Posted on 08/26/2004 11:05:33 PM PDT by n-tres-ted
Two weeks ago a man stood up at a George Bush campaign appearance in Florida to ask about a piece of legislation known as HR25. Many, including myself, were pleased to hear Bush respond with some positive thoughts about the Fair Tax plan, a movement to replace the federal income tax with a national retail sales tax.
Washington is a city of inertia, and right now the inertia belongs to our present method of funding the operations of our government, the income tax. Politicians will not easily surrender a funding mechanism that lends itself so well to political demagoguery and which can be used to reward political allies and punish enemies.
The Fair Tax plan deserves a thorough public examination and debate. John Kerry seems dedicated to making sure this doesn’t happen. Soon after Bush cited the national retail sales tax as something worthy of further exploration, Kerry stepped forward with the typical class warfare rhetoric of the left. Acting as if he actually knew what was he was talking about (he didn’t), Kerry announced that the Fair Tax would amount to the largest increase in the tax burden on poor and middle income Americans in our history.
John Kerry was wrong. He was either speaking out of ignorance, or he was deliberately lying about the Fair Tax proposal in order to gain a political advantage. A politician lying in order to gain political advantage --- imagine that.
This column is lengthier than the norm, but I promise you that if you will invest the time it takes to read it you will be well on your way to becoming yet another rabid supporter of the Fair Tax plan. You will know that the poor and middle income Americans would be the prime beneficiaries of the proposal. You may even organize your own neighborhood march on Washington to demand that HR25 receive a fair hearing. In the next two minutes I’m going to turn you into a HR25 Fair Tax zealot. Read on:
First … the briefest of overviews: Simply put, HR25 would provide for the repeal of the 16th Amendment (the income tax amendment) and the dismantling of the IRS. All personal and corporate income taxes would end, as would all payroll taxes. There would not be one cent of federal taxes of any nature taken out of your paychecks. No more Social Security taxes. No more Medicare taxes. You earn $2,000 a payday; you get $2,000 a payday. The federal government would be funded through a national sales tax on goods and services sold at the retail level. No taxes on investments. No taxes on savings. You only get taxed on what you spend at the retail level. Store your earnings in a shoebox if you wish. They won’t be taxed.
When originally proposed, calculations showed that the sales tax would have to be in the area of 23%. A complete economic study is now being completed that is expected to bring that total to under 20%. For the purposes of this column, we’ll stick with the 23% figure.
OK … let’s put on our sensitivity hats for a few minutes here and think of the consequences of the Fair Tax Act on our nation’s poor, poor, pitiful poor. After all, they can hardly afford a 23% sales tax when they’re living paycheck-to-paycheck in the first place, right?
Bear in mind that for the most part those whom we define as “poor” aren’t paying any income tax anyway. In fact, many of them are getting checks from the government; a form of outright income redistribution. The absurdly named Earned Income Tax Credit, for example. How can these people survive going from a no-tax situation to paying a 24% sales tax on all their retail purchases?
The implementation of the Fair Tax would fail in short order if, as the question presupposes, nothing were to change except that all of us would be paying today’s prices for a gallon of milk or a loaf of bread, plus a 23% sales tax. But … that’s would be far from the reality under the Fair Tax. Under the Fair Tax the poor won’t only survive, they’ll positively thrive! The Fair Tax could turn out to be the best poverty-fighting tool devised in this country since the concept of hard work.
Let’s begin by considering two realities.
First, remember, please, that the poor, along with everybody else, will no longer have Social Security taxes or Medicare taxes withheld from their paychecks. Whatever they earn, they get on payday. For the poor this means an immediate 12 to 15% increase in their earnings.
Second. Don’t forget the 22% in imbedded taxes. These embedded taxes exist in virtually everything poor Americans or any other Americans have to buy. These embedded taxes represent all of the corporate and business income taxes and payroll taxes that the companies involved in the production, manufacture, marketing, distribution and sale of the goods and services must pay in the course of business. As soon as these taxes are gone, and after the competitive forces of the free market work their magic consumers, including the poor, will be paying at least 20% less for virtually everything they buy. This includes such basics as food, clothing, shelter and transportation. Yes... they’ll have to pay the new national sales tax, but when you factor in the lower prices caused by the disappearance of the embedded taxes you’ll see that the total price paid for consumer goods in terms of real dollars will fall or will remain very nearly the same.
So … just considering these factors, the Fair Tax delivers a winning hand to people living in or near to what we call poverty. They get every penny they earn on payday, amounting to a 12 to 15% pay raise, and when you factor in the Fair Tax and the lower prices, they’re actually end up spending less of their money for a retail purchase than before. What John Kerry calls the greatest increase in the tax burden on the poor in the history of our country is, in reality, their greatest tax reduction.
You need a clearer picture? Pull out your calculator. Let’s say that a single mother with two children spends $45 a week on groceries. The removal of the 22% embedded tax would bring the price of those groceries down to $35.10. The sales tax at 23% would be $8.07. This brings the total price to $43.17. That’s less than would have paid under today’s tax system. This single mother, whom we’ll consider “poor,” has just received a 12% to 15% increase in her weekly paychecks, and she’s paying less at the grocery story for her basic necessities.
So far, so good. At this point you should be thoroughly convinced that the Fair Tax would actually benefit, rather than harm the poor. But, then again, maybe not. Here’s the convincer. Brace yourself for the knockout punch.
The Rebate
Under the Fair Tax plan every consumer, rich and poor alike, will receive a check or an electronic credit to their bank account from the federal government every single month equal to the sales tax that person or that family would be expected to pay on the purchase of the basic necessities of life for that month. The size of the monthly payment will be based on the government’s published poverty levels for various sized households.
Here’s an example of how the rebate payments would have worked in 2003.
Let’s say you’re a married couple with two children. The Fair Tax Act sets forth a formula for computing the poverty level, based on government figures, which negates any marriage penalty. If the Fair Tax Act had been law in 2003 you would have been granted an annual consumption allowance of $24,240. This is what the government would assume you would have had to spend during that one year to buy the basic necessities of life for your family. The sales tax on this amount would equal $5,575. The government would have rebated this amount to you in 12 equal monthly installments of $465. What about a single woman with one child? Her monthly rebate in 2003 would have been $232. The lowest payment would be to a single person with no dependents. That person would have received $172 per month.
Now … bear in mind, this rebate isn’t only paid to the poor. It is paid to everyone, rich and poor alike. The purpose here is to make sure that no American has to pay the Fair Tax sales tax on the basic necessities of life. Unlike the present income tax system, the Fair Tax treats each and every person in this country exactly the same. This, of course, presents somewhat of a problem to politicians who like to use the tax code to foment class distrust or outright warfare.
OK … let’s add it up for America’s lower income citizens:
1. They get their entire paycheck. 2. Even with the sales tax, and considering the drop in prices, they’ll be paying essentially the same or less for everything they buy. 3. They get a check from the federal government every month to rebate any sales taxes they had to pay on life’s basic necessities.
Are you beginning to see just how far off-base John Kerry was with his intemperate criticisms?
Though most of the poor don’t have what we would call complex tax returns, let’s also include the time these they (all of us, really) will save by not having to keep tax records or file tax returns.
If you’re looking for some reason to oppose the Fair Tax plan, you’re going to have to find a better excuse than its effect on the poor. John Kerry might find it politically expedient to demagogue the issue for votes, but now you know enough to know what he’s up to.
For more comprehensive information on The Fair Tax you can visit http://www.fairtax.org.
Neal Boortz is a lawyer and nationally syndicated radio talk show host.
©2004 Neal Boortz
Hey, I`m self employed as well and you don`t even want to know the kind of tax hell I go through every year. Matter of fact I just finished up 2 weeks ago after making a few mistakes on my deductions, I had to file 2 amendments which probably shorted out the IRS computers. They sent back the money I paid them, I sent it back, then they claimed I owed them 40 grand which almost literally gave me a heart attck. Then I hired an accountant to straighten everything out, gave him power of attorney, and I had to get copies of all the checks I ever wrote them through 2003, and I still haven`t heard back from them and we are now into month 5. Just imagine what kind of hell it`s going to be like if Kerry wins!
Hehe. Because they couldn't confuse you out of more of your money then.
The Democrats aren't against this because they're concerned about the poor "getting hit with regressive taxes." They're against this because they know it would make everyone in the country consider themselves to be a taxpayer. And once you're a taxpayer, you're much less likely to support anything that would make your taxes go up. It would destroy the very mechanism by which the Democrats are able to scare so many poor people into voting for them.
Bingo.
Another lie, HR25 does NOT provide for the repeal of the 16th amendment... Was he saying something about lying and not knowing what's in the fairtax?
Could someone clarify this for me because I'm not sure I'm getting the premise right. We would pay 23% sales tax on goods? What about those of us in states, like NY who already pay a sales tax of 8.75%. What would be my sales tax on a $20,000 car be? 31.75%? Is this the suggested solution? It stinks paying 8.75%.
What happened to the flat tax? That's the way to go if we have to pay these damn taxes.
What gets me, is we were considered too rich to get the rebate for the child refund last year. They certainly don't consider the price it cost for people to live in individual states. There is no fairness in taxes. Flat tax, in my mind, is still the best way to go.
Do you really trust the crooks in DC to "phase out" the current income tax?
Besides, with state sales taxes of around 6-7%, add that to say 23%, and you have a huge incentive to do your business in the black market.
If you would like to be added to this ping list let me know.
John Linder in the House & Saxby Chambliss Senate, offer a comprehensive bill to kill all income and payroll taxes outright, and provide a IRS free replacement in the form of a retail sales tax:
H.R.25, S.1493
A bill to promote freedom, fairness, and economic opportunity by repealing the income tax and other taxes, abolishing the Internal Revenue Service, and enacting a national retail sales tax to be administered primarily by the States.Refer for additional information: http://www.fairtax.org & http://www.salestax.org
The Democrats aren't against this because they're concerned about the poor "getting hit with regressive taxes." They're against this because they know it would make everyone in the country consider themselves to be a taxpayer. And once you're a taxpayer, you're much less likely to support anything that would make your taxes go up. It would destroy the very mechanism by which the Democrats are able to scare so many poor people into voting for them.
On the nose!!!
So many Americans paying little or no federal taxes makes for a natural spending constituency. It's like me in the restaurant: What do I care about extravagance if you're footing the bill?
---Walter Williams
| "As a matter of fact, what the income tax does — and this is the debate that I think we always try to get into in order to let you and him fight, see — and the people of this country are led down a path where the actual control of their resources, which in the end is the control over their will, is handed off to the government." . . . "The government then manipulates that will in order to destroy the freedom of our electoral system through the income tax structure, and we call the resulting slavery a free system." "In point of fact, it is not as the founders understood, and the only way to restore real freedom is to give people back control over the income that they earn so that they won‘t, at the voting booth and in other phony issues, be subject to that manipulation." |
Imagine paying an additional $125,000 on a $400,000 house.
Um, no thanks.
We need tax reform, but abolishing the income tax outright is about the single most risky proposition of destoying that which most of us clearly take for granted: a stable government.
Yeah right! Maybe $145 a week!
Besides, with state sales taxes of around 6-7%, add that to say 23%, and you have a huge incentive to do your business in the black market.
You are aware aren't you that you pay that now whenever you purchase anything at all?
DO YOU PAY YOUR INCOME TAX
AT THE SUPERMARKET?
by D. Sherman Cox J.D. L.L.M. Taxation
And that black market, otherwise known as a cash economy is already out their because of the high marginal rates of the federal income/payroll tax system exceeding 40%.
Tax Evasion: The Underground Economy
Reducing that marginal federal tax rate to 23% can only improve that situation.
Imagine paying an additional $125,000 on a $400,000 house.
Um, no thanks.
Then why are you doing so now?
You pay it at the front end when you get hit with income and payroll tax personally, reducing the resources from which you could purchase a house. Then again at the purchase end when you pay for the embedded taxes buried in the tax inflated price of all the goods and services that went into building that house.
Under the NRST you get hit once and only once on a product. Used products and residential property (defined as any product on which the NRST has already been paid and property grandfathered by the legislation presumed to have paid through the income/payroll tax system) are not taxed by the NRST on resale.
We need tax reform, but abolishing the income tax outright is about the single most risky proposition of destoying that which most of us clearly take for granted: a stable government.
| 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 accepts 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. |
There was good reason why Karl Marx and the Communist Party makes the progressive/graduated income tax the 2nd plank of the Manifesto of the Communist Party, by Karl Marx and Frederick Engels, published in 1848. We should never forget nor overlook the philosophical underpinnings of that choice:
"The proletariat will use its political supremacy to wrest, by degree, all capital from the bourgeoisie, to centralize all instruments of production in the hands of the state ... . Of course, in the beginning, this cannot be effected except by means of despotic inroads on the rights of property ... . These measures will, of course, be different in different countries. Nevertheless, in most advanced countries, the following will be pretty generally applicable.
I have a better idea. Put the Constitutional provision, tariffs, on every good and service entering the country. Not only will we pay NO taxes,
Hmmm,
"if the jurisdiction of the national government, in the article of revenue, should be restricted to particular objects, it would naturally occasion an undue proportion of the public burdens to fall upon those objects. Two evils would spring from this source: the oppression of particular branches of industry; and an unequal distribution of the taxes, as well among the several States as among the citizens of the same State."
"The maxim that the consumer is the payer, is so much oftener true than the reverse of the proposition, "
"When they are paid by the merchant they operate as an additional tax upon the importing State, whose citizens pay their proportion of them in the character of consumers. "
"Suppose, as has been contended for, the federal power of taxation were to be confined to duties on imports, it is evident that the government, for want of being able to command other resources, would frequently be tempted to extend these duties to an injurious excess. There are persons who imagine that they can never be carried to too great a length; since the higher they are, the more it is alleged they will tend to discourage an extravagant consumption, to produce a favorable balance of trade, and to promote domestic manufactures. But all extremes are pernicious in various ways. Exorbitant duties on imported articles would beget a general spirit of smuggling; which is always prejudicial to the fair trader, and eventually to the revenue itself: they tend to render other classes of the community tributary, in an improper degree, to the manufacturing classes, to whom they give a premature monopoly of the markets; they sometimes force industry out of its more natural channels into others in which it flows with less advantage; and in the last place, they oppress the merchant, who is often obliged to pay them himself without any retribution from the consumer. When the demand is equal to the quantity of goods at market, the consumer generally pays the duty; but when the markets happen to be overstocked, a great proportion falls upon the merchant, and sometimes not only exhausts his profits, but breaks in upon his capital."
we'll all have decent jobs when the factories and investment capital come running back home. Talk about a win-win.
With no federal taxes on manufacturing with an NRST, exports leave the country at our competitive advantage, exports are fully taxed on retail sale treated the same as domestic manufacture for the first time.
The potential of going to a retail sales tax only system:
Chairman of the House Ways and Means Committee,
Rep. Bill Archer (R-TX)
August 12, 1996
- "A recent survey was done, in Europe and Japan, of the major corporations and I was astounded at the results. They were asked, 'If the US abolished its income tax and went to a sales tax, would that have any impact on your decisions?' Eighty percent of the corporations said they would build their factories in the United States of America. Twenty percent said they would move their international headquarters to the United States of America."
I wonder what the answer would have been if the sales tax were 18% and an across the board tariff on foreign durable goods of 5% were in place, 30% for Communist countries if we trade at all.
We would pay 23% sales tax on goods? What about those of us in states, like NY who already pay a sales tax of 8.75%. What would be my sales tax on a $20,000 car be? 31.75%? Is this the suggested solution?
You are already paying that now, the federal income/payroll tax system hits you at the front end with personal taxes reducing the pay you take home out of which you buy anything.
Plus you get hit again through the tax inflated prices(embedded with the business side of income and payroll taxes) of everything you purchase.
It stinks paying 8.75%.
Yep, especially plus the federal income/payroll tax burden embedded into prices of everything you buy now on top of getting hit personally at the individual income/payroll tax before we even get a glimpse of it.
What happened to the flat tax? That's the way to go if we have to pay these damn taxes.
It doesn't do away with payroll(i.e SS/Medicare) taxes, the IRS and it still burdens business and consequently consumer prices, only hidden from view so we don't squeak so loudly.
Flat Tax as Seen by a Tax Preparer
by Vern Hoven
In fact the flat tax is just another variant of a VAT that includes a wage tax on individuals. None other than the father of the flat tax, Robert Hall of Stanford University (along with Alvin Rabushka), in his 1995 Ways and Means Committee testimony said, "The Hall-Rabushka flat tax is a value-added tax."
Which was pointed out again in additional hearings in April of 2000:
http://waysandmeans.house.gov/fullcomm/106cong/4-11-00/4-11kotl.htm
"Robert Hall, one of the originators of the proposal(Flat Tax), who describes his Flat Tax as, effectively, a Value Added Tax. A value added tax taxes output less investment (because firms get to deduct their investment.)"
"The Flat Tax differs from a VAT in only two respects. First, it asks workers, rather than firm managers, to mail in the check for the tax payment on that portion of output paid to them as wages. Second, it provides a subsidy to workers with low wages."
The Flat Tax; Chapter 3, by Robert Hall and Alvin Rabushka
| Here is the logic of our system, stripped to basics: We want to tax consumption. The public does one of two things with its income—spends it or invests it. We can measure consumption as income minus investment. A really simple tax would just have each firm pay tax on the total amount of income generated by the firm less that firm’s investment in plant and equipment. The value-added tax works just that way. But a value-added tax is unfair because it is not progressive. That’s why we break the tax in two. The firm pays tax on all the income generated at the firm except the income paid to its workers. The workers pay tax on what they earn, and the tax they pay is progressive. To measure the total amount of income generated at a business, the best approach is to take the total receipts of the firm over the year and subtract the payments the firm has made to its workers and suppliers. This approach guarantees a comprehensive tax base. The successful value-added taxes in Europe work this way. The base for the business tax is the following: Total revenue from sales of goods and services less purchases of inputs from other firms less wages, salaries, and pensions paid to workers less purchases of plant and equipment The other piece is the wage tax. Each family pays 19 percent of its wage, salary, and pension income over a family allowance (the allowance makes the system progressive). The base for the compensation tax is total wages, salaries, and retirement benefits less the total amount of family allowances. |
Flat tax, in my mind, is still the best way to go.
The income tax system we see today, started out a flat tax. Didn't last a single session of Congress before it started its evolution to what we have now. The Reagan tax reforms collapsed the rate structure to three brackets, that did last long did it.
As long as you have an income tax no matter its flavor or number of brackets, you still have the basic problem:
"A hand from Washington will be stretched out and placed upon every man's business; the eye of the federal inspector will be in every man's counting house....The law will of necessity have inquisical features, it will provide penalties, it will create complicated machinery. Under it men will be hauled into courts distant from their homes. Heavy fines imposed by distant and unfamiliar tribunals will constantly menace the tax payer. An army of federal inspectors, spies, and detectives will descend upon the state."
-- Virginian House Speaker Richard E. Byrd, 1910, predicting the consequences of an income tax.
| "As a matter of fact, what the income tax does — and this is the debate that I think we always try to get into in order to let you and him fight, see — and the people of this country are led down a path where the actual control of their resources, which in the end is the control over their will, is handed off to the government." . . . "The government then manipulates that will in order to destroy the freedom of our electoral system through the income tax structure, and we call the resulting slavery a free system." "In point of fact, it is not as the founders understood, and the only way to restore real freedom is to give people back control over the income that they earn so that they won‘t, at the voting booth and in other phony issues, be subject to that manipulation." |
To remove perception of the tax burdens of the individual, is to remove the goad which assures accountability of government to the electorate. Federal tax rates are high and government grows ever larger because a majority of the electorate do not perceive proportionately the burden their demand for largesse imposes on the minority of citizens.
The siren call for representation without taxation is the formula that got us where we are at today. The ability to hide or disguise taxation from the view of large sectors of the electorate allows the Congress to get away with the creation of the evergrowing monster that it fosters.
Hear, Hear......Wouldn't we need to ask the benevolent WTO first, if that was OK?
Gonna happen, folks! Gonna happen!
“I have sworn upon the altar of God eternal hostility against every form of tyranny over the mind of man.” [Thomas Jefferson, letter to Benjamin Rush, 1800.]
Click here and here to help us scrap the Code, scrap the IRS and abolish the VLWC!
You can also click here to sign a petition in support of Fundamental Tax Replacement.
We will never be a truly FRee people so long as we have the income tax and the IRS.
What about Savings? I finally get to a point in my life where I'm putting money away. The fair tax comes in and it loses 30% of its value?
What about the effect on tourism(non native US)? If prices go up 30% how many people are going to stay home and not come to the USA?
I don't know how much foreign tourism affects our economy, but it must have some effect in tourist cities like Orlando, NYC, Vegas, etc.
Also, what about Tax avoidance? I bet the black market shoots up, specially near Border areas where you can slip over the border and buy Canadian or Mexican.
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