Archive for August, 2012

THE ONLY SOLUTION

“A government bureau is the nearest thing to eternal life we’ll see on this earth.”- President Ronald Reagan

As the debt nears the $16 trillion mark, we are debating if Missouri Senate candidate Todd Akin’s comments are indicative of a Republican war on women; or if Vice President Biden’s “chains” comment is indicative of a campaign of racial pandering of the lowest kind. As we view these pathetic sideshows in the electoral arena, is it any wonder why the problems persist in worsening while nothing seems to be done about them?  There is an unwillingness to face facts in the political class. As long as they can still promise government services in return for votes they are perfectly willing to ignore the fourth straight year of $1 trillion + deficits and blame any economic maladies on fluctuations in the Sea of Japan. This crosses the line of irresponsibility and flirts with the criminal when even the most, so called, radical reform efforts cannot even balance the budget inside of 30 years. We are facing a situation that could provide the dictionary with  the definition of unsustainable but are afflicted with political leaders that are malignantly short sighted, incredibly selfish, and pathetically weak willed.

There are a few key drivers of our debt and the precariousness of our situation. Regardless of our tax rates and revenue levels the budget of the federal government is guaranteed to grow each and every year. Using a process called baseline budgeting the Congress ensures that we will be spending more and more year after year on the same programs and agencies. It also allows for politicians to claim that they are making important cuts to our budget when all they are accomplishing is cutting the pace which the budget will grow instead of cutting into the budgets of those bureaucracies themselves.  One is hesitant to heap the totality of the blame against Congress for these measures. Our government is simply far too large to manage in any other way. If each individual agency, commission, department, and sub-committee was looked at and had to have a hearing to justify its’ spending each year we would have not time to tackle any other issues. The baseline budgeting technique allows for management with a minimal amount of oversight. In that sense the time is spent efficiently, but our money is not. The complexity of our budget process is also to blame in part for the morass that accumulates around the $3.6 trillion that we spent in 2011 alone. If one wonders why government cannot be more accountable with its money take a look at that number again. There is no possible way that $3.6 trillion can be readily accountable in a system this broken. Since that is the case, it is time we change the system.

Another ballooning issue that is crippling our economy, eating up our taxes, and inflating our debt is the rising cost of entitlement spending. When President Bush tried to use his 2004 election victory to take on Social Security reform he was roundly criticized. When Paul Ryan created a plan to reform the Medicare system he was actually portrayed as pushing an elderly woman off of a cliff. Such is as what passes for intelligent discussion nowadays. There is much noise surrounding the danger of the military industrial complex. It has become synonymous with stories of the boogeyman to listen to some of the warnings. For all of the hubbub surrounding defense spending, it was 19% of 2011’s budget. In the middle of two wars and numerous other “engagements” it was 19%. The spending on Medicare/Medicaid and Social Security however, was 43%. The interest on our debt was 6%. Combining the entitlements and interest gives us roughly half of our expenditures for 2011. This is money that is automatically spent and baked into the pie of every budget discussion. A balanced budget cannot occur without actual entitlement reform. That is not a talking point, it is a numerical fact. And with behemoths of this size, any actual discussion revolves around the how of payment. Without denying coverage to anyone, the current methods are not enough. There will be more retirements as the baby boomer generation ages, and that will increase the spending on these programs. The best estimations give these programs just under two decades to remain solvent, but all agree that they will become bankrupt. Instead of attacking those presenting solutions while hiding in the miry shadows of political doublespeak the FairTax establishes a way to ensure the funding for these programs while prioritizing government spending. Currently, tax revenue is received from multiple sources and those incoming monies are tagged for specific funds and areas. It is a maze of accounts and figures. The FairTax simplifies it in the best possible way. All money is collected from one source, the sales tax, and is deposited in a general fund. Not only will it result in more transparency, the process is begging to made into a pie chart, it will force politicians to prioritize their spending. We will know the revenue we are bringing in, now the questions is “where will we spend it?” The established priorities of both parties ensure that defense and large social programs will be covered and the discussions can focus on what the proper role of government should be. If Cowboy Poetry does not make the cut, it will be because we have deemed it not worthy of your tax dollars. No longer can it hide by taking money from some obscure fund established years ago. The same money offered to buy body armor for our troops will be spent on a $10 million remake of Sesame Street for Pakistan. Now you can see how radical a change this is to any other budget discussion. By placing all of the money in the same pot we can finally judge the wasteful projects against the necessary in full view of the public in terms we can all understand. And since asking for more money will literally be raising the price of milk, politicians will learn quickly how to live within their means, one election at a time.

The tax code itself is a great driver of debt. When it’s not driving corporations off shore, taking their jobs with them, it is demolishing the family and raising the cost of living. The complexity of the tax code also means that we are collecting less than we should in revenue, because of the numerous loopholes, the ease to evade, and the cost of compliance. Every penny we spend on the IRS is one that should be going elsewhere to a more profitable cause. There is also another deficit that gets less attention from the media. It is a trust deficit between those we choose to lead us and the people they supposedly represent. The tax code is the heart of this deficit. Every time we read about powerful political leaders getting censured, when corrupt politicians step aside legal charges to become influential lobbyists, when Congress participates in insider trading or passes a law that penalizes you for not having health insurance but opts them, their families, and their staff from those same restrictions we lose faith. We lose faith in a system that uses rules rigged from the start against those that wish to challenge them. We lose faith in a system that refuses to believe in the dignity of its own foundation, the individual. We have watched this subtle change from public servant to politician from the moment that we allowed them access to our pockets. Their greed has pushed them farther, their tenacity has not slackened, and their goal will never be reached. To begin the push back against an encroaching power you must cut them off from its source of strength, the unlimited and unobstructed grasp at our personal property. The moment we passed a law that demanded people remit the cash in their hands to a government agent before they were able to leave work put government in a place that it has no right to be. We lost the bulwark of liberty the day we ascribed the idea that government knew how to better manage our affairs than we did. It is long past the time to right that egregious wrong. We know that waiting for the FairTax to spring forth from a government committee on its own would be akin to waiting for our position in the stars to suddenly change. Luckily we are still Americans. And our forefathers wrote Declarations, created Constitutions, spilt blood, fought tyranny, instituted law, and brought down an empire because they knew man had the inalienable right to forge his own destiny. Our fates are not etched in the cosmos; we are not chained to the seasons or the sun. For us the dawn is always rising, we have seen the promise of the past, the hope of tomorrow is ours.

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JOBS JOBS JOBS

Two competing Presidential campaigns are always going to cover a wide swath of current topics. The candidates will meet with politically active groups from several of the states and speak to issues held dearly by each of them. However, if the tenor of this campaign year is to be summed up in just one word, it would be jobs. The reason that jobs have become the focal point of this election season is not because it polls well, it is not because people respond in a certain way in focus groups, it is because it is the issue that Americans have been pleading to be answered since 2008. While the Congress has tackled issues such as highly divisive healthcare reform that has so far failed to meet any of its promised outcomes, the issue of homosexuals serving in the military, and making sure that we are unable to drill oil off of our own coasts while ensuring that other countries can off of theirs. In fact, the most aggressive jobs plan that we have seen in the past four years, apart from a stimulus plan that failed to stimulate, involved funneling hundreds of billions of dollars to green energy companies owned by political allies that have already gone under. And it is in this national discussion on jobs that the issue of taxes will inevitably pop up.

The importance of tax reform is directly tied to the severity of this particular economic crisis. Our corporations, who do the hiring, are suffering under the highest tax in the industrialized world. A crippling 35% rate has pushed them off American shores and as a result, they have taken badly needed jobs with them. A reduction of that rate will go a long way to bringing those jobs back and keeping jobs here at home. But it will only go so far. These past four years will be long remembered by the business world. They have watched an entire political party castigate them as a greedy lot who deserve to be penalized even more than they already are merely for partaking in and succeeding in our capitalist system. A reduction of that corporate rate will have a direct positive impact but may not be enough to allay the fears felt by many that this antagonistic atmosphere could easily return. Our current political climate has become one of drastic swings toward one ideology and then back again. There is no security in cutting the rate against raising it again in the future. Of course it is easy to imagine, down the road, of an ever watchful group of voters who will keep guard of this newly created tax rate but that does not match historical reality. If we are to send a clear message to our job producers of both large corporations and small businesses, we must make it a big one. The FairTax eliminates the corporate tax. It does not just cut the rate for now; it eliminates the government’s ability to tax income directly and repeals the current tax outright. That is the kind of message that will bring jobs home, create them here at home, repatriate our money, and change the minds of other nation’s job creators. How many successful aeronautics companies in France would love to escape the upcoming possibility of a 75% tax rate and come to America which is offering an income tax rate of zero? We have the opportunity with the FairTax to not only shift the discussion of tax reform but to shift the paradigm of where we see ourselves within the world. There is one way to stop the bleeding of jobs overseas for sure, pass the FairTax.

The issue of jobs is also critically important because we are still a country that prides itself on its representation of the people. And there is no issue that is weighing heavier on the hearts of Americans right now. Much ballyhoo is made of the unemployment number every month. But we know that the number itself is only telling part of the story. The more depressing tale consists of the new lows our labor force participation is reaching on a regular basis. It is important to note that these people are not just out of work and are looking for jobs, for far too many Americans they have simply given up. Earlier this year Congress actually extended the time you could collect up to 99 weeks. Two years is 104 weeks. If the “land of opportunity” has to provide two years of unemployment then it is not working as it was formed. The fault does not rest in those that are utilizing it; the fault rests with those in leadership positions who continue to defer to an election instead of solving this problem. Tax reform is brought up as a major possible solution and there are two leading and very different ideas. One is to use the system we have now but change the rates up, and tax the rich more. This does not seem to create anything but government jobs, which fail to add as much to the economy as private sector jobs do. The other is a dramatic simplification of our current system. But it is nothing we have not seen before. In fact, the 1986 Tax Reform Act is very similar to this proposal. It is very important for a few reasons, it was possibly the last time that taxes played such a dominant role in the political discourse and it was a very large reform package. The 1986 law actually created only two tax rates, which were compiled together from the existing brackets. It is widely considered to be a success but it was as temporary as it was successful. The tax brackets could not stay simplified and in six years one was added by a member of the same party of the President that signed the original reform and an additional six years saw the inclusion of three more. Twenty years after sweeping and successful tax reform and we have returned complexity and morass back into the tax code against the will of the people along the way. Tax reform under such a complicated system will always be temporary and party designation is no guarantee of permanence. Luckily the FairTax answers these concerns simply and with a lethal efficiency. The era of class warfare tax arguments will be dead under the FairTax. Since the government no longer has the ability to peek into your pocket it can no longer use that information against you. Instead, it will have to focus on the larger problems that arise. The FairTax does not operate on a bracketed system that does nothing but separate the people and pit them against themselves. Any change made to the FairTax is a change made to everyone and everyone instantly. If Congress raises the tax they are also raising the tax on themselves, there are no shelters or loopholes to escape to. But more importantly, the FairTax helps the jobless of today’s society. Below is a graphed chart estimating the impact the FairTax will have on our future up to ten years down the line. If you can find a tax plan that can credibly claim similar benefits then by all means support it, and also pinch yourself, because you would be dreaming. The FairTax eliminates so much that is wrong with our current code to give us the tax code we deserve and need right now. Your Congressmen are still on recess, which means that they should be in your district. Call their office; get your friends to do the same. Find their town halls and ask them why they refuse to back the only tax proposal that is serious about tackling the key issue of our time. This is our time and the most exquisite of golden opportunities, do not waste it. We can wake up tomorrow with a malleable tax code that guarantees us only that it will change. Or we could wake up with the FairTax in a United States of America that respects its job producers, that recognizes the proper role of government, and reveres the individual citizen.

FairTax simulation model results
Cumulative growth over current system Year 1 Year 2 Year 3 Year 4 Year 5 Year 10
Gross domestic product 2.4% 5.2% 7.0% 8.2% 9.0% 11.3%
Employment 3.5% 5.7% 7.0% 7.7% 8.2% 9.0%
Domestic investment 33.0% 35.4% 36.9% 38.0% 38.8% 41.2%
Income from employment (wages) 27.4% 31.8% 34.5% 36.4% 37.7% 41.2%
Consumption 2.4% 4.1% 5.8% 7.1% 8.1% 11.7%
Disposable personal income (adjusted for changes in the price level) 1.7% 4.5% 6.4% 7.7% 8.7% 11.8%
Units scaled 2004 GDP = 1.00. Capital and labor set to equal constant shares of 0.3 and 0.7, respectively.
Source: Arduin, Laffer & Moore Econometrics, “A Macroeconomic Analysis of the FairTax Proposal”, February, 2006.
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SOME ASSEMBLY REQUIRED

This weekend national leaders of the FairTax movement met in Chicago to discuss a plan of action that will unite our grassroots efforts and provide a unified front against the tax code and its supporters. For whatever the myriad reasons that brought together leaders from across the nation the experiment ended as a brilliant success. There is a small contingent of dedicated individuals that are putting together a national strategy that will serve to help focus our efforts toward a successful conclusion. You have probably read on this website before about the dire need for volunteer support and the crucial link that citizen involvement will play in the eventual passage of the FairTax. The meeting in Chicago only cemented my belief in the necessary requirement of the input of the American people, read you, for the FairTax to celebrate victory. Much of the timing of our efforts surround the reality of current events. We are afforded what can only be described as what our founders would call the “blessings of Providence”. The selection of Paul Ryan from Wisconsin by Presidential candidate Mitt Romney only proves that the focus of the next two years and the campaign is tax reform. Such reform is the item of the day in a way that this country has not seen since 1986. This means that whoever will win the Presidency will be almost required to tackle some semblance of tax reform in the newly elected 113th Congress. Which leaves you with a choice. Since the topic of tax reform will be discussed and acted upon in the next two years, will you allow Congress to pass a bill of its own making or do you want to have a say?

Congress will act with your input or without it, what it does is actually up to you. We start now. Many wish to wait for crowds and numbers to make our case, some are perfectly willing to grow our numbers one precinct at a time and let the slow attrition of time and effort make a difference. This model violates the laws of political physics. Utilizing this new timeframe does not allow for such a patient approach. We must take an aggressive approach. Not a mean or spiteful one, but one of action, of will, and eventually success. The truth is that we cannot win a political battle against entrenched interests carving out one congressional district at a time. The TEA Party was able to burst onto the scene inside of two years and credibly claim responsibility for one of the most volatile political elections in our history. They were capable of doing this because they were, correctly, identified as a national movement. This created the energy, motivation, and hunger for action that was necessary to make the change. Barack Obama’s 2008 campaign operated in much the same way, although it is far easier to characterize a national campaign as a national movement, he did, and reaped a significant benefit in terms of energy and motivation. It was not a methodical approach at the district or county level until after the initial reaction. The way we operate currently makes it difficult for people to believe we are anything resembling a national movement but in name only. Our focus and activity is locally based and homegrown. Our grassroots is strong but its reach is short. This would not be viewed as a negative except for the opposition we face. Our opposition is national and well funded, it is difficult to pose a threat to a Congressman who spends most of his time in Washington when our voices are traveling over such a long distance.

But this is where we make our change. Not only are we far more committed to interstate cooperation we have a national focus. This website has long been of the thought that our efforts can be best put into the conversion of those on the House Ways and Means Committee. The tab on the top of the page would suggest so. I have not been alone in this belief either, it should be said. However, the redoubled effort is focused, laser-like, on these 37 members instead of the 218 needed for passage on the floor. This will allow our not-insignificant grassroots to flex its muscles a little bit and put the pressure on a smaller crowd of elected people. It cannot be done without your help. Let me repeat for effect, this drive, this cause, this idea, is doomed to failure if starved of your considerable talents and skills. One of the chief reasons I believe in the FairTax is because it is truly the best and most effective bill to return power to the American public since the Revolutionary War. In order to effect this change of ownership however we have to reclaim it. Government growth is at the heart of many American’s frustrations with Washington and we need to realize what gives it the power to grow unheeded. The tax code. Its ability to reach into your paycheck, your wallet, your pocketbook, your portfolio, your safe, your bank account, and even your will after death is directly tied to its unimpeded expansion. If you want it to stop, if you want to stop it, support the FairTax. Not in name, not in signature, not on an email sign up list, but in effort, action, and dedication.

So consider this a call. A call for talented, dedicated, strong willed patriots to stand not for ourselves but for the rights of Americans since 1913 through today and for the foreseeable future. To stand not for a new cause or an invention of time but for principles espoused so long ago in a document we call the Constitution. For a national movement to show its strength we need a nation full of people moving. For a national movement to have a voice we need a nation full of people speaking. For a national movement to have heart we need a nation full of people believing, with every breath that they know better than a government cloistered away behind unfeeling bureaucracy. Notice the difference between what we seek and what we need versus the IRS and what they desire. We need your opinions, they want your cash, we need your voice, they want your silence, we need your action, they want your obedience. You are given a choice in November to be sure, but if you want a say in how your government is actually run then your action is needed now, more than ever. We can change Presidents in November, we can even change the majority party in the Senate, we could also change none of it. But if you want to change America, in a way that reflects your views, wants, and priorities, then support the FairTax! Because folks…it’s now or never.

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LIKE A ROCK

Of course by now you are aware of the tax paid by our Olympic athletes upon returning home after representing our country abroad. There is not any better example of the backward nature of our tax code in action. Too many people get caught up in the class warfare aspect of the tax code to realize that America punishes success in every form. Whether your fortunes are won here in the States or across the pond, no one can escape the reach of the IRS. It should be noted that this is unique to America in developed nations, and none of our competition faces such a stringent punishment for winning. Although Sen. Marco Rubio is proposing a bill to eliminate the tax on our elite sportsmen this only serves to scratch the surface of the problem. While it would be great to have our young athletes competing tax free it would be an economic boom if we could do the same. If our companies could compete without the additional burden of a 35% tax rate then our economy could have the opportunity to excel that it so desperately needs.

But we know that the elimination of the corporate tax would allow our companies to compete in ways unimaginable now. The choices we have available are a tax system that shows its wear under economic downturns or one that allows for success and remains stable throughout tough times. To study the difference we can look to California. All states have been hit by the economic crises and California, despite its large economy, has not been spared. The loss of jobs has had a devastating effect and the unemployment rate still stands at 10.7%, well above the 8.3% national average. This of course has a negative impact on the state’s tax revenues. California is in a tough enough spot as it is. The state was planning on $1.9 billion from the Facebook IPO. The stock’s poor performance has cost the state hundreds of millions of dollars that would go a long way to help ease the financial burden. That is one reason why the state is putting forth Proposition 30 on this November’s ballot. It includes several different tax increases to meet the state’s budget needs. But the point is that the current systems of taxation are unpredictable and subject to drastic change. A common complaint about a sales tax is that it would be difficult to project. But as California has shown, it is far more stable than an income tax or even a property tax. The job loss has starved the income tax revenue, but the prolonged joblessness is now taking its effect on the property tax revenue. California is an expensive place to live and the loss of income has led to a rise in foreclosures. The state is feeling the impact of prolonged, aggregate, personal tragedy, but the sales tax remains stable.

It is one thing to misread how a stock will trade and plan accordingly. California made a bet with their budget and lost to the tune of hundreds of millions. However, our tax code on the national level is not caught missing millions in bad bets. It is found giving away billions to frauds. According to a recent report we have lost $280 million in Tampa alone. The same report indicated that by best estimates we would pay out $21 billion in fraudulent tax refunds in the next five years. In 2010 it is possible that $5.2 billion was paid out fraudulently and sources disclose that the problem is growing. The sad part about that statement is that $21 billion over five years looks to be a modest estimate. Now I understand when the debt problem is in the trillions it is tough to bicker over wasted billions, but I am willing to bet that the American public is sick and tired of paying taxes that pay for fraud and want a system that is not rife with it.

Part of the problem with the tax code is exactly what Senator Rubio is trying to accomplish with his bill protecting Olympic athletes. While it is literally maddening to expect our finest athletes to be penalized for victory that we fully expect and support, the answer is not to further complicate the tax code with yet another loophole. What we owe these champions and all other Americans is the Olympian effort needed to overhaul the tax code. Our current system is built on the constant manipulation of the tax code to score political points or curry political favor. We deserve something run by the people and for the people. There is a clear difference between the two codes. The same difference between a roller coaster and a train. The current tax code is similar to a roller coaster. There are supreme highs and lows, it takes people on a twisting series of turns, loops, corkscrews, and most of the time it is difficult to ascertain just which way is up. Looking at a roller coaster from the ground looks like a terrible mess of wood or steel and after you are finished you could never describe what just happened. A train is predictable, uniform, treats all equally, and functional. While a roller coaster may be fun it would quickly lose its luster when it is forced into everyday life by federal mandate, the lines would be long and the one could never be sure of the maintenance. A train provides the stability needed to plan for the future. In fact, it was a rail line that connected the east to the west of this country with the driving of a golden spike. What a more fitting model to use for a tax code. We could connect the left and right with the signing of a single bill. The rich lose all loopholes that have been crafted into law over a period of one hundred years. The poor no longer have the payroll taxes disproportionately taken from their paycheck. All Americans will benefit from the freedom that our businesses, both large and small, will regain. The only downside is it requires heavy lifting. No change like this will happen on its own. We will run the gauntlet and see this cause through until conclusion. Like the Olympians in London we will put forth our best effort and not rest until we receive the gold. We are off to a good start. Check back next week for a plan for success that we can all get behind.

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