Archive for November, 2011

IN THE LAND OF DIVIDE

There is not much the two parties in Washington can agree upon. This has served to slow Congress down. The so-called super committee passed its deadline without reaching a resolution and the major sticking point between the two sides was the issue of tax rates. Last week we saw how much time is wasted in the repetitious debate on tax rates. This frustrating aspect to our current situation can be removed instantly by the passage of the FairTax. In addition to solving many of the problems facing our country today the FairTax provides a breath of fresh air to our divisive politics by instituting policies both parties value.

For instance, to answer the issues raised by the left the FairTax ensures protection for the poor better than our current system ever could. It also guarantees that wealth cannot be hidden or escape taxation like the sieve our current code is. While it is true that close to the bottom 50% of the income brackets in this country do not pay income taxes there are plenty of other insidious methods employed by our government to collect taxes without being visibly noticeable or voluntary. The most regressive aspect of our current tax code are the payroll taxes. By eliminating these taxes and the income tax employees could finally take home their entire paycheck. The FairTax also goes the extra step to ensure that the poorest of the poor are not taken advantage of in a system designed on a sales tax. The advent and purpose of the prebate answers this concern specifically. By providing a prebate on the sales tax cost on basic goods and services up to the poverty level the FairTax ensures that the unfortunate are not at a disadvantage. The FairTax also removes all loopholes and exemptions present in our convoluted code. This means there are no ways to hide from or dodge this tax. For example, if a millionaire decides to buy a yacht, it would not matter which state he decides to dock it, he will pay the FairTax at the point of sale.

Even if you belong to a libertarian leaning party the FairTax can answer your wants. Our current tax atmosphere is a choking one. Your money is taken even before you see it in your paycheck, it is taken as it is spent, as it is invested, it is tracked when given to charity, and taxed again when passed on. The same dollars cannot escape taxation on multiple occasions. The FairTax removes these machinations in favor of a predictable one-time tax. This tax does not apply to any used goods providing for avenues that do not require government oversight of any kind. Within an atmosphere of ever encroaching government controls this is a step in the right direction.

The FairTax also answers the needs of the right. The most striking is the elimination of the IRS. Removal of this entity greatly decreases the control that government has on the individual and reduces the size and spending of government. This also ensures an equal and fair distribution of taxes without trying to equally distribute wealth. The Herman Cain 9-9-9 plan and Rick Perry’s flat tax plan seek to do the same by less effective measures. The plans of all Republican candidates at the moment seek to do this and remove loopholes or special interest tax breaks while the FairTax does all of this without bogging down the debate with specifics in the tax code. The FairTax completely removes our current code which removes the necessity to argue over specifics in a 70,000+ page tax code. Targeting particular egregious examples will make our system work better however it is fighting a losing battle. One could spend a tremendous amount of political capital fighting over such a large tax code and what few that have the nerve to do so would be ignoring other pressing concerns. The FairTax provides an easy fix that is wrapped neatly in a 131 page bill that exceeds even the highest aspirations of the current Republican field.

There are also facets to the FairTax that do more than answer political party concerns. The upward mobility our country provides is jealously guarded by both political parties. One can debate the effectiveness of the measures used by both sides to ensure it but it is true that both seek to see that our country remains unique in this regard. The FairTax allows for this in a way that both sides can come together on. There is no tax on tuition for education. The FairTax sees education as it is, an investment. This investment in human capital is critically important for the future of our economy. This is an aspect of the bill that both Republicans and Democrats could definitely agree upon. The bill as a whole could make college more affordable for all families, by removing the income tax, payroll taxes and any tax on tuition. The FairTax is the only tax bill that makes this distinctive stance.

It seems unlikely in a political environment marked by division and inaction that a sweeping idea could be seriously discussed much less passed. The FairTax answers the needs voiced by both parties in the current tax debates. If there is a bill that should be discussed at such a time it is H.R. 25. Be sure to call your Congressman regardless of party and ask them to support the bill that could remove the need for a perennial tax debate so that we can focus on some bigger problems.

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THE STATUS QUO IS BROKEN SO CHANGE IT

Europe is in shambles. The US could suffer another credit downgrade. The Super Committee seems unable to reach a deal by their stated deadline. Instability and uncertainty plague our markets while the Congress debates over loopholes and tax hikes on a small portion of the public. There is not one redeeming quality to the current tax climate in the United States or Europe. In the United States we have the highest corporate tax rate in the world. This has led to companies leaving the country, which leaves many workers jobless. In addition to exacerbating our unemployment problem it also forces consumers to pay higher prices for goods, suffer lower quality goods or work for less pay. In Europe they have an equally outdated progressive income tax system on top of an invisible and exponential VAT tax. These systems have been draining money out of these economies for years, slowly whittling away at the greatest economic engines in the history of the world. Their reach has expanded and prohibited success for decades leaving us to clean up the mess. When a system is this broken it is time to rid ourselves of it.

Businesses have no idea of how to plan their futures adequately when the major tax decisions that face this country are relegated to committee of 12 people meeting in secret. That is in addition to a regulatory environment filled with a few too many acronyms. With the tax code taken care of, focus can be paid to these regulatory agencies. That cannot happen when we have to worry about the changes Congress will make to the tax code on a yearly basis. At the end of 2010 Congress reached a long delayed and much debated deal regarding the “Bush tax cuts”. At that time they decided to keep them in place. Here we are one year later and Congress is calling for immediate tax hikes on the rich. These are arguments that are using up an incredible amount of time. Why have a knock-down, drag-out brawl about tax rates if the debate will rage again in less than a year? In between the tax rate debates the United States has added hundreds of billions of dollars to our debt, and had our credit rating downgraded for the first time in our history. By instituting a flat sales tax that applies to everyone the FairTax removes this ridiculous ritual. If the tax rate is to be raised under a FairTax, then Congress will have to explain why to the American public at large because it will affect everyone and be completely visible. If there is such a pressing need for a tax hike than odds are that most of Congress will be behind it, if not the discussion will not last very long, which will leave Congress to tackle the more difficult issues facing the nation.

Our current tax structure is also mainly hidden from view from the public at large. The corporate tax alone is paid by every American when they purchase any good or service. The income tax portion is the largest one discussed however for many Americans who do not pay income tax the payroll taxes represent the most regressive aspect of our system. Even the White House acknowledges the importance and impact of the payroll tax. The benefits they tout are from a temporary 2% cut. Imagine the benefits to employers and lower income families with the complete removal of the payroll tax. Incidentally in their plan the White House also pushes a temporary 100% expensing plan for business on their investments. Another idea the FairTax would make permanent and another example of the cross party appeal of the bill. All of those are examples of the gigantic hidden aspect to our tax code. By hiding in the shadows the government can take your money without many even realizing it. The FairTax puts all the taxes on the table in front of you. It is a flat 23% rate that is easily calculable for business and individuals alike. That’s all. There is no hidden aspect to the FairTax, no separate tax on business and individuals, no differing rates for different people.

We face an organism that is not merely flawed but broken. If we continue down the road of imperceptible changes and loophole reductions while doing nothing about the underlying issues of a hidden tax structure than we will go the way of Europe. Its particular brand of social unrest has already made its way across the pond. Our tax systems are not exactly dissimilar either. Our inaction today only kicks the can inevitably down the road so that future generations have to deal with an exacerbated problem. Our forefathers refused to act on the issue of slavery willing to wait for the problem to either resolve itself or for another generation to take up the banner. The future generations unfortunately took up two competing banners and carried them into the bloodiest American war in our short history. A dire future in deed lies ahead of us if we do not act. War may not be the outcome but our standing in the world is already fading. Our credit rating has been downgraded once with a threat of another rounding the bend. Our forefathers fought hard to create for us a land free from the tyranny of centralized authority, since then many have died to ensure liberty was for all. We would do them all a disservice if we turned a blind eye to the largest power grab in our history. Support the FairTax and oppose an overreaching government, support the FairTax and return the reigns back to the people for which it is of, by and for.

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ACTIVISM 101

The FairTax has been receiving increased support from Congress ever since it was first introduced in 1999. The only reason that we can count these successes is because of an energetic and dedicated grassroots movement. We are on pace to exceed our record level of cosponsors and yet there is still plenty of work to do. I have been asked on more than one occasion as to what can possibly be done to advance this cause. I would like to focus, this week, on the many opportunities that exist for people to get involved.

What should be understood primarily is that the top priority of this grassroots movement is the education of the American public. The easiest way to get educated on the FairTax is to read the bill itself. I would also modestly encourage you to check back here week after week to cover the benefits of the plan. We also have a Speaker’s Bureau on hand that will be more than willing to speak to any group or organization that you may belong to. Here in the DFW area we have floated the idea to some interested parties to have smaller get-togethers hosted in the homes of friends or family.
We are constantly trying to spread the word. In fact if you are looking for the FairTax organization near your hometown try this link. FairTax.org has compiled a list of its local volunteers and leaders
so that anyone looking for an opportunity to serve can find it.

For those who are familiar with the idea there is a plan of attack. First it would be most beneficial to focus our efforts on our hometown Congressmen. We currently have 66 cosponsors in the House which leaves 369 to complete the set. Not to mention 92 Senators that we must still convince. Now I do not believe for a second that we will have 100% support from either branch, nor do we need it. However, it does offer us 461 opportunities to get involved. There is no shortage to the work. Do not be overwhelmed though; there is a large base of dedicated FairTax volunteers that are working to shrink those numbers as we speak. To give a little perspective, and hope, when I was in Washington this summer as part of a team that visited Congressional offices on behalf of the FairTax I
got a chance to hear from Congressman Rob Woodall GA-7. As the sponsor of the bill and its most vocal proponent his words were very encouraging. Offering us this insight he told us that for a bill to really start gaining traction it would need cosponsors numbering in the triple digits. 34 is a much more manageable number than 369, especially spread across 50 states. Another encouraging note is the fact that for the first time in FairTax history the powerful House Ways and Means Committee gave H.R. 25 a hearing in front of the full committee this past July.

In an attempt to push us over that not insignificant number of 100 I have started a Congressman of the month portion to www.fairtaxcometh.com. We will highlight one Congressman per month to focus our campaign efforts on. This will likely be a member which has showed some interest in the past or seems likely to support the bill based on other stances. To be clear we are talking to friends when making these calls or sending our letters or faxes. To start off our Congressman of the month campaign I have selected Louie Gohmert, TX-1. In this particular case Congressman Gohmert’s staff has vocalized his concern to us as to the likelihood of the repeal of the 16th Amendment. I would wish to assure him through our collective efforts that the same national grassroots movement that is enthusiastically lobbying the FairTax will be the same fighting force demanding that repeal. The only difference is that our efforts can be contained to our own states which leads me both to believe that it is more likely to happen and to my next point.

I happen to be lucky enough to have a Congressman who is a cosponsor of the bill. Ralph Hall, TX-4, I am proud to say is a supporter of the FairTax. This has allowed me the chance to look at other ways to help prove the strength of our effort to Washington. To help answer the concern over the possibility of repeal of a Constitutional Amendment it is imperative that we continue our efforts
with our state legislatures. We must endeavor to convince our local representatives to pass resolutions, that are relatively easy to do, that declare their intention repeal the 16th Amendment if there is a
passage of the FairTax. This will have a two-pronged effect, in showing that the states are willing and ready to take up the issue of repeal; Congress will be emboldened to act by receiving the message from the states. They will also get a feel for what their possible competition has to say on the matter. In the 111th Congress 269 members were from state or territorial legislatures, another 214 were in the public service or politics. Getting these individuals on record at all levels of government is critical for our future efforts.

There is a plethora of activities available ranging in difficulty from giving a speech to picking up a phone. There will be even more openings heading into an election year.  Education of our friends and neighbors and of our Congressmen is the top priority. Some of the biggest lobbying firms in Washington D.C. are based on tax lobbying. There is a large sum of money in writing loopholes into our existing code. This is a plan that will unlikely be passed by an effort generated on Capitol Hill. That is why our grassroots efforts are vital to the success of this bill. Thomas Paine wrote in Common Sense “We have it in our power to begin the world over again.” That is no less true today than at our founding.

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A FASCINATING FACET

There are a number of differences between the FairTax plan and other plans occupying the current political debate. I thought of contrasting the 9-9-9 plan specifically however it seems that Herman Cain has been through enough this past week. He certainly does not need another independent blogger giving their unwarranted opinion. This is a much better opportunity to discuss the plan that best serves America’s future, the plan that goes the furthest toward setting us on the course for lasting success than any other alternative that exists today. In my time giving speeches around the
Dallas/Fort Worth area of Texas one question has been asked more than any other. It is in regards to the prebate aspect to the FairTax. I would like to delve into that portion of the plan in an attempt to answer any questions, dispel any uncertainties, and correct some mischaracterizations.

First of all the prebate is a monthly check given to each American household that covers the sales tax portion of a basic basket of goods up to the poverty line. Without any further study some conservatives are hesitant to back this part of the plan. Part of the problem is our current situation. Roughly 50% of the population does not pay into the income tax system and immediately throwing a
23% sales tax would hamper the economy from the outset. This provides a way to untax essentials in a way that treats everyone equally without providing politicians the ability to start writing loopholes into the law.

Essentially the prebate is exactly the same as a tax rebate. The FairTax assumes that the American household purchases enough to survive the month, meeting the cost of basic necessities. The FairTax then reimburses the household for the cost of only the sales tax up to the poverty level as determined by the Department of Health and Human Services. This guarantees that all Americans are treated equally under the law and not targeted based solely upon income. All Americans receivethis prebate check and the amount is dependent on the size of the household not income.

 

One-adult household Two-adult household
Family Annual Annual Monthly Family Annual Annual Monthly
Size Consumption Prebate Prebate Size Consumption Prebate Prebate
Allowance1 Allowance1
1 person $10,890 $2,505 $209 couple $21,780 $5,009 $417
and 1 child $14,710 $3,383 $282 and 1 child $25,600 $5,888 $491
and 2 children $18,530 $4,262 $355 and 2 children $29,420 $6,767 $564
and 3 children $22,350 $5,141 $428 and 3 children $33,240 $7,645 $637
and 4 children $26,170 $6,019 $502 and 4 children $37,060 $8,524 $710
and 5 children $29,990 $6,898 $575 and 5 children $40,880 $9,402 $784
and 6 children $33,810 $7,776 $648 and 6 children $44,700 $10,281 $857
and 7 children $37,630 $8,655 $721 and 7 children $48,520 $11,160 $930

 

 

The chart above sets out the amounts sent to the corresponding households based on the 2011 numbers in the DHHS povertyguideline. As you can plainly see this in not a questionable theory that must
be figured out in committee; we do not have to pass the bill to find out what is in it. It ensures that no one has to pay taxes on basic needs and the FairTax achieves this by focusing on the freedom of the citizen instead of the power of the bureaucracy.

Since this prebate is a reimbursement based on an assumption of compliance it could not be considered a welfare program. In fact the cost of the prebate is significantly less than the cost of the innumerable deductions and exemptions in our current code. The cost of the prebate is estimated to be $489 billion if 100% of the households participate. The same paper cites a Congressional Joint
Committee on Taxes study that found the full cost of tax breaks in 2006 to be over $945 billion. The prebate not only untaxes the poor on the necessities and treats every household in America equally it does it for half the price. This is merely another example of the cost savings present in the FairTax.

There are a few unstated serendipities to just the prebate part of the overall FairTax plan. The first is the encouragement of families. The FairTax does not have to encourage families; it merely ends the discouragement under the current tax code. However, the next benefit is the real game changer. Our current tax code penalizes every citizen, it confiscates wealth and punishes success. Those that benefit most from this system are those that do not pay into it. Illegal aliens do not pay into the income tax system yet can take part in the many programs provided by the government paid for by tax dollars. Under a FairTax system legal citizens and illegal aliens alike pay into the system with every purchase. The prebate however is reserved only for the households of legal citizens. There is a tax
system on the table that actually incentivizes entering the country legally. The FairTax strips away the strongest financial advantage for crossing the border illegally.

The prebate is one aspect of a fundamentally transformative law. It shifts the focus of government to the people and reverses the influence the tax code has on illegal entry to the United States. Again this is only one aspect of the FairTax and it alone sets it head and shoulders above the other plans presented which only seek to tweak the current system. The FairTax demolishes a broken structure. It replaces it with a plan that works to treat everyone equally and encourages following the law. Is that too much to ask from Washington?

 

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