Keep Your Entire Paycheck. Make April 15 Just Another Day

Thursday, June 09, 2005

Open Letter to Rush Limbaugh

Dear Mr. Limbaugh;

Today was the first time I've ever heard your radio show and I am shocked -- shocked, I say --and disappointed in you. In your answer to the FairTax question it was painfully obvious that you did not know what you were talking about. Obviously you don't understand the situation.

You support a flat tax. That's what we had to begin with, and look where we are now. A flat tax is an INCOME tax. It taxes productivity. It has to have exemptions and exceptions and incentives to make it work, and once you add those, it's not FAIR to someone -- historically that's us guys in the middle. AND the flat tax is on top of an income tax. That's really close to the VAT that has decimated European economies.

You said, "The Home Mortgage Interest Deduction - now a lot of people, because it's been around for so long, it … it's so important, that's one of the reasons that some people buy a house - only to get the deduction on a mortgage. "Ah, I can save a lot of money!" But, Mr. Limbaugh, to get that deduction, you have to itemize your taxes and 3/4 of the taxpayers don't bother to do that.

Besides, people buy homes for emotional reasons, not financial ones. A house or yard reminds them of their childhood home or they want to personalize with paint and shelves and they can't do that in a rental. The build up of equity is a nice little extra but the tax incentive does not motivate them AND that incentive is unfair to renters -- retirees, for example, who can't keep up a big yard any more and rent an apartment for something smaller with no upkeep. That's regressive.

Here's what you need to know: The progressive FairTax proposal is the only one extant that was developed by top-notch American economists (Harvard, MIT, Rice, Stanford and more) over a decade of study, taking into consideration not only the national economy but the will of the American taxpayer. It is NOT a Value
Added tax or a flat tax.

It is the only proposal that repeals the current income tax, social security tax, employment taxes and corporate taxes, among others and yet funds the government at present levels. By removing Federal taxes it lowers retail prices by the 20% to 30% manufacturers and retailers now add to prices of goods to pay their taxes.

The FairTax gives every American 100% of his or her pay- or pension check.

Each American with a social security card (children, too) receives a monthly stipend to assure that s/he does not pay tax on necessities up to the poverty level; thus the poor pay no tax and the wealthy pay their share. (The wealthy buy more expensive things than the rest of us.)

The FairTax is on new goods and services only and the price of those goods and services stays approximately the same because of the removal of the aforementioned embedded taxes. It is not assessed on charitable gifts or contributions. There are no exemptions or so-called "incentives" in the
FairTax, or it would not be fair! One man's incentive is another's disadvantage in taxation.

The FairTax is a progressive tax that expands the tax base and fertilizes the economy. Because we pay only when we buy, the wealthy pay more (since they tend to buy couture dresses instead of Target specials, limousines and Jaguars instead of Toyotas and Hondas, two or three mansions instead of a
small house in the suburbs, etc.) and since people who can afford it prefer quality to economy and half the fun of having money is showing off, it's highly unlikely that they will change. Heck, if they wanted to save money,
they could by buying at WalMart now!

The FairTax brings the $350 BILLION the IRS says it loses to tax evaders annually (that's $2,000 extra each of us pays to make up for the slackers) into the economy, along with the 6 TRILLION dollar criminal, drug and porn dealer underground economies. Illegal immigrants and 40 million foreign tourists annually will pay into the tax base. The FairTax makes the USA the only country in the world that does not tax productivity -- opening us up to foreign investment as well as bringing home those outsourced jobs.

The biggest argument against the FairTax is that people believe Congress will never support and it would take too long to repeal the 16th Amendment. Congress will act if their constituents demand it of them -- remember the suffragettes? (Well, we're too young, but we've heard of them.) Congress also passed prohibition, then repealed it. Besides, the FairTax would give Congress more money to play with. They use money for power and they'd have more of it with FairTax. What's bad about that from their point of view. They could fix the national highway system, provide better pay to keep soldiers' families off of food stamps and give each family that $100,000 for each soldier killed or even missing in action. And National Health Care -- OR they could lower the FairTax rate. Maybe all of the above!

As for the 16th, it doesn't need to be repealed until after the FairTax is passed. It speaks only to the apportionment of taxes; once the income tax and the tax code are gone, the 16th will be easy. Remember when Congress decided to lower the voting age to 18? (We ARE old enough to remember that
one!) They got that ratified in 8 months. It CAN be done and you, too, can decide how to spend, save or invest ALL of your income.

Call me if you'd like to talk about it.

Sunnye Tiedemann

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Wednesday, June 08, 2005

House Tax Writers Contemplate Overhaul

And the “politics” of politics roll on. If this article doesn’t shout out that we need tax reform, I don’t know what else would. This shows the deep pressure for politicians to keep the tax loopholes in place. Notice, the first politician talked about here, Charlie Rangel is the representative I mentioned in an earlier article… one of the few that oppose the FairTax.

Also, who is Chairman Bill Thomas kidding? Being concerned about tax incentives (loopholes) is one thing. However, the promotion of savings is a great boost to our economy. Saving money and subsequently investing it, grows money (the economy). Has he not heard of the time-value of money? If you save money as a country, you have more to spend in the future (money for poor people to pay bills with). About his class warfare statement, has he ever gotten a job from a poor person? Wealthy people, that need more incentives to save, create the jobs of this country.

I fear that too many politicians get trapped in the game of money for themselves and not their constituents. But my biggest fear is that it will only take several HONEST Washington politicians at one time to make the necessary changes for our government. We have been very short on those, since the beginning of time.

06.08.2005, 04:23 PM
Associated Press

House tax writers contemplated the difficulty of abolishing tax breaks in the name of simplicity on Wednesday while considering ideas to overhaul federal tax laws.

"I came to Congress to close up all the tax loopholes," said Rep. Charles Rangel, the top Democrat on the House Ways and Means Committee. "How little did I know that so many would be incentives."

Lawmakers typically design tax breaks to encourage or support certain behaviors. They span from business credits for creating jobs and providing health insurance to personal deductions for education and mortgage expenses.

Rangel asked for help from economists, assembled to explain competing tax proposals, as the tax writers consider whether to keep or drop tax breaks and pick winners and losers.

"There's a long list of things, and a lot of them are political, a lot of them are special interests, a lot of them are well intended," said Rangel of New York.

The tax experts urged the committee to shed some tax breaks. The hearing set the stage for a report later this summer from a presidential commission studying ways to make taxes simpler, fairer and more economically productive.

President Bush's Advisory Panel on Federal Tax Reform has already said the tax laws contain too many deductions and credits, and that the first purpose of taxes is to raise money to fund the government.

Leonard Burman, co-director of the Tax Policy Center, told the committee that the tax deductions and credits embedded in the tax system tell middle-income families to pay tax and then "if they jump through a whole bunch of hoops they can get a bunch of it back."

"We're saying that certain people get a benefit, other people don't. People are working really hard at determining their tax liability," Burman said.

Rep. Nancy Johnson, R-Conn., said tax incentives have proved themselves as an efficient way to get government benefits to many people at a low cost.

"I think the record demonstrates their power," Johnson said. "You've got to have better information for me to convince me that tax credits aren't powerful or important in structuring a society."

R. Glenn Hubbard, dean of Columbia University's Graduate School of Business and Bush's chief economic adviser from 2001 to 2003, said most economists agree tax incentives are powerful.

"They do stimulate the desired activity almost always," Hubbard said. "The question is, are they the best way of doing that?"

Ways and Means Committee Chairman Bill Thomas, R-Calif., said he's concerned about tax incentives, especially those that promote savings, that help wealthier taxpayers but don't provide a big enough incentive for poorer taxpayers.

"I'm worried about the person who's worried about the first dollar saved," Thomas said after the hearing. "I'm not interested in creating new ways for rich people to make more money."

Read More Here!

Response to Wm Gale and Peter Orsag's article titled, U.S. Economy: We're All Living on Borrowed Time

June 1, 2005.
"The situation is pretty simple. The private sector is saving next to nothing."" Do you have ANY idea how hard it is to save when a hefty chunk of your paycheck is taken out to pay the IRS and social security, not to mention employee taxes? The income tax is so bad that families with two paychecks have to be extra careful not to work hard enough to get boosted into a higher tax bracket where the AMT hovers. I don't think you do. Too many high income people like yourselves find ways to cut your taxes through loopholes, etc.

"The federal government continues to borrow substantial amounts. As a result, national saving ? the combined thriftiness of government, businesses and households ? is at its lowest level since the Depression, and the nation is borrowing massive and growing amounts from abroad. All of this is coming at the worst possible time, as the nation prepares for the tremendous pressure on Medicare, Medicaid and Social Security created by the imminent retirement of the baby boomers and rising healthcare spending." Frustrating, isn't it. And it's so true. Strangely enough, there's a solution, one that the Brookings Institution refuses to consider seriously, presumably because it was developed by your competition -- economists from Harvard, MIT, Stanford, Rice, and others. It's called the FairTax.
The FairTax would rid us of the fearsome, regressive, repressive and unfair income tax and give everyone 100% of their paycheck to spend, save or invest as they choose with BEFORE tax dollars. Because the FairTax taxes only new goods and services (and at a rate that keeps the price of goods the same as they are now), it taxes everyone fairly. It's a progressive tax because everyone, rich and poor and in-between, gets a rebate so that no one pays tax on necessities up to the poverty level.
Most important to your concerns, however, since the FairTax is a consumption tax, those who now evade paying their taxes (the IRS says that's $350 BILLION annually -- they recover $50 Billion of that, leaving $300 Billion UNcollected), members of the drug and porn industries ($ Trillions of dollars), illegal immigrants and 40 million foreign tourists annually would pay into the system, broadening the tax base enormously.

"Because our foreign creditors have to be paid back, foreign borrowing mortgages whatever future income the country generates." The FairTax would make the US the only country that doesn't tax productivity. Think what an attraction that would be to foreign investment. Then we wouldn't even consider borrowing from them! They would be here paying consumption taxes like everyone else.

"The big deal is that we are even less equipped to deal with the deficit problems now than we were in the Reagan era. Nor did the problems just disappear on their own. They were resolved through difficult political choices and some good luck." Yes we are. And we'll have a lot of good luck going for us if you and Brookings would just remove the blinders from your eyes and back the FairTax.

One thing is for certain: You can complain all you want about the condition of the economy but unless you are willing to get in there and fight to correct it -- and the FairTax ) is really the best offer on the table so far -- you're part of the problem. Complaining doesn't do any good unless you back a viable solution.

Read More Here!

Monday, June 06, 2005

FairTax is Still the Way to Go

The President's Tax Reform Panel is soliciting comments on the potential benefits and problems with the various tax reform proposals that have been presented to the Panel (last month). I wrote in response to their request and have decided to share that reasoning here, as follows.

Dear Mr. Mack III, Mr. Breaux, and other Panel Members,

I admire your action to find out what the American people think about our current tax code system. Please consider what I have to say as you go further in your research. I favor the consumption tax system called the FairTax. The FairTax would eliminate the Internal Revenue Service and the repeal the 16th Amendment, under House Bill HR 25.

Please consider the following benefits of the plan, compared to the other plans presented to your panel last month (Flat Tax, Consumed Income Tax, Freedom Flat Tax, and the BEST Plan).

All FICA taxes are eliminated, both for individuals and corporations. All other plans leave the current payroll tax system in place, continuing the regressive nature of the payroll tax system.

The FairTax consists of one, simple rate at the cash register. All of the other plans, still tax businesses in one way or another. This not only taxes the producers of the goods of this country (which should be untaxed for being a driver in the economy), it also taxes different producers and different individuals at different rates, which is wrong.

These first two facts mean that there will be a dramatic reduction in the overall price level of all goods and services. The currently institutionalized cost of taxes that is contained in all prices will be eliminated, and competition will force the prices down.

The IRS is eliminated. As with the other items, the institutionalized cost of compliance, both for corporations and individuals, will be eliminated. The IRS has a "corporate culture" of its own that puts it into adversarial position with every citizen. It cannot be reformed or transformed. It must be eliminated. With the IRS and the income tax system in place, no matter how simple, it leaves room for changes and more loopholes. In 1913, the current income tax system started out as a Flat Tax on the wealthiest individuals. The current system needs to be scrapped, along with any other income tax.

The individual gets to decide, through lifestyle purchases, how, where and when to pay taxes. The "rich" cannot avoid taxation through sheltering. Every other plan still leaves many gaps for loopholes that politicians and beurocrats could enjoy to use the American people as puppets and shell out class warfare.
Under the FairTax, because only retail businesses will be filers (but, not payers of the tax), all other plans utilize between twice (the BEST Plan) to 10 times the amount of filers (All other plans). Because retail businesses will be collecting and remitting taxes, a 1/4% collection allowance will go to the retailers and the state governments for managing the system, without the Internal Revenue Service.

Every citizen gets to experience the cost of government in a direct, visible way, the share of which increases as the level of purchases increases. Because the other plans still tax businesses in some way, under those plans, individuals would not know their portion of business taxes that they pay.

The distribution of the tax burden is mitigated by a monthly rebate check to every family for taxes paid on purchases up to the poverty level. This offsets any taxes paid by the poorest among us. The BEST Plan also uses a rebate check. However, the other tax systems would still use “deductions” and personal “exemptions” to manipulate the tax burden of the American people.

The FairTax plan is an integrated proposal with many positive features, not the least of which are the advantages that will accrue to residential real estate ownership. Owners will be able to pay the entire house payment, both principal and interest, with “pre-tax” dollars. They will get this benefit without itemizing deductions, which only a small percentage of homeowners do today. With the other plans, extra filing will be required to get any deduction, if it is offered. Under the FairTax, they will be able to save for down payments much faster, without the penalty of taxation.

Also, interest rates will be even lower than they are today. Because all of the other plans still tax businesses, interest rates would stay near the current level.

Because only new (not used) goods and services will be taxed at the final point of purchase, there are some items that would include a built-in deduction (as they are called in the current system), including tuition, charitable contributions, savings, investments, and interest payments (the familiar mortgage interest deduction). The Freedom Flat Tax only uses a standard deduction. All other plans also use different deductions, such as the benefit the FairTax will bring, although it is not called a “deduction”.

We are losing jobs because of our tax system. The income tax on corporations causes the prices of our goods and services to go so high that we can no longer compete in the international marketplace. We all want products that are less expensive. Countries with lower corporate tax rates can make items at a lower cost.

To benefit American manufacturing and job growth, we need to eliminate corporate business and payroll taxes to not only eliminate the pass-through cost to American consumers, but also to create a greater demand for American-made products for export, if exports do not pay the same tax. American workers cannot compete with low wage countries nor do they want to, but we should compete globally with lower taxes on business and on American made products. Good paying manufacturing jobs will be the result of creating a corporate tax-free zone in America. Instead of business going offshore to Mexico or China or the Bahamas for Corporate headquarters, American businesses will have a major incentive to produce in the United States and increase their financial, investment, and equipment capital in our country.

The FairTax has an automatic provision for border adjustability. However, the Flat Tax, Consumed Income Tax, and the Freedom Flat Tax all do not have any border adjustability under their system, except for the business tax portion of the Consumed Income Tax. The BEST Plan has a destination principle tax, but is not automatic.

The FairTax has the lowest compliance costs of all the plans presented, with the BEST Plan not far behind. However, with the income tax in place, all other plans still have significant compliance costs, but lower than the current system.

System inequities will persist under the Consumed Income Tax and the Freedom Flat Tax. Under the Consumed Income Tax, there are higher marginal tax rates for larger businesses, while the election to choose between taxing methods under the Freedom Flat Tax creates unfairness.

Independent research supports revenue neutrality under the FairTax or the BEST Plan. However, no sufficient research data exists for the other income tax plans.

The tradeoffs for the FairTax plan include the diminished jobs for tax lobbyists and IRS agents. However, with the increased amount of jobs throughout the country, many other opportunities will open for them. No longer will drug dealers, prostitutes, and illegal immigrants be able to skirt by without paying their fair share.

Current seniors of the wealthiest caliber (extremely minor percentage of people) that have saved investments could be double-taxed after the passing of the FairTax. However, many benefits will be gained for their children and grandchildren. Also, the decreased retail prices and rebate checks will diminish most of the negative aspects for wealthy seniors. All in all, the difference will be nominal for them, compared to other citizens.

There will be some transition costs. However, those will be minimal, whereas most tax-incentivized investments and accounts will only need to take away the payment of income taxes. For example, municipal bonds will no longer have tax-free benefits, but they will still be the same bonds.

No matter what the plan you recommend to the President, all will have lower administrative costs, save the country money, and will be better than the current complicated system.

Please consider the FairTax plan, which has already been extensively researched and is in the works in Congress. The BEST Plan does not have any legislation currently in Congress and the other plans, besides the FairTax, are income taxes, which are inferior to the FairTax.

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