StraightUpAmerican.com

Today we continue to address some of the more common misinformation and misconceptions regarding the FairTax plan. Where does all this misinformation come from and why do people continue to spread it without confirmation or even question? Perhaps the real question should be why would anyone want to continue to disseminate erroneous information when it can be so easily checked out.

“The Fair Tax eliminates various government services, Social Security, Medicare, Unemployment, etc.”

The FairTax plan has nothing to do with government services. Not only does it not eliminate Social Security, Medicare, Unemployment, etc. or any other of our current entitlement programs it does in fact fully fund these programs. The only thing that changes under the FairTax plan is the manner in which federal taxes are collected. Instead of paying taxes on every dollar we earn, we pay taxes on the dollars we spend. The FairTax is intended to be revenue neutral, meaning that it simply replaces dollar for dollar our current federal tax revenue. It just does it in a simple, fair and transparent manner.

So, under the FairTax plan Granny keeps getting her Social Security check every month and she continues to enjoy the protection of Medicare. The only change most of us will see is that we no longer have to spend hours or days preparing our income tax return because, whoops, there is no tax on income. We no longer have to save every receipt in hopes of a tax deduction. Our accountant is free to actually help us plan our financial future rather than spending most of their highly paid time on tax preparation. And, April 15 becomes just another beautiful Spring day.

“Anyone near a Canadian or Mexican border will go there to buy everything.”

This is commonly known as the “Over the border” argument.

The prices we are currently paying for goods and services include approximately 22% in embedded taxes. These are the income taxes that must be paid by every hand that touches these products and services from the producer to the consumer. Under the FairTax plan these embedded taxes no longer exist so the cost of production drops by approximately 22%. Then, the FairTax, of 23%, is added at the final retail consumer level bringing the cost of the product or service back to its original price. If the prices are going to remain virtually the same why would anyone race across the border to purchase goods and services? And, if they would, why aren’t they doing it now?

“People will take all their money out of the country.”

Again, this logic is assbackwards. People and companies have taken their money out of the country because of our current income tax system. There are billions, probably trillions, of dollars belonging to American citizens and companies sitting in banks all over the world because under our current system it would be worth half or less simply by bringing it back into the country. Under the FairTax plan there would be no tax or penalty on that money until and unless it is spent at the retail level. So, our citizens and our companies would instead race to bring it back into America and put it to work creating jobs and earning even more money.

“50 million tourists can’t spend enough to support 300 million citizens.”

Arguably, the greatest benefit of the FairTax plan is that it increases the tax base. The fact that millions of tourists will be contributing to our federal tax coffers is a bonus in increasing that tax base. Tourist spending is not intended to replace taxpayer contributions, but to add to it. By increasing the number of people paying taxes the tax burden is spread more evenly and lightly upon all, like a fine layer of smooth peanut butter on bread.

“If new homes are taxed but exisiting homes are not, people will stop buying and building new homes.”

An obvious assumption but a little research shows why this would not happen. Yes, the FairTax will be added to the final price of a new home. But, remember that the FairTax eliminates all the embedded taxes associated with the production of that home. And, existing home prices still contain those embedded tax costs. Take this combined with the fact that under the FairTax capital gains taxes are no longer a concern when selling a home, and that the dollars used to purchase a home have not been previously taxed and there is actually no incentive to buy an existing home rather than a new one. And finally, there is a finite number of existing homes. As people are better enabled to save the down payment and more people move toward home ownership the supply of existing homes will naturally decrease and as new homes are more affordable due to the lack of embedded taxes there will be an equilibrium reached between the two.

One final thought: Change is a fearful thing and the idea of the FairTax plan seems like a big change. In reality, it’s not. It merely changes the manner in which we pay and collect taxes. Those who truly should, and do, fear the FairTax plan are those in political power. The FairTax plan returns the power and control to the people of this country. Let us not forget that less than a hundred years ago we had no tax on income in this country. The income tax is a relatively modern innovation that simply does not work. It provides for government bureaucracies to control the purse strings of the nation, and thus to control the people. The FairTax plan reverses this situation and places the power of the purse with the people.

Cordially yours,

Tim

President Obama is right about one thing; it is time to reform our federal tax system. And, the only system that makes sense for America is the FairTax plan.

What is the FairTax plan?

The FairTax plan is a comprehensive proposal that replaces all federal income and payroll based taxes with an integrated approach including a progressive national retail sales tax, a prebate to ensure no American pays federal taxes on spending up to the poverty level, dollar-for-dollar federal revenue neutrality, and, through companion legislation, the repeal of the 16th Amendment.

The FairTax Act (HR 25, S 296) is nonpartisan legislation. It abolishes all federal personal and corporate income taxes, gift, estate, capital gains, alternative minimum, Social Security, Medicare, and self-employment taxes and replaces them with one simple, visible, federal retail sales tax administered primarily by existing state sales tax authorities.

The FairTax taxes us only on what we choose to spend on new goods or services, not on what we earn. The FairTax is a fair, efficient, transparent, and intelligent solution to the frustration and inequity of our current tax system.

The FairTax:

• Enables workers to keep their entire paychecks
• Enables retirees to keep their entire pensions
• Refunds in advance the tax on purchases of basic necessities
• Allows American products to compete fairly
• Brings transparency and accountability to tax policy
• Ensures Social Security and Medicare funding
• Closes all loopholes and brings fairness to taxation
• Abolishes the IRS

Americans for Fair Taxation, “www.fairtax.org,” offers a library of information about the features and benefits of the FairTax plan. Please explore it!

Jack Goodman is another popular candidate for the Missouri District 7 Congressional seat, so I decided to take a look at his position on the FairTax plan.

The Web site for Mr. Goodman’s candidacy, www.JackGoodman.org, does not specifically address the issue of tax reform. Nor have I seen his position on tax reform stated in any printed materials. So, I made a call to the number listed on the Web site and asked. I was told that Mr. Goodman does indeed support the FairTax plan, and that if elected he would not only support it but would work to promote it as a U.S. Congressman.

In an interview conducted by KY3 News on July 19, 2010, Mr. Goodman had this to say when asked about his view of the FairTax initiative:
“I support the FairTax with minor modification and think the economic potential is tremendous, especially if we are able to pass a federal version.  In 2009, I was the Senate handler for Missouri’s version of the FairTax. The FairTax is transparent, eliminating the hidden layers of imbedded taxation in the retail price of products.  It also forces those who currently evade taxation to pay their share, such as drug dealers, illegal aliens and those in organized crime.  The Fair Tax would also be a huge incentive to bring manufacturing jobs back to America.”

While I would have liked to see a more demonstrative statement of his support of the FairTax plan in his candidacy materials I have to conclude that Jack Goodman is certainly worthy of consideration for the Missouri District 7 seat. I’ll leave you to evaluate his position on other issues, but as for the FairTax plan I believe he, ‘gets it.’

The FairTax is the popular name that has come to represent two actual bills that have been introduced into Congress: H.R.25 and S.296. Below is the summary provided by the Congressional Research Service of the Library of Congress. It’s basically a mile high view of the bill, but it’s a good place to start.

SUMMARY AS OF:
1/22/2009–Introduced.

Fair Tax Act of 2009 – Repeals the income tax, employment tax, and estate and gift tax. Redesignates the Internal Revenue Code of 1986 as the Internal Revenue Code of 2009.

Imposes a national sales tax on the use or consumption in the United States of taxable property or services. Sets the sales tax rate at 23% in 2011, with adjustments to the rate in subsequent years. Allows exemptions from the tax for property or services purchased for business, export, or investment purposes, and for state government functions.

Sets forth rules relating to: (1) the collection and remittance of the sales tax; and (2) credits and refunds. Allows a monthly sales tax rebate for families meeting certain size and income requirements.

Grants states the primary authority for the collection of sales tax revenues and the remittance of such revenues to the Treasury. Sets forth administrative provisions relating to: (1) the filing of monthly reports and payments of tax; (2) accounting methods; (3) registration of sellers of goods and services responsible for reporting sales; (4) penalties for noncompliance; and (5) collections, appeals, and taxpayer rights.

Directs the Secretary of the Treasury to allocate sales tax revenues among: (1) the general revenue; (2) the old-age and survivors insurance trust fund; (3) the disability insurance trust fund; (4) the hospital insurance trust fund; and (5) the federal supplementary medical insurance trust fund.

Prohibits the funding of the Internal Revenue Service (IRS) after FY2013. Establishes in the Department of the Treasury: (1) an Excise Tax Bureau to administer excise taxes not administered by the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF); and (2) a Sales Tax Bureau to administer the national sales tax.

Terminates the sales tax imposed by this Act if the Sixteenth Amendment to the U.S. Constitution (authorizing an income tax) is not repealed within seven years after the enactment of this Act.

As you can see this is the briefest of overviews of what the bill actually calls for, but we’re going to take the bill one tasty morsel at a time, chew it, digest it and analyze it for ourselves. Along the way we’ll also take a look at the criticisms and claims of those on both sides of the issue, and hopefully we can bring you reasoned input from both sides.

No, the FairTax is not a perfect plan. No tax system ever will be. But, it is fair; it makes sense; and, it is transparent. It is the catalyst that will change the direction of our Country and enable us to regain the path to prosperity.

The Congressional race for the Missouri District 7, U.S. Representative seat is wide open with eight Republican and two Democrat candidates competing in the upcoming primary. There is no incumbent in this race as Congressman Roy Blunt is making a bid for the Senate seat of Senator Kit Bond. So, the question is where do these candidates stand on the FairTax?

Billy Long seems to be leading the pack of the Republican candidates so I decided to take a look at his position first. Mr. Long seems like a strong candidate in most respects, but unfortunately when it comes to the FairTax his position is a little weak and muddled. In his ads online and in print he indicates that he is in favor of “Fair Tax” (with the space between the two words). There’s a big difference between “Fair Tax” and the FairTax plan. Everyone claims to be in favor of “Fair Tax.” That is not specific support of the FairTax plan. In fact, Mr. Long’s stance on the issue of taxes states, “Billy is open to either a flat tax or a fair tax as a way to fix our tax system.”

This is like saying, “I’d be happy to take more poison or the antidote as a way to recovery.” The tax on income is the fundamental problem, and no amount of tinkering with it is going to fix it. Mr. Long’s openness to a flat tax indicates that he either doesn’t truly understand the problem, or he wants to ride the wave of support for the FairTax into a Congressional office.

I placed a call to the offices of ‘Billy Long for Congress’ to confirm his position on the issue, and was told that although his first choice would be the FairTax he is also open to a flat tax on income because of the difficulty of getting the FairTax passed. I’m sorry, but this is exactly the kind of wishy-washy stance we do not need in Washington.

There is no ‘either, or’ in the issue of tax reform. This Country will crumble under the weight and corruption of the income tax system, and we need representatives that understand that and are eager to fight for a new future. Accepting more of the same just because something is better than nothing isn’t going to cut it any longer. The only solution to our Country’s fiscal woes is to rid ourselves of taxes on income. Anything less is just politics. I wish Mr. Long all the best, but at this point I couldn’t vote for him.