Under my blog title: New vs. Existing housing, Dennis wanted an explanation about how interest rates would drop by 25%. The following is a direct quote from the white paper in the research section of www.fairtax.org:
"Lower interest rates
On top of the advantage homebuyers directly receive from not being taxed on the amount of their wages used to pay mortgage interest, they will be further advantaged because interest rates are driven downward under the FairTax, making home ownership more affordable. Consider this truism: Banks and other financial institutions (or even private parties) that lend money are taxed today on the interest income received. As a result, these lenders have to charge as much as 2.5 percentage points more to cover the cost of the tax wedge imposed upon them. Mortgage debt is no different. Homeowners pay the taxes imposed on interest charged to them to the extent those taxes are “pushed forward.” One can see the price of this tax wedge pushed forward on debtors every day in the persistent difference observed between for-profit corporate bonds (which are taxed) and municipal bonds (which are not taxed).7 The FairTax eliminates taxation of the interest received, as it eliminates all income taxes. As a result of the non-taxation of the lender, mortgage interest rates will fall as the lender has to concern itself with only the risk-adjusted rate of return, not a combination of the tax and risk-adjusted rates of return."
Several economic studies have estimated that switching from an income tax system to the FairTax would result in an interest rate drop of approximately 25%. Therefore, if the current interest rates are 6.6%, the resulting drop would be 4.95%. Pretty neat, huh? A homebuyer could buy more house for his money or simply pay his house off at a faster rate.
Thank you for your question, Dennis. You might want to pick up THE FAIR TAX BOOK by Neal Boortz and John Linder. It is an easy read and a good analysis of the Fair Tax bill which is now in committee in Congress. We now have 65 sponsors on this bill and if all the people who believe in The FAIRTAX would go into www.fairtax.org and sign the petition, it would show our representatives that we mean business.
Friday, September 28, 2007
Thursday, September 27, 2007
RECAP OF FAIRTAX TREATMENT OF HOUSING
1. The FairTax completely untaxes preexisting homes.
The pre-existing or used home is the most common property
bought by first time home buyers.
2. The FairTax replaces the mortgage interest deduction.
Helps first time buyers by lowering interest rates, paid with
pretax dollars (no income taxes and no payroll taxes)
3. The FairTax Lowers interest rates.
Banks and lending institutions will no longer have to pay
income taxes on the interest received from borrowers.
Borrowers will no longer have to pay income taxes on wages
received to make these mortgage payments (principal as well as interest)
4. The FairTax removes all embedded tax costs, making homes more affordable.
When a new home is constructed, the builder will no longer have to
pay embedded (hidden) taxes in their construction materials, passed forward
from the point of manufacture to the builder to the homebuyer.
5. The FairTax enables homeowners to save faster.
Since savings are no longer taxed, The FairTax allows the
homebuyer to accumulate the down payment faster.
Homes will be more affordable and interest rates will be
cheaper, allowing homebuyers to pay off their house as a faster rate.
6. The FairTax improves the economy.
Under the FairTax, in 10 years the economy will be about 15%
larger and wages will increase far more than under the present income tax, by
approximately 13%.
And wage earners will be bringing home 100% of their income!
7. THE FAIRTAX MAKES THE HOMEBUYER HAPPY!
8. THE FAIRTAX MAKES THE BUILDER HAPPY!
9. THE FAIRTAX MAKES THE REALTOR HAPPY!
10. THE FAIRTAX MAKES THE USA HAPPY!
The pre-existing or used home is the most common property
bought by first time home buyers.
2. The FairTax replaces the mortgage interest deduction.
Helps first time buyers by lowering interest rates, paid with
pretax dollars (no income taxes and no payroll taxes)
3. The FairTax Lowers interest rates.
Banks and lending institutions will no longer have to pay
income taxes on the interest received from borrowers.
Borrowers will no longer have to pay income taxes on wages
received to make these mortgage payments (principal as well as interest)
4. The FairTax removes all embedded tax costs, making homes more affordable.
When a new home is constructed, the builder will no longer have to
pay embedded (hidden) taxes in their construction materials, passed forward
from the point of manufacture to the builder to the homebuyer.
5. The FairTax enables homeowners to save faster.
Since savings are no longer taxed, The FairTax allows the
homebuyer to accumulate the down payment faster.
Homes will be more affordable and interest rates will be
cheaper, allowing homebuyers to pay off their house as a faster rate.
6. The FairTax improves the economy.
Under the FairTax, in 10 years the economy will be about 15%
larger and wages will increase far more than under the present income tax, by
approximately 13%.
And wage earners will be bringing home 100% of their income!
7. THE FAIRTAX MAKES THE HOMEBUYER HAPPY!
8. THE FAIRTAX MAKES THE BUILDER HAPPY!
9. THE FAIRTAX MAKES THE REALTOR HAPPY!
10. THE FAIRTAX MAKES THE USA HAPPY!
Wednesday, September 26, 2007
THE FAIRTAX BEATS THE INCOME TAX HANDS DOWN
How can a home be as affordable to a homebuyer after the FairTax as it is under our present income tax system? Below is an example of the total costs of buying a new home comparing the FairTax with the income tax. There is a chart in the FairTax website: http://www.fairtax.org/ that shows this better than I can. I am not computer-literate enough to transfer the chart without it going belly-up on me. There is comprehensive information under the research section of this website, much more than I can include in this blog. So if this subject (real estate) is of particular interest to you, please go into the website and read the entire content. I have just given you a brief overview during the last couple of days.
The example shows a new home purchase price of $153,800 and a break-down of the total costs over the 27 year life of the loan. With the income tax, payroll taxes on interest and principal, the total taxes comes to $66,851. With the FairTax, only $46,140. Total housing cost including taxes: with income and payroll tax system, $377,790. With Fair Tax and a 25% mortgage interest rate drop: $312,099. Which sounds better to you.
The Fairtax completely untaxes preexisting homes. Homebuyers can buy a used home with pretax dollars. With the present income tax system, they have to use after-tax dollars, PLUS they bear the burden of all the embedded taxes that went into the building of this home: timber producers, lumber mills, construction material supplies, etc. These costs are passed through time and again as part of the “value” of the home. This is why used homes are not taxed with the FairTax; they have been taxed and taxed and taxed…………..and nobody realizes it.
A new home is only taxed once, at the point of purchase. There are no embedded taxes along the way because the builder bought the materials without being taxed. Taxes are taken at the consumer end, not all throughout the building process. The tax is paid once, and only once, so the prices are kept lower over the long haul.
The example shows a new home purchase price of $153,800 and a break-down of the total costs over the 27 year life of the loan. With the income tax, payroll taxes on interest and principal, the total taxes comes to $66,851. With the FairTax, only $46,140. Total housing cost including taxes: with income and payroll tax system, $377,790. With Fair Tax and a 25% mortgage interest rate drop: $312,099. Which sounds better to you.
The Fairtax completely untaxes preexisting homes. Homebuyers can buy a used home with pretax dollars. With the present income tax system, they have to use after-tax dollars, PLUS they bear the burden of all the embedded taxes that went into the building of this home: timber producers, lumber mills, construction material supplies, etc. These costs are passed through time and again as part of the “value” of the home. This is why used homes are not taxed with the FairTax; they have been taxed and taxed and taxed…………..and nobody realizes it.
A new home is only taxed once, at the point of purchase. There are no embedded taxes along the way because the builder bought the materials without being taxed. Taxes are taken at the consumer end, not all throughout the building process. The tax is paid once, and only once, so the prices are kept lower over the long haul.
Tuesday, September 25, 2007
NEW vs. EXISTING HOUSING UNDER THE FAIRTAX
The FairTax treats new homes and existing homes differently. New homes are taxed and existing homes are not.
New homes are taxed under the FairTax; however, the embedded taxes are eliminated, which could reduce the purchase price of a new home by 12-20%, depending on the market.
Existing homes comes under “used goods”, which are not taxed; however, the embedded taxes will remain in the used home, which pretty much equalizes the new home and the used home.
New Homebuyers will worry about the added taxes on a new home. What they need to realize is that this home will be 12-20% lower in price than under the previous income tax. Another thing they need to remember is they will be purchasing this home with 100% of their income, so they will have more money to put down and more money to spend on payments.
Builders will worry about a 23% sales tax being added to the cost of the new home he is selling. What the builder needs to realize is that he will not be paying any taxes on the materials that go into the new home (goods can only be taxed once, remember?) On top of that, the builder will no longer have to pay embedded (hidden) taxes such as corporate income taxes and payroll taxes that are also embedded in the manufacture of these materials. And in addition to that, the builder will no longer have to pay ½ of the social security & medicare for his workers plus the compliance costs that go along with the present system of income taxes. The builder will end up with a better profit , or at least the same amount of profit (and 100% at that!), the workers will end up with 100% of his paycheck and hopefully a pay raise if the builder passes some of his savings on to them.
The home buyer will be paying pretty much the same amount for the new home that he would have before the FairTax. He will simply be paying part of that cost in taxes that he can see, not hidden, embedded taxes all the way up the manufacturing line. The home buyer won’t even worry about not getting a mortgage deduction, since the income tax no longer exists, the interest rates will be 25% cheaper and he can qualify for a larger home. He will be a happy camper in his new home!
The Realtor will worry at first that every home buyer will insist on a used home so they won’t have to pay taxes. Sellers would no longer want to sell in order to buy a new home. Then they will see that the price structure of the new home doesn’t really change and that the market remains stable for both new and used homes. The Title company takes care of collecting the taxes at closing and the Realtor gets to pocket 100% of their income! No more having to pay 100% of their social security and medicare, which is the one thing you cannot lower with income tax deductions.
EVERYBODY IS HAPPY! – IT’S A WIN-WIN
New homes are taxed under the FairTax; however, the embedded taxes are eliminated, which could reduce the purchase price of a new home by 12-20%, depending on the market.
Existing homes comes under “used goods”, which are not taxed; however, the embedded taxes will remain in the used home, which pretty much equalizes the new home and the used home.
New Homebuyers will worry about the added taxes on a new home. What they need to realize is that this home will be 12-20% lower in price than under the previous income tax. Another thing they need to remember is they will be purchasing this home with 100% of their income, so they will have more money to put down and more money to spend on payments.
Builders will worry about a 23% sales tax being added to the cost of the new home he is selling. What the builder needs to realize is that he will not be paying any taxes on the materials that go into the new home (goods can only be taxed once, remember?) On top of that, the builder will no longer have to pay embedded (hidden) taxes such as corporate income taxes and payroll taxes that are also embedded in the manufacture of these materials. And in addition to that, the builder will no longer have to pay ½ of the social security & medicare for his workers plus the compliance costs that go along with the present system of income taxes. The builder will end up with a better profit , or at least the same amount of profit (and 100% at that!), the workers will end up with 100% of his paycheck and hopefully a pay raise if the builder passes some of his savings on to them.
The home buyer will be paying pretty much the same amount for the new home that he would have before the FairTax. He will simply be paying part of that cost in taxes that he can see, not hidden, embedded taxes all the way up the manufacturing line. The home buyer won’t even worry about not getting a mortgage deduction, since the income tax no longer exists, the interest rates will be 25% cheaper and he can qualify for a larger home. He will be a happy camper in his new home!
The Realtor will worry at first that every home buyer will insist on a used home so they won’t have to pay taxes. Sellers would no longer want to sell in order to buy a new home. Then they will see that the price structure of the new home doesn’t really change and that the market remains stable for both new and used homes. The Title company takes care of collecting the taxes at closing and the Realtor gets to pocket 100% of their income! No more having to pay 100% of their social security and medicare, which is the one thing you cannot lower with income tax deductions.
EVERYBODY IS HAPPY! – IT’S A WIN-WIN
Monday, September 24, 2007
IMPACT OF THE FAIRTAX ON HOME OWNERSHIP
The FairTax encourages home ownership and homebuilding by placing all Americans and all businesses on equal footing – no loopholes, no exceptions. The home building market would greatly benefit from enactment of the FairTax. There are two points of concern here: (1) The elimination of the home mortgage interest deduction and (2) the different treatment between new and used housing. Today I am covering the home mortgage interest deduction.
There is a lot of opposition to the removal of the mortgage interest deduction, but if you stop and think about it, ALL deductions need to be eliminated if the FairTax is going to be fair to all. And since you aren’t going to be paying any income tax, why should you receive any deductions? You don’t need deductions any more – get it? The only reason for the mortgage interest deduction is so you don’t have to pay as much in income taxes.
Well now, with the FairTax, you and you alone can regulate how much you pay in taxes. You will receive 100% of your income and will be making house payments with your entire paycheck, not just a portion of what is left after the government takes what they want. Right now, only about 35% of the taxpayers itemize their deductions and take advantage of the mortgage interest deduction.
One other thing I need to mention: With the FairTax, mortgage interest rates will fall by approximately 25%, which will allow you to buy more house or pay off your existing housing loan sooner.
More tomorrow……………..
There is a lot of opposition to the removal of the mortgage interest deduction, but if you stop and think about it, ALL deductions need to be eliminated if the FairTax is going to be fair to all. And since you aren’t going to be paying any income tax, why should you receive any deductions? You don’t need deductions any more – get it? The only reason for the mortgage interest deduction is so you don’t have to pay as much in income taxes.
Well now, with the FairTax, you and you alone can regulate how much you pay in taxes. You will receive 100% of your income and will be making house payments with your entire paycheck, not just a portion of what is left after the government takes what they want. Right now, only about 35% of the taxpayers itemize their deductions and take advantage of the mortgage interest deduction.
One other thing I need to mention: With the FairTax, mortgage interest rates will fall by approximately 25%, which will allow you to buy more house or pay off your existing housing loan sooner.
More tomorrow……………..
Friday, September 21, 2007
ALL BLOGGED OUT FOR THE WEEK
I got "writer's blog" today - will start in again on Monday with the FairTax impact on Real Estate. Have a good weekend, all.
Bobbie
Bobbie
Thursday, September 20, 2007
TIMELINES OF THE FAIRTAX REGARDING IMPLEMENTATION
Kevin Spence left a new comment on my post "FAIRTAX TOUTED AT MACHINIST UNION MEETING": What are the timelines of the fairtax movement regarding implementation? I've never seen any information about that.
I didn't know the answer to this one, but I knew where to get it. I contacted the FairTax Organization in Houston, TX and received the following reply:
There will not be any phase in for the FairTax. Income and payroll taxes end on December 31, 2008 and the FairTax goes into effect the next day, January 1, 2009. Of course, taxpayers will still be required to file their 2008 income tax returns which will be due on April 15, 2009. The IRS will remain in place until September 30, 2011 to carry out all tax processing and enforcement activities relating to tax returns for the 2008 tax year.
Here is how it would work with the current dates listed in HR 25:
Dec. 31, 2008 – taxes on income for all tax years beyond December 31, 2008 are repealed. All income tax withholding and payroll tax deduction for federal taxes ends.
Jan. 1, 2009 – the national sales tax is imposed on all non-business purchases of goods and services.
Jan. 15, 2009 – estimated tax payments (form ES) for the final quarter of tax year 2008 will be due.
Apr. 15, 2009 – tax returns for the 2008 tax year will be due.
Apr. 15 through Sept. 30, 2011 – the IRS will be processing 2007 annual tax returns for the individual income tax, corporate income tax, estate and gift tax, and the self-employment tax. It will conduct its normal collection and enforcement activities, including audits. The IRS can devote all of its attention to collecting the 2007 taxes since there will be no time devoted to getting ready for 2008.
Sept. 30, 2011 – No funding of the IRS beyond this date as specified in Sec. 301 of HR 25 below.
SEC. 301. PHASE-OUT OF ADMINISTRATION OF REPEALED FEDERAL TAXES.
(a) Appropriations- Appropriations for any expenses of the Internal Revenue Service including processing tax returns for years prior to the repeal of the taxes repealed by title I of this Act, revenue accounting, management, transfer of payroll and wage data to the Social Security Administration for years after fiscal year 2011 shall not be authorized.
(b) Records- Federal records related to the administration of taxes repealed by title I of this Act shall be destroyed by the end of fiscal year 2011, except that any records necessary to calculate Social Security benefits shall be retained by the Social Security Administration and any records necessary to support ongoing litigation with respect to taxes owed or refunds due shall be retained until final disposition of such litigation.
Aaron Schutte
Grassroots Special Projects Coordinator
713.963.9023 ext. 9612
Thank you Aaron, for helping me out with my blog. The people at http://www.fairtax.org/ are very helpful to all of us who are trying to make this FairTax a reality. They have been working at this for years and are seeing more positive activity this year than ever before. LET'S GET IT DONE!
Bobbie
I didn't know the answer to this one, but I knew where to get it. I contacted the FairTax Organization in Houston, TX and received the following reply:
There will not be any phase in for the FairTax. Income and payroll taxes end on December 31, 2008 and the FairTax goes into effect the next day, January 1, 2009. Of course, taxpayers will still be required to file their 2008 income tax returns which will be due on April 15, 2009. The IRS will remain in place until September 30, 2011 to carry out all tax processing and enforcement activities relating to tax returns for the 2008 tax year.
Here is how it would work with the current dates listed in HR 25:
Dec. 31, 2008 – taxes on income for all tax years beyond December 31, 2008 are repealed. All income tax withholding and payroll tax deduction for federal taxes ends.
Jan. 1, 2009 – the national sales tax is imposed on all non-business purchases of goods and services.
Jan. 15, 2009 – estimated tax payments (form ES) for the final quarter of tax year 2008 will be due.
Apr. 15, 2009 – tax returns for the 2008 tax year will be due.
Apr. 15 through Sept. 30, 2011 – the IRS will be processing 2007 annual tax returns for the individual income tax, corporate income tax, estate and gift tax, and the self-employment tax. It will conduct its normal collection and enforcement activities, including audits. The IRS can devote all of its attention to collecting the 2007 taxes since there will be no time devoted to getting ready for 2008.
Sept. 30, 2011 – No funding of the IRS beyond this date as specified in Sec. 301 of HR 25 below.
SEC. 301. PHASE-OUT OF ADMINISTRATION OF REPEALED FEDERAL TAXES.
(a) Appropriations- Appropriations for any expenses of the Internal Revenue Service including processing tax returns for years prior to the repeal of the taxes repealed by title I of this Act, revenue accounting, management, transfer of payroll and wage data to the Social Security Administration for years after fiscal year 2011 shall not be authorized.
(b) Records- Federal records related to the administration of taxes repealed by title I of this Act shall be destroyed by the end of fiscal year 2011, except that any records necessary to calculate Social Security benefits shall be retained by the Social Security Administration and any records necessary to support ongoing litigation with respect to taxes owed or refunds due shall be retained until final disposition of such litigation.
Aaron Schutte
Grassroots Special Projects Coordinator
713.963.9023 ext. 9612
Thank you Aaron, for helping me out with my blog. The people at http://www.fairtax.org/ are very helpful to all of us who are trying to make this FairTax a reality. They have been working at this for years and are seeing more positive activity this year than ever before. LET'S GET IT DONE!
Bobbie
Wednesday, September 19, 2007
FAIRTAX TOUTED AT MACHINIST UNION MEETING
I received the following e-mail from a fellow FairTax person. He was surfing through a blog written by someone that was at the machinist union meeting where Mike Huckabee spoke. This is not an endorsment for Mike Huckabee for President; however, I am endorsing anyone and everyone who advocates for the FairTax. The FairTax is a bi-partisan issue.
He said that the only topic discussed by the former governor was the Fair Tax. He said Huck asked union members to take a look at their paycheck stub and see how much they earned that pay period and compare that amount to how much they got to take home.
He reminded them that most of us have adjusted to living on that net amount at the bottom of the pay-stub. That we all think in terms of NET or TAKE-HOME pay instead of what we all really earn.
He told them that with the Fair Tax, the deductions for income and payroll taxes would disappear and that for many of them in that hall, they could anticipate raising their children and operating their household with a 30% to 50% increase in what they bring home.
He spoke of the new jobs that would be created and how competitive their industry would be in the global market when the embedded costs that income taxes add would no longer be a component of the cost of production.
According to someone who was there, it was just as much of a Fair Tax rally as it was a Huckabee rally... But not one media service reported what was actually said...
He said that the only topic discussed by the former governor was the Fair Tax. He said Huck asked union members to take a look at their paycheck stub and see how much they earned that pay period and compare that amount to how much they got to take home.
He reminded them that most of us have adjusted to living on that net amount at the bottom of the pay-stub. That we all think in terms of NET or TAKE-HOME pay instead of what we all really earn.
He told them that with the Fair Tax, the deductions for income and payroll taxes would disappear and that for many of them in that hall, they could anticipate raising their children and operating their household with a 30% to 50% increase in what they bring home.
He spoke of the new jobs that would be created and how competitive their industry would be in the global market when the embedded costs that income taxes add would no longer be a component of the cost of production.
According to someone who was there, it was just as much of a Fair Tax rally as it was a Huckabee rally... But not one media service reported what was actually said...
Tuesday, September 18, 2007
INTERESTING STATISTICS I PICKED UP
We were out of town today, but while we were in the car, we heard a very interesting conversation on the radio. This employer said for every dollar she paid out in wages, it cost her
$1.24. And for every dollar an employee received in wages, they only actually received $.76.
Now think about that for awhile. The employer pays $.24 more and the employee receives $.24 less. That amounts to $.48 out of every $1.00 paid to the employee that goes to the government in various forms of taxes.
Can't you just imagine the possibilities for both the employer and the employee if we had the fairtax in place?! Savings! Investments! Education! Homeownership! They would both have more to spend on what they wanted, not what the government dictated.
Stand up and be counted! Make your voice heard! Go to www.fairtax.org and sign their petition. Vote for the politicians who say they will vote for the FairTax. We can make a difference!
$1.24. And for every dollar an employee received in wages, they only actually received $.76.
Now think about that for awhile. The employer pays $.24 more and the employee receives $.24 less. That amounts to $.48 out of every $1.00 paid to the employee that goes to the government in various forms of taxes.
Can't you just imagine the possibilities for both the employer and the employee if we had the fairtax in place?! Savings! Investments! Education! Homeownership! They would both have more to spend on what they wanted, not what the government dictated.
Stand up and be counted! Make your voice heard! Go to www.fairtax.org and sign their petition. Vote for the politicians who say they will vote for the FairTax. We can make a difference!
Monday, September 17, 2007
LET’S PRETEND WE HAVE THE FAIRTAX NOW!
Everyone who wants one, has a job. The economy is booming!
Corporations are moving their headquarters and manufacturing back to the USA.!
We get to keep 100% of our paycheck!
Social Security is on stable footing for the first time in years!
Medicare is paying its own way and is no longer in danger of default!
The Corporate taxes and costs of compliance hidden in both wholesale and retail prices no longer exist!
We love our monthly prebate check! The lower income people pay no taxes because of this and the rest of us get a free ride up to the amount of the poverty level!
This means we can save more, faster and have more money available for education, home ownership and retirement!
We don’t have to fill out those stupid IRS forms anymore! We save a total of $250 billion or more (about 3% of the GDP).
The government wins too! They get the same amount of revenue they are used to getting!
And guess who has to start paying taxes for the first time in their lives? Illegals, prostitutes, drug dealers, the porn industry, criminals, plus all of the other under-the-table transactions that take place!
Then comes the repeal of the 16th amendment – when we are sure we get the kind of FairTax we want!
Do you know what we have done? We have eliminated the IRS as we know it. No more audits (except for businesses), no more nasty letters, no more high-handed tactics!
NOW DO YOU KNOW WHAT THIS MEANS? THIS MEANS THAT APRIL 15TH WILL BE “JUST ANOTHER SPRING DAY”!
Friday, September 14, 2007
THE MAD DASH TO CONSUME PRIOR TO ENACTMENT OF THE FAIRTAX
Some retailers are worry that the public will rush to purchase durable goods without tax before the FairTax goes into effect. After the FairTax is put into place, retailers fear there would be a compensatory drop in consumption of equal magnitude. A study on this subject shows that (worst-case scenario) the retailers can expect a drop in consumption of 1.15% the first year. By the fourth year and every year thereafter (this was a 10-year study) consumption will be higher. This would amount to a minimum of 3% growth in the economy in the 10-year period than it would have under the present income tax. Again, this is worst-case scenario. Even if growth is reduced the first year, retailers will be more profitable because of the repeal of the income tax and lower compliance costs.
This ends my dissertation on the Impact of the FairTax on Businesses. There is much more in-depth information available in the research section of www.fairtax.org. Since businesses are going to bear the brunt of collecting this tax, I thought it necessary to enlighten both businesses and consumers as best I could.
This ends my dissertation on the Impact of the FairTax on Businesses. There is much more in-depth information available in the research section of www.fairtax.org. Since businesses are going to bear the brunt of collecting this tax, I thought it necessary to enlighten both businesses and consumers as best I could.
Thursday, September 13, 2007
WHY SHOULD RETAILERS SUPPORT THE FAIRTAX?
Retailers will be more profitable – a zero corporate tax rate and no taxes on dividends or capital gains for their shareholders. This means more money to invest. Compliance costs will be lower by appx. $225 billion. Retailers will also receive a collection fee for collecting and sending the sales taxes to the government.
The economy will grow, more people will have jobs, incomes will increase more rapidly, which means people will have more money to invest and to buy goods and services. Consumer interest rates will fall between 25-30%, which means consumers ability to finance goods and services will increase.
Consumption is taxed once under both an income tax and a sales tax. Under the current tax system, consumption purchases are made from after-tax dollars. Under the FairTax, consumption purchases are made from after-tax dollars. The difference is not the way they impact consumption, but rather how they impact savings. The present income tax double or triple taxes savings, while the sales tax does not tax savings until consumed.
Retailers’ Compliance costs will be lower. There will be one sales tax on all goods and services, so the retailer simply needs to calculate its total retail sales on a monthly basis:
No more uniform inventory capitalization requirements.
No more complex rules governing employee benefits and retirement plans.
No more tax depreciation schedules.
No more tax rules governing mergers and acquisitions.
No more international tax provisions.
Sorry to spend so much time on businesses and their compliance rules, but whether you know it or not, or whether you like it or not, business is very important in the life of a consumer (you and I). All our goods and services come from some type of business and the easier they can make it for businesses, the lower the prices will be and the better the services will be.
The economy will grow, more people will have jobs, incomes will increase more rapidly, which means people will have more money to invest and to buy goods and services. Consumer interest rates will fall between 25-30%, which means consumers ability to finance goods and services will increase.
Consumption is taxed once under both an income tax and a sales tax. Under the current tax system, consumption purchases are made from after-tax dollars. Under the FairTax, consumption purchases are made from after-tax dollars. The difference is not the way they impact consumption, but rather how they impact savings. The present income tax double or triple taxes savings, while the sales tax does not tax savings until consumed.
Retailers’ Compliance costs will be lower. There will be one sales tax on all goods and services, so the retailer simply needs to calculate its total retail sales on a monthly basis:
No more uniform inventory capitalization requirements.
No more complex rules governing employee benefits and retirement plans.
No more tax depreciation schedules.
No more tax rules governing mergers and acquisitions.
No more international tax provisions.
Sorry to spend so much time on businesses and their compliance rules, but whether you know it or not, or whether you like it or not, business is very important in the life of a consumer (you and I). All our goods and services come from some type of business and the easier they can make it for businesses, the lower the prices will be and the better the services will be.
Wednesday, September 12, 2007
I am taking a break from the FairTax impact on business to show you a copy of a letter written by Gary Burger, a member of the FairTax organization. It is a good explanation of why the FairTax needs to be passed before the 16th amendment is repealed. I will resume discussion about business and the FairTax tomorrow.
Editor:
Your editorial on the Fairtax admits that it is the best method to tax the American public, but you object to it because of what Congress 'might' do after it is enacted, that is, increase taxes by also reenacting an income tax. You misunderstand the 16th Amendment. It allows an income tax, but does not require it. Since the Fairtax is revenue neutral, the only reason to reenact an income tax is to increase revenues. We do not believe that the American public would tolerate the reenactment of the income tax after the Fairtax takes over and everyone sees the economic boom, the lack of record keeping, the return of privacy, and the transparency of the system. In fact, once the Fairtax is enacted and the people see how good a tax system can be, it will be much easier to repeal the 16th Amendment. All your requirement of repealing the 16th Amendment does now, before the Fairtax, is to kill the Fairtax or any other true reform measure. Nobody is going to be able to repeal a constitutional amendment without knowing what the replacement will be and if it will work. And few will support a reform proposal if its reversal requires a Constitutional Amendment to return to the old system, should the reform turn out to be unsuccessful, as unlikely as we think that will be under the Fairtax.
For years, advocates of the so-called "Flat Income Tax" have used this argument to defeat the Fairtax. Its no longer selling and you should smell the coffee and drop this illogical argument against the Fairtax.
Gary H. Burger
Editor:
Your editorial on the Fairtax admits that it is the best method to tax the American public, but you object to it because of what Congress 'might' do after it is enacted, that is, increase taxes by also reenacting an income tax. You misunderstand the 16th Amendment. It allows an income tax, but does not require it. Since the Fairtax is revenue neutral, the only reason to reenact an income tax is to increase revenues. We do not believe that the American public would tolerate the reenactment of the income tax after the Fairtax takes over and everyone sees the economic boom, the lack of record keeping, the return of privacy, and the transparency of the system. In fact, once the Fairtax is enacted and the people see how good a tax system can be, it will be much easier to repeal the 16th Amendment. All your requirement of repealing the 16th Amendment does now, before the Fairtax, is to kill the Fairtax or any other true reform measure. Nobody is going to be able to repeal a constitutional amendment without knowing what the replacement will be and if it will work. And few will support a reform proposal if its reversal requires a Constitutional Amendment to return to the old system, should the reform turn out to be unsuccessful, as unlikely as we think that will be under the Fairtax.
For years, advocates of the so-called "Flat Income Tax" have used this argument to defeat the Fairtax. Its no longer selling and you should smell the coffee and drop this illogical argument against the Fairtax.
Gary H. Burger
Tuesday, September 11, 2007
IMPACT OF THE FAIRTAX ON SMALL BUSINESS - 2
Compliance costs can be a real economic drag on a small business. They bear a compliance cost burden about 27 times greater than the largest U.S. corporations. They must use different accounting rules to keep track of income, inventories, various types of expenses, depreciation, tax basis for assets sold, various pension and deferred compensation rules, employee benefits rules, etc. The small business must also keep track of payroll taxes, including Social Security, Medicare, and unemployment taxes.
Under the FairTax, small business has a zero tax rate and zero compliance costs. The only thing they have to keep track of is how much did they sell to consumers. Period. It is estimated that business compliance costs will fall by more than 90%.
There would be no more estate tax, which would allow the business owner (or farmer/rancher) to pass their life’s work on to their children without the huge estate tax we talked about earlier (Impact on Farmers & Ranchers)
The FairTax plan increases economic growth, leaving an immediate and powerful impact. The GDP (gross domestic product) would increase by almost 10.5% in the first year. It will raise the economy’s capital stock by 42%, its labor supply by 4%, its output by 12% and its real wage rate by 8%. It also lowers real interest rates by more than one 20-30%.
This in turn will benefit us all in the form of lower prices on goods and services. It will be a win-win situation.
Under the FairTax, small business has a zero tax rate and zero compliance costs. The only thing they have to keep track of is how much did they sell to consumers. Period. It is estimated that business compliance costs will fall by more than 90%.
There would be no more estate tax, which would allow the business owner (or farmer/rancher) to pass their life’s work on to their children without the huge estate tax we talked about earlier (Impact on Farmers & Ranchers)
The FairTax plan increases economic growth, leaving an immediate and powerful impact. The GDP (gross domestic product) would increase by almost 10.5% in the first year. It will raise the economy’s capital stock by 42%, its labor supply by 4%, its output by 12% and its real wage rate by 8%. It also lowers real interest rates by more than one 20-30%.
This in turn will benefit us all in the form of lower prices on goods and services. It will be a win-win situation.
Monday, September 10, 2007
THE IMPACT OF THE FAIRTAX ON SMALL BUSINESS
Small businesses create a large effect on the U.S. economy. Over 5 million strong, they account for 89% of all U.S. employers and employ over 20 million people. One business owner stated that “A simpler, fairer, and growth-oriented tax code will ease the compliance burden on the small business owner”.
Tax regulations create the most difficulty for small businesses. The time and money associated with tax compliance is astronomical. The burden of record keeping takes time and their taxes are usually done by a tax accountant at great expense to the businesses. Since time is money and tax accountants also take money, these expenses are passed on to the consumer in the form of higher prices.
Most small businesses pay taxes via the individual income tax. The business income from sole proprietorships, S corporations and LLC’s is all taxed at the owners’ individual income tax rate. Research suggests that across-the-board tax cuts, regardless of income level, would increase entrepreneurial start-up and survival.
The FairTax plan would replace all of the taxes that businesses have to collect and pay to the Federal Government with a national sales tax which would also be collected by businesses. The big difference is the businesses would only have to collect one tax, at the retail level, and send it to the state, which would in turn send it to the Feds. Their record keeping would be reduced to just one tax (the sales tax) to be collected and their only record keeping would be to total their sales receipts for the month and pay the percentage of tax indicated. Much easier than the system in place now, and they get paid to collect this tax.
I will be spending more than one day one this subject of businesses and the FairTax. It is a very important part of understanding the sales tax and takes more than one day to cover it all.
Tax regulations create the most difficulty for small businesses. The time and money associated with tax compliance is astronomical. The burden of record keeping takes time and their taxes are usually done by a tax accountant at great expense to the businesses. Since time is money and tax accountants also take money, these expenses are passed on to the consumer in the form of higher prices.
Most small businesses pay taxes via the individual income tax. The business income from sole proprietorships, S corporations and LLC’s is all taxed at the owners’ individual income tax rate. Research suggests that across-the-board tax cuts, regardless of income level, would increase entrepreneurial start-up and survival.
The FairTax plan would replace all of the taxes that businesses have to collect and pay to the Federal Government with a national sales tax which would also be collected by businesses. The big difference is the businesses would only have to collect one tax, at the retail level, and send it to the state, which would in turn send it to the Feds. Their record keeping would be reduced to just one tax (the sales tax) to be collected and their only record keeping would be to total their sales receipts for the month and pay the percentage of tax indicated. Much easier than the system in place now, and they get paid to collect this tax.
I will be spending more than one day one this subject of businesses and the FairTax. It is a very important part of understanding the sales tax and takes more than one day to cover it all.
Thursday, September 6, 2007
THIS BLOG WAS CALLED TODAY
ON ACCOUNT OF THE FOOTBALL GAME. It's all Gary's fault - he makes me watch it!
Talk to you tomorrow - enjoy the game.................Bobbie
Talk to you tomorrow - enjoy the game.................Bobbie
Wednesday, September 5, 2007
IMPACT OF THE FAIRTAX ON FARMING & RANCHING
Farmers and ranchers are disadvantaged under the current income tax system. Their special tax problems fall into three categories:
1. The confiscatory tax imposed on the sale, gift, or bequest of the farm or ranch.
2. The alternative minimum tax
3. The failure of the current tax code to consider fluctuations in year-to-year income.
The current capital gains treatment causes problems with non-liquid assets. It imposes a tax of as much as 15% (which increases to 20% in 2009) on the sale of farms and ranches and depreciated machinery and equipment. This makes it very costly to pass the property on to future generations, since estate taxes are 45% in 2007. So if they sell, they get hit with a capital gains tax and if they want to pass it on to their heirs, they get hit with a 45% estate tax.
Farmers and ranchers spend countless hours and dollars creating estate plans in order to avoid this estate transfer tax.
And then they get hit every year with the alternative minimum tax (AMT), in my opinion a tax upon a tax. It certainly takes away any incentive of trying to make more money.
The FairTax eliminates all federal individual and business taxes. It will also lower the effective tax rate on farming households, since the FairTax exempts the basic necessities of life from taxation, up to the poverty level, as determined by the Health and Human Services poverty level each year and paid out to each head of household, in advance, on a monthly basis.
For a more in-depth look at the FairTax handling of farms and ranches, go to http://www.fairtax.org/ and poke on the research button. Find the white paper on the Impact of the FairTax on farming and ranching. There is much more information there.
Bottom line: The FairTax would be a real god-send to farmers and ranchers as well as you and I.
1. The confiscatory tax imposed on the sale, gift, or bequest of the farm or ranch.
2. The alternative minimum tax
3. The failure of the current tax code to consider fluctuations in year-to-year income.
The current capital gains treatment causes problems with non-liquid assets. It imposes a tax of as much as 15% (which increases to 20% in 2009) on the sale of farms and ranches and depreciated machinery and equipment. This makes it very costly to pass the property on to future generations, since estate taxes are 45% in 2007. So if they sell, they get hit with a capital gains tax and if they want to pass it on to their heirs, they get hit with a 45% estate tax.
Farmers and ranchers spend countless hours and dollars creating estate plans in order to avoid this estate transfer tax.
And then they get hit every year with the alternative minimum tax (AMT), in my opinion a tax upon a tax. It certainly takes away any incentive of trying to make more money.
The FairTax eliminates all federal individual and business taxes. It will also lower the effective tax rate on farming households, since the FairTax exempts the basic necessities of life from taxation, up to the poverty level, as determined by the Health and Human Services poverty level each year and paid out to each head of household, in advance, on a monthly basis.
For a more in-depth look at the FairTax handling of farms and ranches, go to http://www.fairtax.org/ and poke on the research button. Find the white paper on the Impact of the FairTax on farming and ranching. There is much more information there.
Bottom line: The FairTax would be a real god-send to farmers and ranchers as well as you and I.
Tuesday, September 4, 2007
THE IMPACT OF THE FAIRTAX ON SENIORS
I am going to begin today with “The impact of the FairTax on Seniors”, a “white paper” from www.fairtax.org. I will just give you a feeling for what is in this document and if you wish to learn more, go into their website and poke on the “research button” to find the various “white papers”.
The FairTax will ensure that the Social Security and Medicare programs that are so important to Seniors become stable again, no longer a threat to “go broke” in a few years if taxes are not raised.
The FairTax rebate zeros the retail taxation of necessities, up to the poverty-level, for Seniors. Some Seniors don’t even spend over the poverty level, since they have accumulated “things” over a lifetime. Other Seniors will welcome the extra money that a prebate would bring them.
The FairTax does not tax used goods, which gives Seniors a choice of whether they wish to buy new goods and be taxed or used goods with no tax added. (We all will have this choice)
The FairTax ends all record keeping and income tax filings, which means no more large bills from Tax Preparers or Accountants. (These people will be happy to find other jobs helping you invest and grow your extra dollars saved by the FairTax)
The FairTax will reduce manufacturers’, services’, and retailers’ costs, (remember the embedded taxes?) allowing them to lower costs to seniors (and the rest of us).
Seniors will pay no more taxes on IRAs and other tax-deferred plans.
The FairTax ends gift and estate taxes so Seniors will have the satisfaction of knowing their hard-earned money will go to their heirs instead of the IRS. Wheeee!
With the FairTax, Seniors can sell their homes and pay no capital gains taxes.
The FairTax will generate an economic boom, easing future budget pressure on Seniors’ entitlements.
The FairTax ensures your grandchildren will be able to keep 100% of their income and they can decide when to spend it and what to spend it on. They will not have the IRS looking over their shoulder at every step of their careers, taking money here and grabbing money there.
The FairTax will ensure that the Social Security and Medicare programs that are so important to Seniors become stable again, no longer a threat to “go broke” in a few years if taxes are not raised.
The FairTax rebate zeros the retail taxation of necessities, up to the poverty-level, for Seniors. Some Seniors don’t even spend over the poverty level, since they have accumulated “things” over a lifetime. Other Seniors will welcome the extra money that a prebate would bring them.
The FairTax does not tax used goods, which gives Seniors a choice of whether they wish to buy new goods and be taxed or used goods with no tax added. (We all will have this choice)
The FairTax ends all record keeping and income tax filings, which means no more large bills from Tax Preparers or Accountants. (These people will be happy to find other jobs helping you invest and grow your extra dollars saved by the FairTax)
The FairTax will reduce manufacturers’, services’, and retailers’ costs, (remember the embedded taxes?) allowing them to lower costs to seniors (and the rest of us).
Seniors will pay no more taxes on IRAs and other tax-deferred plans.
The FairTax ends gift and estate taxes so Seniors will have the satisfaction of knowing their hard-earned money will go to their heirs instead of the IRS. Wheeee!
With the FairTax, Seniors can sell their homes and pay no capital gains taxes.
The FairTax will generate an economic boom, easing future budget pressure on Seniors’ entitlements.
The FairTax ensures your grandchildren will be able to keep 100% of their income and they can decide when to spend it and what to spend it on. They will not have the IRS looking over their shoulder at every step of their careers, taking money here and grabbing money there.
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