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Tuesday, August 23, 2005

So, What is Really Fair?

As many people know, it is no secret that many citizens, especially seniors, have contributed money to investment accounts (i.e. Roth IRAs) that have already been taxed through income. That is exactly why I was planning to write a letter to Mr. Linder and start a discussion about how the H.R. 25 bill could be manipulated slightly to compensate this disadvantage for Roth investors. I could venture to say that I am one of the FairTax bill’s biggest supporters, since I jumped on board about one year ago. However, no plan is perfect, and this is the one thing I saw as imperfect.

So, I was barely into my discussion with my wife about the letter I was going to write, when she throws out something mind-blowing. My original thought was to provide an exemption for the people that have already paid income taxes on their investments, much like the Inventory provision in the HR 25 bill for retail businesses that are affected. (For those of you who do not know, the HR 25 bill includes a section that states that no inventories of businesses in place at the time of enactment will be charged the tax, as a transition clause.) She asked me what investments I was talking about. My response was that I was talking about investments that have already been taxed once through the redistribution tax, (I’m sorry, I mean the Income Tax) like Roth IRAs, as opposed to 401Ks and Traditional IRAs. So, what about my dad’s guitars, she asks? If you couldn’t figure it out, her dad is into collecting guitars as an investment. “Um…” She adds, “Would he be compensated?”

You might think that would be rare, but she made me think more broadly. Yes, it would be great to provide some compensation to the people that put money into their Roth IRAs, BUT what about the house that I bought with after-tax money, which I will sell eventually. I don’t buy them, but what about those people that buy gold coins? My point is, that everything that you buy, especially real estate and items you sell later, has already been taxed via your income. Not only that, but it has been taxed (approximately 22%) additionally without you knowing it through hidden passed-on corporate taxes.

Also, keep in mind that the government has needed to fund itself up to this point. It will still need to fund itself, even after the FairTax is enacted. Should we take back the money that we paid to the government already, just because we will have a different way of funding the monstrosity after the FairTax is enacted?

Well, there would be one way the government could overcome the dilemma, which is to stick it the “other people”. We could tax the people that have invested in the 401Ks more heavily after the FairTax, to compensate. Or we could let everyone that bought anything, off the hook, but make the pre-tax investors pay the future sales tax. Would that be fair? Unless you follow Marxism, I would say “absolutely not”. This is why the FairTax was brought about in the first place. It keeps the deductions and loopholes out of the way.

So, what it comes down to is that no system is perfect, nor will any ever be. But, even with this dilemma, the FairTax is as close as possible and will require some transition costs. There is no denial about this quandary. Sometimes it is very necessary to take one step back to move two steps forward.

So let’s get rid of the 22% embedded taxes for everyone and let the people alone that haven’t been taxed that extra confiscatory income tax already. That is fantastic for them. If I am being taxed less in the first place, what would it matter if someone is being taxed less than I am. People should mind their own business.

It is understandable that many people would have felt that this would be a disadvantage. Look at me; I did. Education is the key; much like my wife did for me today. Learn from other people, and use the truth. There will be nothing we can do about how the government has funded the services that we all use, already. Let us move on.

This country will continue without you, after you leave here. Keep in mind the people that will follow: your children and grandchildren. Let us not ruin their livelihood by being caught up in this one snag.


Blogger Merrill Bender said...

Wait - is everyone concerned about retirement savings.

401(k) and IRA (traditional) paid no income tax on those moneys.

They paid no income tax on the interest or capital gains.

They expected to pay income tax when they withdrew.

They now pay a Fair Tax at 23% minus the offset of the Prebate.

There net Federal tax rate on those funds may be less than under the old system.

Roth IRAs and Collectables when Cashed in don't pay a tax unless you are buying something new; If Dad buys a used Mercedes or Corvette , no tax.

If the Roth IRAs get cashed in for a Son's College Fund, No Tax.

With the price drop on new goods and services even buying those will be about the same as before so the net impact is marginal but the tax is paid.

you are right by keeping it simple with no loopholes, every American Family Young or old will net out ahead with the Fair Tax.

Wednesday, August 24, 2005 6:28:00 PM

Blogger Duane said...

Paragraph two of the Declaration of Independence begins with "We hold these truths to be self-evident, that all men are created equal,". In the Constitution, the founding fathers supported this by forbiding titles, nobility and monarchy.

Yet we allow ourselves to be divided into "classes" by requiring that different people pay different income tax rates.
These have been justified with phrases like "ability to pay" and "redistribution of wealth" when, in fact, it is introducing "class" into our society.

The FairTax brings us back to the "classless" society envisioned by the founding fathers by having only one rate for ALL Americans.

Saturday, September 24, 2005 6:57:00 AM

Blogger johnwk said...

"The FairTax brings us back to the "classless" society envisioned by the founding fathers by having only one rate for ALL Americans."


You have got to be kidding!

H.R.25 is the same socialist tax pig we now have but in a different dress and it defies the intentions and beliefs under which our founding fathers framed and ratified our Constitution.

Those who have studied the debates during which time our Constitution was framed know that a wealth based tax being imposed upon the states [which income taxation and H.R.25 both are] was a bone of contention during the framing of our Constitution. But a compromise was finally agreed upon for a general tax among the states ___ representation and taxation were to be tied together by the rule of apportionment!

This was intended to insure if impost, duties and excise taxes were found insufficient to meet Congress’s expenditures and Congress found it necessary to lay a general tax among the states, and particularly if it were a wealth based tax, those states contributing the lion’s share of the tax would be compensated by a proportionate vote in Congress equal to their contribution…a vote to be exercised when their money would be spent!

Of course, we all know that socialists and the friends of big government do not like this rule [Representatives and direct taxes shall be apportioned among the several states] and we all know socialists and the friends of big government just love the one man one vote idea when it comes to spending money from the federal treasury. But, when it comes to filling that treasury by the rule of one vote one dollar, socialists and the friends of big government run and hide and make things up about our Constitution in an attempt to subjugate the intended rule of ___ representation with proportional financial obligation.

Our Socialist friends in America worked very hard to get the 16th Amendment adopted to remove the requirement of Congress having to apportion a tax on “income”. Keep in mind that a rule which requires taxes calculated from “income” to be apportioned among the states defeats the socialist idea of income taxation___ from each [state] according to its ability. Under the rule of apportionment, each state would only have to contribute a share of a total sum being raised proportionately equal to its number of votes in Congress!

And now, our socialist friends are back and want to lay and collect a tax upon property, real and personal, which H.R. 25 proposes to do, without apportionment among the states and without regard to any census or enumeration, while keeping alive Congress’s power to calculated taxes from income, without apportionment among the several states and without regard to any census or enumeration!

For details and documentation concerning the rule of apportionment CLICK HERE

Fortunately, H.R. 25 is rejected in a NEW POLL by more than a two to one margin in favor of our Constitution's original tax plan!

Seems the supporters of H.R. 25 are unable to defend their socialist friendly proposal against the wisdom of our Founder’s original tax plan.

The only tax reform we need is to have the following words added to our Constitution:

The Sixteenth Amendment is hereby repealed and Congress is henceforth forbidden to lay ``any`` tax or burden calculated from profits, gains, interest, salaries, wages, tips, inheritances or any other lawfully realized money

Here is a COMPARISON between H.R. 25 and our Constitution's original tax plan.



Friday, December 15, 2006 4:56:00 PM

Blogger Dragon said...

And how is the FairTax a "wealth tax?" It's a spending tax, pure and simple. It encourages savings and investment and it pays the government bills. In fact, Americans for Fair Taxation may have underestimated the impact from taxing the underground economy.

On top of that, no one has any idea, that I've heard, about the impact of trillions of dollars returning to the country from offshore, tax-sheltered accounts.

Monday, December 24, 2007 8:05:00 AM


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