Keep Your Entire Paycheck. Make April 15 Just Another Day

Thursday, May 05, 2005

The Manipulative and Powerful
Part II of II

Wow! I was just reading off Nancy Pelosi’s (D) website. I’m amazed at what is coming out of her face. As I was saying, they really do think we are stupid. I am appalled to think that some people actually believe what they report. I think I’ll just go right off the top and refute everything she and Mr. Rangel reported on September 23, 2004.

They say: “Today, we are here to highlight one of the many clear contrasts between Democrats and Republicans: Republicans want to undermine our American values of prosperity and fairness with a new national sales tax of at least 30 percent and as high as 50 percent or more on all goods, including homes and cars.” First, why she does not know that this is a bipartisan bill, I do not know. Tell Mr. Cramer (AL-5), Mr. Peterson (MN-7), Mr. Hall (TX-4), and Mr. Conaway (TX-11), all democrats, that this bill is not bipartisan. Secondly, the only thing H.R. 25 (FairTax) strives for is fairness and prosperity. If everybody, especially Ms. Pelosi, understood economics, this would be a no-brainer. Thirdly, the bill explicitly states that the tax rate would be 30 percent (tax-exclusive) on used goods or services, not any more.

She says: “A national sales tax would be a burden for middle class Americans, but a boon for the wealthy. Families with children would lose their current tax deductions, and seniors would essentially be taxed twice.” Actually, if you look at the monthly rebate under the FairTax as a deduction, which it essentially is, then the more members of the household, the more money you get as a rebate. Not losing anything there.

In contrast to the ignorance portrayed here, seniors, unlike under the FairTax, are already double- and sometimes triple-taxed on their earnings. First, everybody has to pay both their payroll taxes (Social Security and Medicare) and income taxes based on their base income, not their adjusted income – basically a tax on a tax. Second, everything that anybody buys, including seniors, has a 22% to 25% hidden cost of the corporate taxes and compliance (accounting and penalty avoidance) that every business passes onto their customers in the form of higher prices. Third, everybody that sells their home (unless they use one of the loopholes – which costs time and money to figure), pays a capital gains tax. Approximately 81% of seniors own their homes.

Not only will people be able to save and/or invest their PRE-TAX money and make money instead of losing the time-value of their payroll taxes, the hidden costs of their purchases will be gone, and prices will go down. When seniors go to sell their home, no longer will the smaller condo cost them that extra 15% to 28% in capital gains taxes. That sounds pretty pricey to downgrade – not so with the FairTax. To top all that off, throw in an extra bit of income that will come every month in the rebate. If that’s not enough benefit, I have more. Let’s just toss in the fact that the FairTax plan makes sure that the Social Security benefits indexing formula is adjusted so that benefits will increase to the extent, if any, that the sales tax results in higher tax-inclusive prices. Don’t forget; the income tax imposed on investment income and pension benefits or IRA withdrawals will be repealed, the estate and gift tax will be repealed, and the older citizens of this country will be happy in the fact that their children and grandchildren will no longer be laboring under the burden of the IRS and the income tax. There is no legitimate argument against the vast benefits for all of us, especially seniors.

They babble: “The… plan would make it harder for middleclass families to make ends meet. A national sales tax would undermine the American value of prosperity. For example, cars that cost $20,000 would cost an additional $6,000 under this proposal. Just wait until the car dealers hear about this proposal. Prescription drugs that cost $100 would now cost $130. New homes, insurance premiums, brokerage fees, and gasoline would all be heavily taxed to replace revenue brought in by the current tax system.” It is absolutely amazing to me what people can manipulate others with when they are trying desperately to hang on. Can you feel your power slip? That must be the problem. Stop LYING to people Ms. Pelosi and Mr. Rangel. You conveniently leave out the fact that before any sales tax is imposed on the people of this country, the current hidden taxes will be gone, in the form of lower prices; approximately 22% to 25%. This is a huge point. Please realize that after-sales-tax prices will be about the same they are with our income tax system. You say that is all well and good, BUT don’t forget that you won’t have any federal withholdings of any kind. All in all, the average tax-paying American will save 25% every year. Personally, I could use 25% more than I make. Could you?

She exclaims: “It would wipe out our system of progressive taxation. A national sales tax would undermine the American value of fairness.” At first glance, the national sales tax wouldn’t be progressive. Unfortunately, a lot of people only give it a simmering glance, instead of actually learning about the entire plan. By itself, a national sales tax would be regressive. There is no denying that issue. However, the FairTax, a more comprehensive and well-researched plan adds, among other things, a monthly rebate to everybody’s income and taxes away the payroll tax, making it progressive.

The distribution of the FairTax is fairer than the present tax law because it only taxes consumption above the poverty line, assuring each family to spend tax-free for their basic needs. This is accomplished by providing a rebate to each family equal to the taxes paid on the purchase of essential goods and services as determined (as has always been) by the Health and Human Services Poverty Level. The rebate would be paid monthly in advance to every family by the Social Security Administration. Before you speak up about the cost of a system such as that, don’t forget that the SSA consistently mails millions of checks every month to Social Security beneficiaries with no problems.

Because of the convoluted tax code, I can not tell you exactly, but the current effective tax rate for an American citizen is somewhere between 0% and 60% with hidden taxes (for comparison’s sake). Under the FairTax, the absolute maximum tax rate someone could pay, even without deductions or loopholes, is 23% (tax-inclusive to compare to the current system), and you would have to be off-the-scale in income earning power for that to happen. Even better though, the poorest citizens (with no other family members), making $1.00 in income would have a negative effective tax rate of about -2,000%. That is extreme, but it shows you the progressiveness of the system, and the fairness at the same time.

She glorifies: “The American people should be aware that the Republicans’ primary tax agenda is a new national sales tax.” Amen! I guess she does have one thing right, although she forgot to mention the other supporters in her own party. I hope they are not offended. I would be!

These examples show great things about the tax system, for individuals. However, I haven’t even begun to tap into the immense benefits for the country and our entire economy. I’ll save that for later. In summary, how about getting rid of the absolute power to take everything you own and make, making the country smarter via pre-tax spending on education, higher wages, lower prices, more jobs, saving trees, getting more useful bills passed in Congress, a boom in investments, more exports, bringing outsourced jobs back to the US, and lowering interest rates – all national interests that the FairTax help.

Mr. Rangel and Ms. Pelosi, please get down from your pedestal and support this bill. If you really want to keep your power, get with what the people need and want. Really, you would find that more people would support you if the facts were presented, correctly. Stop trying to manipulate people. We’re not puppets. It is time for change to the FairTax. Find out what the facts are by going to and


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