are all volunteers, but for the needed updates to our economic studies which will be vital for all future years.
Please go to https://fairtax.org/1040 to invest in AFFT and in your and your family’s future.
“So what is it? If it’s a flat tax rate with no adjustable rates then I’m for it. But if, as the article proposes, the flat tax would have different rates based on how much we spend, how would that be tracked and implemented so they’d know when to charge the higher rate? That’s the part that’s throwing me. I don’t want the government tracking my spending to know when to charge me a higher rate.”
The short answer is that it is a flat rate, everyone pays the same rate with each purchase. I think where you are getting hung up is the effective tax rate vs tax brackets.
Look at the prebate as just a flat refund of all taxes paid up to the poverty level that everyone is eligible to receive. Everyone pays the same tax at the register and everyone received the same annual refund amount. If your spending is at the poverty level, with the prebate, your effective tax rate is 0% due to all of the taxes having been refunded. If your spending is somewhat above the poverty level, your effective rate (23% paid at the register minus the rebate) is going to be very low, say around 7%. If you spend a lot more, your effective rate will be, say, 18%, etc. You actually have to spend quite a lot annually to get close to the full rate of 23% (inclusive, 29.87% exclusive).
A "prebate" that "everyone is eligible to receive" sounds an awful lot like UBI to me. Is it a flat tax or not?
It's kind of like gay marriage. At first, the small-government person in me supported any adults calling themselves married as long as they don't force the rest of us to call it that. But the Dims didn't stop with that. They've now taken it to supporting pedo and such.
Don't do the same with the good idea of a fair tax. Don't define it in a way that can be implemented only with UBI (calling it "prebate" is lipstick on a pig). Don't make people pay different sales tax rates if they spend more and have the audacity to say there are no tax brackets.
The "flat" in flat tax means everybody pays the same rate ... period. That's what makes it beautiful. Adding varying rates and "prebates" makes it everything but flat and too much like the crap we already have in place.
The General Rule section on qualified family reads in part, “All family members sharing a common residence shall be considered as part of one qualified family.” So in scenario 2, they would have to be one qualified family.
I calculated based on the 2023 poverty level figures on the aspe.hhs.gov web site. For the 3 guys they each get
14580 x .23 = 3353.40
For the 3 relatives
(24860 + 9440) x .23 = 7889
for the family split 3 ways is 2629.67 each.
Thanks again for your comments.
With the prebate, everyone is eligible for the same amount. No need to monitor anything related to income or spending. It is a flat rate that refunds all taxes paid up to the poverty level of spending.
Thank you for the clarification on your numbers. I was using a table from 2021.
You will come out ahead!Ignorance is bliss.
Start with the phony "prebate" (GAG!.
The face value of your "prebate" is reduced 30% day one when you spend it.
The price you pay for everything is increased at least 30%. Talk about inflation, which also is increased 30%
Not including any 30% tax you pay ON other existing taxes, fees etc. Like the NEW tax on gasoline, city, county, state services, not to mention the 30% tax on their taxes, fees.
The 30% tax on state/local sales tax.
On services like auto repair/maintenance, haircuts, government services, the hidden 30% increase of government purchases and ALL government payroll. Yes even ALL government (city, county, state, federal) employees payroll is subject to the so called "fairtax")...THAT IS HUGE!!
OH yea. The little, not so insignificant question of 7.65% employer half of FICA hasn't been resolved in the 100% paycheck scam either.
You've had a lot of time to educate yourself on the realities of the Fairtax.
Instead you'd rather display your ignorance of what is written in the bill...Or just continue to make yourself look like a fool and lie about it.
Lurkey, I have neither the time nor the inclination to debate you.
Your arguments are specious, without merit!
I take it that you don’t lioke the FAIRtax, and can only conclude that you make your living in some manner off of the income tax. IOW, with no income tax and no IRS, Lurkey has to go earn an honest living.
I’ll not respond to any more of your insane rants!
Thank you!
Welcome aboard.
Please go to http://www.fairtax.org and find out how you can help us Gitterdone!
My former boss used to challenge us to do stuff by saying that “Can’t never could!”
We GOTTA TRY!
“A “prebate” that “everyone is eligible to receive” sounds an awful lot like UBI to me.”
A refund of taxes paid is no more UBI than the personal exemptions in the current tax system.
“Don’t make people pay different sales tax rates if they spend more and have the audacity to say there are no tax brackets.”
I really think you’re making way too much of this.
Look at it this way: No one pays taxes on spending up to the poverty level so no one is taxed on the necessities of life. After that everyone is taxed at the same rate. That way there are no “effective rates” and no “tax brackets” to get you upset.
Thanks Taxman. I hope the conversation advances!
What?
Nobody knows who spends what any different than now - the retailer just collects the tax and sends it in. Just like they do now with state sales taxes.
Sounds about like the prebate. A $35000 exemption on income tax is probably about the same as a prebate to exempt $35,000 of spending.
Maybe I read the article wrong. The quote that I posted from the proposal (article) says there will be a different tax rate based on how much you spend. So how will someone know when it's time to tax you at the higher rate unless that's tracked?
If you'll read the many replies to my post you'll see various ways they say it'll be implemented. Some say the sales tax rate is based on income, not actual sales. So even if the tax is applied at sales, the tax rate calculated for the sales tax is based on income. Think income tax brackets like we have today, but applied to sales tax.
Others replied that everyone will be taxed the same rate, but the government would adjust it by giving a prebate to people in lower incomes. That sounds too much like a welfare check to me. Others say that everybody will get the "prebate". That sounds too much like UBI to me.
So which is it? If it's a true fair tax with a simple sales tax rate then I'm all for it (if it replaces existing taxes). But once you get into taxing sales at different rates, then it starts sounding too much like the "progressive" taxes we're trying to get away from. Then if you get into prebates and such, I start hating it more than the existing system.
I know, right?! The plan includes an amendment to repeal the 16th amendment. That's hard. But it is true that they could add a sales tax on top of our income tax right now - but they're not, Yet.
You’re getting all kinds of different replies it seems. I’m glad you’re looking into it.
The tax rate at sale is always the same. Always. Always a 30% add-on [or 23% inclusive] for retail sales. Non retail has zero taxes. Always.
I haven’t gotten to the replies you mentioned but I will if I can find/make time.
That's the part I hate, which is what I quoted from the article in the original post I made (that you replied to).
If I make $100 per year and pay $25 in sales taxes that's a 25% effective rate on income.
But if I make $200 per year and pay $25 in sales taxes that's a 12.5 % effective rate on income.
IMO they do that to try to make something look unequal. But the sales tax rate is not related in any way to income. It is based solely on retail sales.
The idea they're trying to get at is to try to say that the sales tax is regressive and they use that as a reason to object to the sales tax. A sales tax can be regressive but the Fair Tax has the rebate thing to minimize that.
The amounts when factoring percentages are probably the same.
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