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Thursday, April 06, 2006

Fair Tax for Senior Citizens

You have worked for many, many years and get a pension every month. Under the current tax plan you are taxed on the entire amount you received through the year. If you had a pension of $1000 a month (and I hope it was much more than that), you will be taxed on $12,000. I did my dad's taxes for several years and was appalled that his pension was taxed as income.

Maybe you worked for years and have a sizeable IRA. When you withdraw that money you will be taxed (unless you put that IRA into a Roth account, but most people have traditional IRA's). As I understand it, after a certain age, you will be penalized for not withdrawing a specific amount. I have heard that there is a 50% penalty if you fail to withdraw enough money after age 70.5. So you are both taxed and penalized for wanting to save your own money!

If you are lucky enough to have stocks and/or bonds you are taxed on the capital gains when you sell those stock. Let's say you sell stocks to pay for a medical procedure or you want to take a vacation; maybe you see your stock going down and want to get out ahead - the reason doesn't matter. You will be taxed on those funds. If you put the proceeds of that sale in your savings account you will be taxed at the end of the year. And you will pay taxes on that savings as long as you have a savings account.

Let's think about this scenario: your spouse passes away and you decide to move to a smaller house. You have a small mortgage (or maybe no mortgage at all) and thanks to today's real estate market you have a sizeable amount in proceeds that you put in the bank. It's for you "old age" or for a rainy day or whatever. Good for you! But. Uncle Sam requires that your declare each year how much you have in savings as part of your tax return. And you will pay taxes on that savings as long as you have a savings account. Ever hear that before?

The Fair Tax treats each of these instances the same way. You only pay taxes when you make a purchase. Your pension hits the bank on the 1st of the month. You will pay taxes on what you buy that month. Let's say your pension is $1000. If you spend $500 you are "taxed" on that $500. The tax is paid then and there, not at the end of the year (or rather when you file your taxes).

Under the Fair Tax, you don't pay tax on your pension, you don't pay taxes on stock sales, you don't pay taxes on the proceeds of the sale of your house, you don't pay taxes on your savings account or withdrawals from your IRA.

You will also receive, untaxed until used to buy new goods or services, a prebate each and every month based on the number of people in your household. Not based on your income or marital status, but on the size of your household. As a senior, you will receive a smaller prebate than a young couple with a couple of kids, but then, you will not be spending as much for the basic necessities of life.

As a person looking down the barrel of senior citizenhood, this is a no-brainer.

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Sunday, April 02, 2006

What About Me?

What About Me?
By Bill Rollyson

When discussing the FairTax with most Americans, this is the underlying question many of them have. In most cases, the answer is that the FairTax is better for them than the current system.

But another question should be asked first. “What about me” in comparison to what? Usually the question is asked in relation to their current circumstances. Unfortunately, these current circumstances are based on twin fantasies of continued economic prosperity and freedom under the current system. As Bill Gross, well known bond fund manager of the PIMCO funds observed, “250 million Americans sitting around thinking up ways for the rest of the world tosupport us is not my idea of a real world outcome.” Or as Kent Conrad, a Democratic senator from North Dakota, points out, "We're not preparing for what we all know is to come,” We’re all sleepwalking through this period."

“I just came from a panel with Alice Rivlin of Brookings and Bob Bixby from the Concord Coalition and we couldn’t stop agreeing on the long term budget danger”, stated Brian Riedl, chief budget analyst at the conservative Heritage Foundation in February 2006 (as reported in the Boston Globe).

And so it is. Whether from the left or the right, there is broad agreement we are on a path that is unsustainable. As David Walker at GAO stated in November 2005, “"We face a demographic tsunami" that "will never recede.” And more recently, “Our current course doesn't just threatenour future economy and quality of life, but also our long-term national security.

”So first, let’s understand, the FairTax should be compared to the reality of the current path we are on, not the fantasy that lays on the surface. Think you have some special break under the current tax system? Unless you are a global company, it won’t last. Even if you can move globally, you leave family, friends, and fellow co-workers behind to face the consequences of our selfishness.

So I want to focus on issues other than those initially brought up by the “what about me” crowd. The FairTax has five qualities that every freedom loving American should embrace.

Change in Direction: I mention this one first because it is answers the issues raised above. The FairTax ends the myth of corporate taxation and makes American companies competitive in world markets.

As John F. Kennedy once said, “The great enemy of the truth is very often not the lie –deliberate, contrived and dishonest, but the myth, persistent, persuasive, and unrealistic. Belief in myths allows the comfort of opinion without the discomfort of thought."

The FairTax increases savings, and production and makes America the tax haven of the world. It increases opportunity for Americans. It funds promised benefits with a much broader and more stable base. It stops our drive off the cliff of economic insanity.

Under any income tax system, your entire financial life must pass through a government filter before you have any control. Even if you falsely believe the current system or a flat income tax system would leave you paying no taxes, you must still report your income sources and expenditures to government. Under the FairTax, all your personal earnings from whatever source run through your control first. You decide what runs through the government filter by your own buying choices. Which is more consistent with a free society?

Visibility: Instead of a maze of illusion that leaves over 40% of Americans thinking government is free, the cost of Government will be equally visible to all under the bright lights of the retailregister.

Equality: The FairTax ends the division of Americans through the tax code. The prebate makes it progressive. Combined with the end of payroll taxes, it is even more progressive than the current system. Yet it treats all Americans equally. The prebate is the same for everyone regardless of income. It is based only on family size. The tax rate on consumption and the items subject to it are the same for everyone.

Accountability: Our current tax system leads to a largely unaccountable political system, regardless which political party is in power. Because it allows politicians to hide the cost of government from a very large percentage of voters and divide the rest into subgroups, there is greater motivation to enlarge government than to control it. The FairTax changes this. It unites Americans in holding government accountable.

The FairTax enhances our economic viability. It passes down a continued legacy of freedom to future generations of Americans.

Inaction will lead to higher interest rates, lower wages, shrinking pensions, slower economic growth, a lesser standard of living, higher taxes in the future for today's younger generation, less savings, more consumption, plunging stock and bond prices, recession, confiscation of assets to pay off debt, and instability.

While the problems above are recognized across party lines, solutions come in three packages. 1)A more socialistic society. The Government takes greater control of wealth and assets to pay off debt and spreads remaining resources among the people, 2) increased future taxes and lower future benefits for all Americans across the board, or 3) an immediate change in our policies that encourages US economic growth, personal savings and investment – this is what the FairTax does.

What about me? As John F. Kennedy said in his inaugural address on January 20th, 1961, “And so, my fellow Americans; ask not what your country can do for you – ask what you can do for your country.” Forty-Five years later, what we must do for the country and future generations should be clear.

Visit and educate yourself. Then join with us in passing the FairTax. In the end, you’re likely to find it was also the best thing you could do for yourself.

By Bill Rollyson

Read More Here!