Archive for September, 2012
Part of the campaign’s swirling political debate surrounds the opposing candidate’s tax proposals. As the media talking-heads, campaign commercials, and the upcoming debates will highlight one candidate promises to raise taxes and the other to lower them. Now, of course, the taxes discussed revolve around certain segments of the population and in an election that needs to do its best to unite the public has only served to spend its time dividing it along the same lines we have seen in the past. Both parties have tax plans that are nothing more than variations of past programs and repackaging old ideas. Each candidate is presenting to the American people nothing new and the same expected lines that we have heard from countless state and national campaigns for years. It is the belief of the FairTax that it is time for something new. The current tax code has been around for 99 years and will reach the centennial mark early next year soon after the inauguration. There is a possibility that we will be swearing in a new President, but we will still be operating under the same old system, regardless. But to clarify, we should be specific, what will we see from these two candidates? And how will that stack up to the FairTax?
The Democrat’s tax plans are summed up with the Warren Buffet rule. They believe that the millionaires and billionaires should pay more, which include families making a combined income of $200,000 or more. Already the word millionaire is rather loosely defined; hardly comforting for the sake of clarity and transparency, two values sorely missing from our current code. It should be noted that there is nothing in the historical record that shows raising taxes spurring economic growth. But the argument is that the raised taxes will be used for “investment”, read increased spending, on certain hand-picked areas of the economy. It is yet another Keynesian ploy that we have seen over the past four years that rests in the belief that government spending can be used to counter the natural business cycle. This tax and spend promise ignores the past four years of over $1 trillion deficits and an $800,000,000,000 (yes, that is a billion) stimulus plan that never brought even the fake unemployment number under 8%. More of the same will only bring us more of the same. And with an overwhelming number of Americans believing that we are moving in the wrong direction and a record number of Americans on food stamps and out of the labor force, this is untenable at best.
The Republican’s plans are less ambitious as they make them sound. The line is given that the tax decreases that are planned would spark a recovery similar to that experienced after the Reagan tax cuts in the 1980’s. While there is far more historical evidence of tax decreases spurring growth, it is a mistake to pretend that there would be a recovery akin to what followed the tax cuts under Reagan. The issue at hand is that the tax structure is not as openly oppressive as it was in the 70’s. While the tax code has indeed become infinitely more complicated and intransigent the top rate is half of what it was in the 70’s. Ronald Reagan cut that rate during his term in office from 70% to 28%, there should be no doubt as to why economic success followed. The problem with the theory that another round of cuts could be just as successful lies with the fact that our tax code is too broken to effectively change it with merely a rate cut. Now the plan to repeal the dramatically outdated and regressive AMT is a step in the right direction but at this point is nowhere near enough. The Republican plan also includes the reduction of the corporate tax rate by 10%. That would mean taking our current rate, currently the highest in the world at 35%, down to 25%. While it will be better and bring down the cost of doing business we still have to realize that 25% puts us at the same rate as China, Greece, Iran, Portugal, and Vietnam among others. It does finally put us underneath Mexico, by a paltry 3%. It becomes apparent that our system is flawed when even a large cut to one rate puts us on par with countries that are financially bankrupt and others that are morally so.
Enter the FairTax. The problem surrounding tax rate inequality is erased under the FairTax. One need not pay attention long to the current debate to see just how divisive the tax code can be. Either it was Republicans cutting that tax rate so that more did not have to pay or it is Democrats complaining about how much the rich pay and demand that they be elected to bring about a sense of economic justice. Perhaps you are worried about the increasing influence of corporate lobbyists that divert the attention of our elected officials away from representing their constituents. This is the driving force behind the rapid expansion of the tax code and is a major complaint from many about how politicians do business. If you want a tax code that remains stable, even in times of economic hardship then look no further. Our deficit and increased spending can be tied to unemployment easily. For every person that loses a job, the government loses 100% of its tax revenue and starts paying out a variety of benefits. Using a consumption model, that number is guaranteed never to rise to 100%. This system is far more stable which also means that when hardship comes, our leaders are less likely to take kneejerk and divisive steps that run the risk of setting us back even more than we are now, like running up a $16 trillion debt for instance. This tax plan also has the opportunity to really let the market free again. To remove the encumbrances of the tax code, its punitive rate on businesses, the cost of time and money to file, the overhead involved in searching out and lobbying for the numerous loopholes and exemptions, will give our companies the certainty that is lacking in our markets. It will also send a clear message to companies offshore to bring their business back to the United States. The FairTax will constitute the greatest stimulus this country has ever seen by doing something radical, by letting people keep what they work to earn. The FairTax is also an ideological statement that looks at the federal government and says that it is no longer entitled to our work.
As we inevitably hear more about the candidate’s tax plans in the coming weeks please realize that whoever is talking is most likely wrong. Neither of the major parties will fix anything and will make no long term changes because the tax code is too easy to manipulate and any change made by one party can be undone within a few years by the other. The FairTax is the only chance to make substantial tax reform because it is tax replacement, not merely tweaking a system that is fundamentally flawed. As you can see, neither candidate for President is running on the issue of the FairTax. Despite whoever else is running, only one of these two candidates will win, the game is rigged that way. To ignore that fundamental rule is to invite folly. There is no hope of a third party win or of a FairTax supporting outlier to swoop in and “save the day”. 80% of the public already identifies with a particular political party, the independents only make up 20%, and no matter how hard you try you cannot cobble together a majority with a base of twenty percent. Look at the history of our own tax code, it got its start on the fringe of American politics but we did not have to elect anyone from those parties to get it. The income tax wormed its way into the discourse until 1913 when every major political candidate for President supported it. This movement needs the same wave of popular support. It can only be won by the American people and will not be given by the American politician. So, you can either sit on the sidelines and watch, achieving nothing. Or you can get in the game and make it count. The FairTax as an idea will never die; ideas have a surprising longevity to them. But the only way it will succeed is through your voice and actions. It is actually pretty simple, if you are unhappy with a service, you ought to ask for your money back. And with the trajectory we are on, it could not come a moment too soon.
The FairTax has been filed in Congress for about a decade and a half now. There are some who hold the belief that this passage of time is proof that this idea is ultimately unachievable. Those who believe this are poor students of history. Our current income tax was established in 1913, after a previous income tax, passed into law in 1894, was declared unconstitutional. Advocates of universal healthcare coverage had promise in 1945 under Harry S. Truman’s Fair Deal proposal. It was not until 2010 that they could claim success with the Affordable Care Act that some still criticize as not fully implementing a single-payer system. Large changes to the political order take time and effort. Like many other examples we need look no farther than our founding. Samuel Adams was a key player in the founding of this country and was one of the earliest advocates of independence. In fact, a man of no softly spoken desires he had this to say about the need for separation,
“If ye love wealth greater than liberty, the tranquility of servitude greater than the animating contest for freedom, go home from us in peace. We seek not your counsel, nor your arms. Crouch down and lick the hand that feeds you; May your chains set lightly upon you, and may posterity forget that ye were our countrymen.”
In an era when we were attempting to reason and redress the Intolerable Acts, Samuel Adams was organizing protests and writing letters of dissent arguing against the expansion of the use of governmental power, all of which were helpful in planting the seeds of rebellion. He attended both the Continental Congresses and was a leader of the original Tea Party. The night of Paul Revere’s ride, many thought the British troops were marching to arrest the leaders of what would become the revolutionary force, one of which was Adams. Like his second cousin, and second President, John Adams, he was a visionary and an active force in the Second Continental Congress to push toward independence. His fingerprints surround the earliest stirrings of the desire for a full and irrevocable separation from the Crown. And his views should be echoed through today’s political discourse because those ideas are at the heart of the debates waging now. His words can add weight to the cause that we fight for, “Hence as a private man has a right to say what wages he will give in his private affairs, so has a Community to determine what they will give and grant of their Substance, for the Administration of publick affairs.” All spelling and grammar are attributed to a blissful time when the rules were not quite so established, but the ideas shall always remain undeniable truths. He also went on to say that it is the “greatest absurdity” that the people be required to surrender or renounce their essential and natural rights to a civil government that is supposed to support, protect, and defend those very rights. If his words are to be believed then we are living in a time of greatest absurdity. He continued to describe those essential rights as life, liberty, and property; one could argue over the first two, there is no doubt that we are no longer in possession of that last right. Long viewed as the bulwark of liberty, private property is no longer allowed under a system that confiscates the first fruits of labor based upon arbitrarily defined rates and levels.
Samuel Adams also knew where the strength lay in this new land. It was in a representative approach to government that followed the basic principles of life, liberty, and property. He understood that economic strength came from economic liberty. Our ability to live our lives free from regulation and restriction is the foundation of our country’s unique success. The individual, left free, is able to chase after his dreams and aspirations until they are as close to completion as possible. It is the reason that industries have flourished here. It is only when these restrictions, a crippling corporate tax rate, governmental involvement to unprecedented levels, and an encumbering tax code occur that our liberty is stifled for other, more political, priorities. These infractions against the ideals in place at our foundation serve to sever our ties to the past and bring us into unfamiliar territory, it has not functioned well. When our economic liberty is accosted then our success is also attacked. Our ability to act shrinks, which is followed by our desire to do so, which breeds failure, malaise, and weakness. We are an industrious people that desire the freedom to act on our own account, when we have it we outshine the world. It is high time that we return such power to the American people so that we can get back to work and reaffirm our position of strength in this still new century. When we are weak at home our strength frays at the edges and this past week has only proven to be a preview of what awaits a weakened America. Again, however, history provides us an example if we remember to look for it. This time we need not travel so far back into the past but only need to remember the last time that evil threatened to engulf the world. This example concerns the unquestionably evil empire that was the Soviet Union. It spent 50 years expanding its reach and subjugating more people under its oppressive and lethal rule. The United States offered détente and counter action. There was one man elected President who sought to end it. His name was Ronald Reagan. Although elected in 1980, as far back as 1968 he spoke about the necessary link between our economic viability and our ability to defend. “The peace and security of the world depends on the fiscal and economic stability and the defense potential of the United States.” In a radio address in 1975 he said, “Power is not only sufficient military strength but a sound economy.” Today we hear politicians promise less of both, not for some greater global cause, but only to get reelected. We are told that we need to tax rich people more, thus making it less desirable to become so, and are planning to make dramatic and substantial cuts to our military. We ended the threat of the Soviet Union by doing the complete opposite of what our leaders are proposing today. In response, people have died, buildings are burning and our flags in tough regions are falling. When will we learn? The success of America is not built upon a speech from our international figurehead, apologetic or otherwise. It is not hashed out in Joint Select Subcommittee meetings held secret from the public. It is not found in state capitals or even our highest courts. The strength that built America is found in the homes of every single citizen. Our actions or inactions affect our nation’s abilities. Our votes, our job performance, our political activism shape the society around us. Following those in Washington has led us to accept an income tax code that has done nothing but grow for the past 99 years. It stifles liberty, discourages investment, and bleeds our jobs and investment capital overseas.
It is time to stand resolute, in the mold of Samuel Adams and the many others that built us the opportunity to do so much more. We have found a cause to stand for, the FairTax, and recognize the principles it espouses. It restores to us the right to property lost so long ago and enables us to take the actions necessary to bring America out of this economic slump. Remember that he was one of the first and worked tirelessly to convince his state and nation that we must take up arms against the world’s largest empire in the name of an idea no one in history had undertaken. The patriots of yesteryear fought and died only in hopes that the idea would work. Why are we so hesitant to act when that very same idea is in danger of dying? Standing on this side of history we know that freedom works. We know that liberty functions, perhaps much better than our founders realize. Imagine traveling back to that summer in Philadelphia and telling those assembled that in less than 200 years their experiment would land a human foot on the moon. We now stare at a limitless future of endless possibilities because they were willing to die for a cause they knew was worthy. We can be dissuaded because some naysayers tell us that if it has not happened in 13 years that it will never happen. Recognize that those foolish enough to really believe such pessimism have forgotten history and are also those that are not involved. It is the armchair politician that is quickest to dismiss something new because all they hear is more of the same from all involved. But it is we active few who understand, that in America, if one is passionate, articulate, knowledgeable, and dedicated anything is possible. From the end of British colonial rule, to the decimation of the Evil Empire, to the overthrow of the tyrannical tax code. If America’s strength rests in you, then the hope for its future does too. As you keep that in mind reflect on this quote from Samuel Adams as he heard the actual shot ring out over Lexington, “What a glorious morning this is.”
Thank you to Tom McClintock of California’s 4th District who becomes our 70th cosponsor today. With steps like these we are even closer to our goals ladies and gentlemen. Good work and good luck! Make sure to celebrate each victory along the way.
Last October we recognized the surging popularity of the term tax reform. The terms current stature with the political class does provide for some inroads for the FairTax but we should be aware right away that we do not have the same goals in mind. Because as we have covered before and as is readily noticeable, reform goes nowhere near far enough to mend this broken system. The FairTax can be more accurately defined as tax replacement rather than tax reform. One reason is because Title 1 of the bill repeals the entirety of our current tax code. It does not merely repeal some loopholes or sunset certain clauses. It outright repeals the current code. More importantly, it operates without the 16th Amendment which is the most damaging act in our history connected to private property. The FairTax is far removed from our current tax code not just in its execution but in its ideology. Our tax code as it stands operates with the assumption that everything you earn belongs to the government first. Before we get our paychecks we can see that someone else was there before us to denote the difference between our gross and net pay. Our income under this system is essentially the remainder we are allowed to keep after those in government have taken what they have deemed necessary. The scary part about this system is that there is no limit as to what they are allowed to take and we are reaching a point where a $16 trillion debt is going to have to be taken very seriously. That leaves our leaders to options on how to handle such a growing mess; they can cut spending, which has not happened since we are running over one trillion dollar deficits without blinking an eye. Or they can raise taxes. Which seems to be the preferred method for many in Washington since they can spin that. And woven throughout all of these historic events are the politicians that still promise tax reform. Far too often that reform is merely the changing of the rates and a settling back into old talking points that etched their way into the public lexicon decades ago. Sometimes, the proposals are some steps in the right direction but languish on their own without answering many of the questions surrounding tax changes. Instead of wasting time zeroing out the death tax only to have it resurrect in few years’ time, repeal it. Instead of arguing over the injustice of the marriage penalty, repeal it. Instead of waving goodbye to the jobs as they leave American shores, repeal the highest corporate tax rate in the world. Each of these tax problems would require months of political wrangling to fix and would most likely culminate in a watered down and temporary solution. Use the Bush tax cuts for an example. It required quite a bit of political capital to pass in the first place and because of partisan opposition they could never be made permanent. In 2009 the cuts were to sunset themselves and the latter part of the year, in a lame duck session, a full Democrat House and Senate passed a two year extension and it was signed by a Democrat President who ran against them just a year before. Now, after all of that discussion, debate, and time wasted over those same tax rates, that have remained unchanged for more than a decade, we will debate and harangue over them again after the 2012 election. We have wasted precious time arguing over the same tax rates even though both parties have passed them into law. In the meantime, both parties have been promising tax reform. You can find tax reform listed on most congressional websites accompanied by pledges to tackle the issue at an undetermined date set in the near but not too near future. Such promises have become a perennial fixture in the political landscape. Reform has shown to be nonexistent or temporary and hardly satisfying, it is time for tax replacement.
The last time one could argue that we had real and substantial tax reform could be 1986. All of the hard fought changes made nearly twenty years ago have been systematically replaced. The code was whittled down to two different rates and now has ballooned into six. Loopholes that were removed but now we stare down a document of over 70,000 pages long. There has been no erosion of the government’s ability to tax and the scope of that ability has only grown, notably with the addition of the Affordable Care Act. We see that reform will ultimately only bring us more of the same, our leaders foolishly spend their time crafting these majestic castles enshrining the ideas they believe in, forgetting that they build with the shifting sands on the shore and ignoring the incoming tide. Our best efforts at reform eventually wash away into the seas of time, forgotten to most, with our energies misspent and wasted. In Washington it seems easier to win battles that you eventually lose. And these are the victories shown to us when they return to run for reelection. They come home and expect us to be proud that they have passed H.R. 6169 which is a meaningless statement on what Congress thinks tax reform should include. Since one congress cannot hold another subsequent congress to the rules that it passes, H.R. 6169 is a meaningless gesture that acts as a smokescreen to voters under the guise of tax reform. We have had nothing but words in regard to tax reform for the past twenty years and now we desire action.
Even the most extreme method of tax reform, the flat tax, is nothing but a reset button on the process that led us here. We have covered a flat tax extensively before and there is no need to reiterate that it is nothing more than a Band-Aid placed ineffectively over a gaping wound. The flat tax, H.R. 6169, and the broken promises of the past twenty years all have one thing in common. They all try to tweak the current tax structure. By now most people have realized that it is this very structure that is the problem. The IRS has removed any right we had toward private property; it has limited our speech and our free exercise of religion, and shows no sign of arresting its own growth of power. Tax reform tries to work within this framework hoping that history deigns not to repeat itself this time. Tax reform will bring us more of the same on a temporary scale. For nearly 100 years our tax code has grown and no amount of tinkering will heal the harm that has occurred. It is time for tax replacement. To throw out this antiquated notion that government is deserving of the first fruits of our labor. To throw out this bloated government-centered bureaucracy for something based on the workings of a free market economy and a liberated people. It is time to repeal this oppressive system and put the government back to work for the people instead of the other way around. Do not buy the promises of tax reform, there is no such thing. Using history as a guide, there will be no tax revolution without your effort and aid. So if you would like to change the future, all you have to do is act.
As the nation unofficially leaves summer behind and takes a day to celebrate the hard work of the country this question arises. Are you not entitled to the sweat of your brow? There is a negative connotation to the word entitlement now, but we were founded as a nation that believed that if you worked to earn something you were indeed entitled to receive it. This was to be a free nation of independent people, not the arbitrary subjugation of people under a monarch. Explain then to me how the first fruits of our labor are not put into our bank accounts, why they are not voluntarily given to our churches, why they are not set aside for college funds or retirement plans. Our labor is exercised at the behest of the government at a rate that they deem appropriate. The taxes we pay are taken from our checks first and those checks stand at mercy of those that set the tax rates. At no point was this envisioned by our forefathers or enshrined into any of our founding documents. There was an idea then that the right to private property was inseparable from our unalienable rights as found in the Declaration. And it is that right that is infringed upon under our system of direct taxation. Can it really be called our property when the remainder is handed to us after the government gets done with it? Under the Sixteenth Amendment our legislature has the legal ability to tax 100% of all income. The only protection is the watchful eye of the American public. But look how easily we are swayed when those in charge only promise to take more from your neighbor as long as they leave you alone. Far too many buy into such a dangerous notion.
The bleeding of our jobs overseas should not merely be taken lightly. This punishment of success has gone on long enough to make real changes to how we as a nation think and act; because those companies are fleeing the most skilled workforce in the world right now. They are leaving for countries with fewer natural resources and less qualified workers. The people looking for jobs right now have college degrees. There are PhD’s who are desperately seeking work. This is not right. We were once a nation that exemplified the demand for quality. What happened to change that? There are some who would immediately accuse us of falling under the spell of the “almighty dollar”. That group is always willing to misplace the blame on the greed of today for the problems created by yesterday’s shortsightedness. What happens when you spend decades punishing success? You get less of it. Real greed should not be confused with ambition. Greed is not working harder to gain more. Real greed is taking money from those who have earned it and redistributing it to those who have not. Real greed is taking money from those who have worked for it and promising it to others for votes. That is the face of greed in this country, and it is not found in the corporate board rooms as we were taught. It is found behind every podium manned by a person demanding a “fair share” that has never been defined as anything other than more. It is found in every Committee room that has found it better to raise taxes than to be fiscally responsible with what it was given. It is found in every braying, bleating voice crying for other’s money to enact a personal need for economic justice. Our system of direct taxation is the manifestation of this greed that has become institutionalized in Washington. To stamp it out we must rip the tax code out. The shortsighted greed of a swarm of congressmen over decades has caused our code to grow at an exponential rate. We must return to a fair system that recognizes where wealth comes from in this country. It comes from work.
And in the meantime our people have been denied the ability to work. Watching the political class talk one might be led to think that our recovery is merely taking its time. While we may be in a recovery it has become abundantly clear that those in charge are more interested in recovering poll numbers than the jobs of those they represent. We could remedy a great deal of the damage done to our business world with one bill. The FairTax repeals this punitive tax on corporations; it also repeals the regressive payroll taxes and the atrocity that is income tax. In doing so it ensures each and every American in country and abroad that when they go to work, what they earn is theirs. It harkens back to a more classical era in which the promises a country made were kept amongst its citizenry. America used to be the place you would travel to in order to escape the arbitrary dictums of tyranny. Our tax code has worked to reverse this reality if not the belief. People assume now that this is how it will continue forever. But it does not have to be. We still have the ability to reclaim what should rightfully be ours. Our property. Under our current system we are fleeing the most skilled labor market in the world and leaving American workers in the dust. The tax code is the key driver of this insanity. We still desire excellence, but at present it seems unattainable in a country whose tax code alone amounts to 70,000+ pages of regulation. There is no mystery as to where the jobs have gone, they have been pushed out to be replaced with a complicated cypher that codifies greed and punishes success. And likewise there is no mystery as to how to bring them back in droves. Repeal the code that is responsible and replace it with one that appeals to our highest aspirations and not our meanest tendencies. Take today to relax, if there are politicians working the crowds today, ask them about the FairTax and why they want to continue on the road that has led us here. But try to celebrate today and the fact that we still live in the most productive place on the planet. Tomorrow as you wake up early and prepare for work, or as you hit the pavement looking for it, know that the jobs we work or seek are not ours. We are currently working for the government instead of the other way around. And all that they have done with our hard earned money is run a $16 trillion deficit and ask for more. Is it not time to stop plodding down this road to ruin? So let us return to the question, are you entitled to the sweat of your brow? Our answer is a resounding and impatient yes. Then it is time for the FairTax. Pass it. And let’s get back to work.