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

Read More Here!

Wednesday, May 04, 2005

The Federal Tax Code Must be Replaced With a Fairer and Simpler System

by Herman Cain, New Voters Alliance (Some of his comments to the tax commission)

I. Introduction
The current income tax system cannot be reformed. It creates disadvantages for multinational businesses, domestic businesses, individuals, and our government.
No amount of tinkering with a portion of the tax code is going to fix it. It is too complicated. It inflates the costs of U.S. goods and services to other nations. It is too unfair and inefficient. It discourages people from working harder to achieve upward economic mobility, which destroys hope and opportunity.
The current tax system needs to be replaced. It can be replaced with a national sales tax, also known as the FairTax (H.R. 25 and S 25).
Several commissions over the last twenty years, including the one I served on in 1995 (The National Commission on Economic Growth and Tax Reform), have all concluded that a replacement tax system should satisfy six principles.
First, it should promote economic growth by reducing marginal tax rates and eliminating the tax bias against savings and investments.
Second, it should promote fairness by having one tax rate and eliminating all loopholes, preferences and special deductions, credits and exclusions.
Third, it should be simple and understandable. Simplicity would dramatically reduce compliance costs and allow people to truly comprehend their actual tax burden.
Fourth, it should be neutral rather than allowing misguided officials to manipulate and micromanage our economy by favoring some at the expense of others.
Fifth, it should be visible so it clearly conveys the true cost of government and so people would not be subjected to hidden changes in the tax law.
Sixth, it should be stable rather than changing every year or two so people can better plan their businesses and their lives.
In remarks made in March, 2005 before the President’s Advisory Panel on Federal Tax Reform Federal Reserve Chairman Alan Greenspan stated, “Many economists believe that a consumption tax would be best from the perspective of promoting economic growth particularly if one were designing a tax system from scratch because a consumption tax is likely to encourage saving and capital formation.”
Consider the compelling advantages of replacing the current income tax code with the FairTax.
• Gross Domestic Product would increase 10.5 percent in the first year and level off in succeeding years at approximately 5 percent annually.
• Consumer prices would decrease an average of 22 percent on goods and an average of 25 percent on services by eliminating the corporate taxes and compliance costs currently imbedded in the costs we pay for goods and services.
• A single national sales tax rate on all new goods and services of approximately 23 percent would be revenue-neutral and would replace the current annual tax revenues of nearly $2 trillion.
• The annual amount of tax avoidance, according to IRS estimates, is nearly $300 billion. This amount would not escape the FairTax.
• The annual cost of compliance with the tax code is estimated at over $250 billion. In addition, businesses and taxpayers spend nearly seven billion hours each year filling out their IRS forms and many more calculating the tax implications of business decisions.
• The annual amount of tax loss due to illegal activity is estimated between $500 billion and $1 trillion. Under the FairTax, those engaged in illegal activities would no longer avoid paying their fair share.
• Imported goods would be treated the same as domestically produced goods. This means U.S. businesses would be much less likely to locate their plants overseas.
• All taxpayers would have an equal voice, not just people who can afford tax lobbyists and skilled tax accountants.
• The FairTax would effectively untax the poor, due to its rebate provision.
• The FairTax does not punish those who work second job to improve their family’s economic situation.
• The FairTax untaxes education, by allowing parents to save and invest for their children’s futures.
These advantages of a national sales tax on consumption have been well researched, analyzed and documented by some of the most respected business people, economists, and academicians in the country. Hundreds of thousands of citizens are now actively supporting a change from an income tax to a national sales tax on consumption. The FairTax will unleash the full potential of the U.S. economy, and the potential inside businesses and individuals to pursue economic freedom.

II. Description of Proposal
The FairTax is a non-partisan proposal that abolishes all federal income taxes, including personal, estate, gift, capital gains, alternative minimum, corporate, Social Security, other payroll, and self-employment taxes, and replaces them all with one simple, visible, federal retail sales tax.
The FairTax dramatically changes the basis for taxation by eliminating the root of the problem: Taxing income. The FairTax taxes us only on what we choose to spend, not on what we earn. It does not raise any more or less revenue; it is designed to be revenue neutral. The FairTax is a fair, efficient, and intelligent solution to the frustration and inequity of our current tax system.
Collection Methods

Retail businesses collect the tax from the consumer, just as state sales tax systems already do in 45 states; the FairTax will simply be an additional line on the current sales tax reporting form. Retailers collect the tax and send it to the state taxing authority. All businesses serving as collection agents will receive a fee for collection, and the states will also receive a collection fee. The tax revenues from the states will then be sent to the U.S. Treasury.

The FairTax is not new – most Americans come into contact with sales taxes daily, since 45 states currently use them to collect state revenues. It is easier to switch from an income tax to the FairTax system than it is to switch from gallons to liters or from feet to meters! Of course, those who depend on the structure and complexity of our current system (e.g., tax lobbyists, tax preparers, and tax shelter promoters) will have to find more productive economic pursuits. However, everyone will have enough advance notice to adjust to the new system.

Under the FairTax, everyone will have to think about taxes in a different way. Income – what we earn – will no longer have to be documented, measured and kept track of for tax purposes. The only relevant measure of our tax liability will be the amount we choose to spend on final, discretionary consumption. Tax-related issues will suddenly become a lot simpler and more straightforward than they used to be. The aggravation and anxiety associated with “April 15th” will disappear forever after passage of the FairTax.

Under the Fair Tax, job creation will boom. Residential real estate will boom. Financial services will boom. Exports will boom. Retail will prosper. Farming and ranching will prosper. Churches and charities will prosper. Civil liberties will be enhanced. In short, it is difficult to imagine all the far-reaching, positive effects of this change from taxation on income to taxation on consumption
The future stability of our nation’s economic infrastructure, and the future for our children and grandchildren, will be determined by the political will and courage in Congress to be aggressive with solving the big issues such as the tax code mess. The 92-year-old income tax code thwarts the natural, individual motivation of citizens to use their God-given talents to pursue happiness and their respective dreams.
Conversely, the FairTax allows all Americans to own all the returns on their sweat equity as the fruits of their labor. Ownership lets people realize their dreams and opportunities and is the key to the greatest nation on earth remaining the greatest nation. We have a moral obligation to protect our Founding Fathers' vision and to protect the unalienable right of ownership for our grandchildren.
It's our unalienable responsibility.

Read More Here!

Monday, May 02, 2005

Ownership of Choice

A lot has been said about President Bush’s use of the word “ownership” regarding Social Security reform. Well, it also applies to tax reform. If I recall correctly, we have a higher percentage of home ownership today than at any other time in American history. But home ownership is only the beginning.

With tax reform, specifically a consumption tax like the Fair Tax, Americans will have more money in their bank accounts. Without sounding materialistic, the only limit to what the individual can purchase is limited only by their bank account and personal desires. Sure, you can use credit to get more “stuff”, but that’s not all that I’m talking about.

An average family (usually considered to be a family of 4) making $50,000 a year will have $7,500 more spendable income. I don’t know about you, but we don’t bury money in a mayonnaise jar in the backyard. Our money goes to paying the mortgage, bills, car insurance, doctor bills, lights, phone, car loan, gas for the car, cable, clothing, and groceries. And of course, we do like to eat out once in a while, maybe see a movie, and take the occassional vacation. If you are like us, money gets tight sometimes. There is little room left for savings. And if there's an unexpected expense, forget it! Whether you are saving to pay off bills, put a child through college, put a downpayment on a house, or even take a vacation, it’s hard when you are living from day to day.

Here’s where the Fair Tax comes in. Take a look at your paystub. Look at the amount of money you take home. Now there are three other items I want you to look at. See the line that says FICA? And FICA Regular? You might recognize as Social Security and Social Security Disability. And Withholding? That’s what is withheld for your Federal Income tax. Add those three figures up. Let’s pretend that they total $350.00 each payday.

Now, imagine a day when those don’t appear on your paystub. What happened to that $350.00? Now look at your take home amount. It should be $350.00 more than it used to be. Wow! An extra $350.00? What’s the catch? There’s no catch. The Fair Tax bill was passed and signed into law by the President. You now have more money to spend.

That’s great so far. But, what about Social Security? What if I become disabled? What happens then? Well, let me ask this first and I promise I’ll answer your question. What are you going to do with that $350.00? Well, I’ll tell you what I would do. I’d take that money pay some bills, maybe make a mortgage payment, a car payment or something like that. Maybe I’ll just go and buy some clothes. Oh, the hot water heater needs to be replaced; I can do it now instead of waiting until it actually quits working (that unexpected expense, remember?). Maybe I’d put it into the bank and let it draw interest for awhile. Then maybe I’d take a vacation. Or pay off the car.

When you spend money, the retailer will collect a tax. They already collect state taxes, so it won’t be much more than just some more code written into the software program that calculates the tax. Tax will be collected if you buy a new item, whether it’s clothing, a house, a car, furniture, or a service such as dry cleaning. If you buy used, well, no tax will be collected.

I haven’t forgotten your question about funding Social Security. The taxes that are collected by the retailer will be sufficient to fund the Federal budget at it’s current levels, including Social Security and Social Security disability.

As it stands now, money is taken from your paycheck to fund the Federal budget and you have no say in how that money is spent. Under the Fair Tax you decide how much tax you pay by what you buy. You see, the Fair Tax is a consumption tax. You control the amount of tax you pay by what you buy. If you are Bill Gates or Teresa Heinz you have the money to buy a fully loaded, brand new Hummer if you choose to, and to pay the tax on it. If you are a middle American like most of the rest of us, maybe you want a new car, but can only afford to pay $25,000. Okay, you’ll pay tax on $25,000. If you choose to buy a used car for $25,000, you will pay no tax. That’s right, no tax. A consumption tax like the Fair Tax doesn’t care what how much money you have or what your tax bracket is (there will be no tax bracket), everyone will pay the same tax rate no matter what your income is.

Think of the person earning minimum wage. They will have more money to spend. Instead of slaving away barely making ends meet, the “working poor” won’t have Federal taxes taken from their paycheck. They get it all. Sure, they will have to pay taxes at the grocery store, but so does Bill Gates. The days of Teresa Heinz paying an effective rate of 12% income tax will be over. She will pay the same amount of tax as the single parent flipping burgers, waiting tables, or stocking shelves at the local grocery store who is barely making ends meet. How can it be more fair than that?

Getting back to President Bush’s concept of an “ownership” society: you will own your own money and you will own the freedom to spend the money you earn the way you choose to spend it. It’s not just about owning material things, but that’s part of it. You may save money to buy a house, or a car, or artwork. Ownership can be intangible: It might be a dream to start your own business or to go to college. It might be your dream to put your child through college. Your dream might be just to get out of debt: pay off the credit cards, the car, the house. This is ownership at it’s greatest. You own the right to make choices on what you do with your money.

How can it be better than that?

Read More Here!

Trouncing Francis Volpe

In a recent article (April 12) in The Sentinel Online titled "Some 'big' ideas are less than grand" this guy named Francis Volpe made a mistake that happens too often in the mainstream media -- he wrote without doing his research. Lest I be accused of the same thing, let me refer you immediately to

Volpe assumes that because he has seen support espoused only by conservatives that FairTax is a conservative issue. Not so. He just hasn't looked in the right places. It's a bipartisan issue with growing support from both parties.

Volpe is quick to show his ignorance. He writes,"In return for getting the federal tax withholding added back to your net paycheck, everything you buy will cost 23 percent additional, under the Linder plan." That is simply not so. This guy is either a very poor researcher or an out-and-out liar.

Truth is, with the FairTax, embedded taxes in products and goods will go down 20% to 30%, depending on how much the manufacturer/wholesaler/retailer has passed along to the consumer of the product. After those are removed you pay the tax.

In the meantime, what you have is your entire paycheck to pay it with. The FairTax, you see, gets rid of ALL the taxes we're used to paying -- income taxes AND employee taxes. It gives every single person his or her total paycheck, or, in the case of the elderly or infirm, their total benefits check. Social security and medicare are fully funded by the FairTax. This is all much more significant than our sloppy columnist would have you believe.

Continuing his walk down the path of deception, Volpe writes,"Imagine those folks who lined up outside of stores a couple of weeks ago to be the first on their blocks to grab a Sony PlayStation Portable, the new hand-held device that lets you play video games, watch movies and listen to your MP3 music files.

One of these from a local store costs $299, plus $17.94 in state sales tax. The day the Linder plan goes into effect, it costs $385.71. "

"Figures don't lie, they say, but liars can figure." The Sony Playstation Volpe refers to as costing "$299, plus $17.94 in state sales tax" already had $65.78 hidden taxes in it, assuming Sony paid only 22%that they embedded in the cost (materials and their own employee taxes) -- chances are it was actually more. But using the 22% figure, the actual cost of the Playstation would have been only $233.32. That's the price you would add the FairTax on, not the inflated price he came up with.

Volpe says, "In my last two-week paycheck, my federal tax payment was only 40 percent more than the $68 price difference above. And I have a lot more stuff to buy before my next paycheck." With FairTax he would have the ENTIRE paycheck to work with. If he decided he wouldn't mind buying that Sony from a previous owner, he wouldn’t pay tax on it at all.

Only new goods are taxed under the FairTax. And everyone gets a rebate so they don't pay any taxes on things they buy up to the poverty level. That means the poor pay no tax at all. And each person with a valid social security number gets $178 a month rebate.

"Consumption taxes also let wealthier people escape taxes on big chunks of their income, since they have way more money than they can spend," Volpe says, forgetting that the wealthy buy BMWs instead of Hondas, mansions instead of houses, Kate Spade handbags instead of Penneys' brand on sale, caviar and champagne instead of sardines and beer – all taxed by the FairTax. People who evade taxes, drug dealers, illegal immigrants, 40,000 foreign tourists annually, and others who now get a free ride would finally pay taxes.

Volpe, obviously no admirer of George Will but an avid reader of the conservative columnist nevertheless, continues: "The thing that really cracked me up is that Will asserts the consumption tax will do away with D.C.'s lobbying culture. Well George, you're pretty well connected in the political realm, so I'm surprised you don't know two things:

"There are more things on a lobbyist's mind than tax breaks. They're seeking favoritism for federal contracts, provisions in legislation that favor clients while sticking it to their competitors, and far, far more."

I'm delighted to hear that, Volpe. That means the lobbyists won't stand in the way of the FairTax, then. In fact, if that's all they want they should be cheering us on. After all, with a broader tax base, the economy booming from overseas investments as well, there'll be more money for Congress to pass out in entitlements.

You have to be either stupid, lazy or a liar to write about FairTax the way Volpe did. But what do you expect from mainstream media, after all?

Check, see what you think.

Read More Here!