I heard on the radio today that the IRS was spending around 3 Billion dollars to bring tax cheaters into compliance with the income tax. Can you imagine what our country could do with that 3 Billion dollars if they didn't have to chase tax dodgers? I think it's time for a change, don't you?
I am copying a letter written by Jim Bennett, a FairTax volunteer. It says a lot in few words:
To the editor of the Wall Street Journal:
Dear Editor, Several comments sent in by readers and appearing in the December 31, 2007 issue call for a response. Retirees who pay sales tax during their golden years for the most part contributed tax-free into IRA's and now under the Fair Tax will be able to withdraw from their IRA's tax-free.
Their Social Security benefits,on which they were double-taxed going in (yes, income and payroll) will be tax free coming out. The Fair Tax will stabilize the tax base for Social Security, whose future is in peril today because of the dwindling payroll base relative to burgeoning retirees.
Seniors will be able to sell their homes free of capital gains tax and pass their estates onto their children tax free. Even if it is true that crime figures and illegal aliens would pay little more under the Fair Tax, would it not be beneficial to shift the tax burden towards these types and away from business?
The fact is that crime figures would have the same purchasing power butnow would pay tax on their purchases. Crime figures and illegal aliens, together with foreign tourists, purchasers of imports and those who go into the corpus of savings would be more disadvantaged than lower and middle-income people as a group.
Wealthy people do benefit from the Fair Tax, as does everyone else, but lower-income people benefit disproportionately. A sales tax such as the Fair Tax is far more efficient to collect than an income tax. Collection points drop from 155 million to 20 million.
Furthermore, it takes two to cheat on a sales tax, and just one to cheat on an income tax. I welcome the attention the Fair Tax is garnering now from the Wall Street Journal.~Jim Bennett
Monday, December 31, 2007
Thursday, December 27, 2007
FAIRTAX FACTS BY LEO LINBECK, CEO AND CO-FOUNDER OF AMERICANS FOR FAIR TAXATION
The following is an e-mail sent to us FairTax Volunteers and I thought I would pass it on. It is lengthy, but a good read and encompasses much of the FairTax Facts. I will leave it up the rest of the week so you can pop in and read a bit every day if it is too long for you.
Meanwhile, I am struggling with my year-end bookwork, getting ready for tax-time. Good grief - what do people see in this present income tax system? What a waste of our good time. Well, here's the good stuff:
COMMENTARY - FairTax Facts By LEO LINBECK, December 26, 2007; Page A10, Wall Street Journal.
Much has been written lately about the FairTax, the proposal to replace the current federal income tax with a national retail sales tax. Unfortunately, much of it is wrong. This country needs a spirited and wide-ranging debate about fundamental tax reform. But that debate is not advanced by misimpressions and distortions of the FairTax. Let us then clear up a few.
One assertion about the FairTax is that it began as a project of the Church of Scientology at a time when it was seeking tax-exempt status. This is false. The FairTax actually comes to us from market research conducted more than a decade ago by a handful of business leaders. Their goal was to determine what type of tax system would be most acceptable to the American public. The studies they paid for cost millions of dollars, included hard economic research by respected scholars, and were subjected to critical peer review.
The result is a proposal, since introduced as legislation in Congress, now known as the FairTax. What emerged from this research is that a national retail sales tax is a preferred method of taxation among most Americans surveyed. Another is that the tax would have significant benefits for the nation's economy. Why? Because it eliminates income taxes and payroll taxes (for Social Security and Medicare), which are costly to collect and end up as "embedded" in the price of everything we buy.
Along with getting rid of the Internal Revenue Service and the complexities of the income tax code, the FairTax would eliminate the distorting effect that income and payroll taxes have on the economy. Research on the price of consumer goods reveals that up to 20% of all prices today represent hidden income taxes and payroll taxes. Once these taxes are repealed and replaced with the FairTax, it is likely that market pressure would force retail prices to fall.
Eliminating embedded taxes will also do something else -- it will remove significant price disadvantages suffered by American producers competing with tax-free imports. Eliminating corporate income taxes and capital gains taxes, which the FairTax would do, would likely make the American economy the most desirable place in the world to do business.
Another benefit of the FairTax is that, unlike other sales taxes, it would not hit the poorest Americans the hardest. The FairTax proposal calls for sending every American a "prebate" check to offset the cost of the national sales taxes paid by those living in poverty. This feature would effectively exempt those living below the poverty line from paying taxes to the federal government, and provide all taxpayers with a reimbursement of a portion of taxes paid.
The FairTax rate is 23% on retail sales when calculated "inclusively," as are income tax rates. It will, in a fairer, more transparent and less-expensive way, raise the same amount of money the federal government now collects through the income and payroll taxes. Because it would be levied on consumption at the final point of sale, instead of on earnings, it would dramatically expand the tax base.
The FairTax would collect revenue from the underground economy. Even illegal immigrants and the 40 million foreign tourists who visit the U.S. each year would pay it. The distributional effects of the FairTax have been extensively studied, and although the proposal has distinct advantages for investors and wealth creation across the income spectrum, the greatest benefit of the FairTax is to low- and moderate-income Americans.
The effect of eliminating regressive payroll taxes is commonly overlooked when analyzing the FairTax, but it would have a very significant impact, as these taxes represent the single largest tax burden on these income earners. Significantly, the FairTax eliminates all loopholes, gimmicks, exemptions and deductions from the federal tax system. Under the FairTax, Congress would no longer be able to reward friends, punish enemies or manipulate behavior through the tax code.
The FairTax would also eliminate the lucrative tax lobbying practices that represent more than 50% of all lobby dollars spent annually in Washington. It's no surprise, then, to see that vested interests have argued against the FairTax and in favor of keeping the mortgage interest deduction. But wouldn't it be better for everyone to stop the IRS from withholding from paychecks; to see the price of new homes -- and all other goods -- drop by removing embedded costs; and to have interest rates fall as the savings rate increases?
Is it really in everyone's interests to keep the income-tax system so that one-third of taxpayers can go on deducting a portion of their mortgage interest from their federal taxes? There have been many tax reform proposals over the years, but most of them simply call for reforming around the margins of the existing tax system.
The President's Advisory Panel on Tax Reform was assembled by the Bush administration and concluded its work a few years ago. Instead of seriously looking at the FairTax, the panel looked at a very different type of consumption tax, riddled with exemptions, and then declared that it would be too expensive and that the rate would have to be far higher than the FairTax rate.
Politically, the FairTax will only become law once enough citizens demand that it be enacted, overcoming the self-interest that members of Congress and others have in holding onto the current system. It is debatable whether a modern, citizen-led tax revolution is possible. But the growing popularity (even among presidential candidates) of the FairTax suggests that another Boston Tea Party may be at hand.
Mr. Linbeck is CEO and cofounder of Americans for Fair Taxation.
If you agree with the idea of the FairTax, go to my link on signing the petition and DO IT. We need all the support we can get to get our congressmen to listen to us instead of the lobbyists.
Meanwhile, I am struggling with my year-end bookwork, getting ready for tax-time. Good grief - what do people see in this present income tax system? What a waste of our good time. Well, here's the good stuff:
COMMENTARY - FairTax Facts By LEO LINBECK, December 26, 2007; Page A10, Wall Street Journal.
Much has been written lately about the FairTax, the proposal to replace the current federal income tax with a national retail sales tax. Unfortunately, much of it is wrong. This country needs a spirited and wide-ranging debate about fundamental tax reform. But that debate is not advanced by misimpressions and distortions of the FairTax. Let us then clear up a few.
One assertion about the FairTax is that it began as a project of the Church of Scientology at a time when it was seeking tax-exempt status. This is false. The FairTax actually comes to us from market research conducted more than a decade ago by a handful of business leaders. Their goal was to determine what type of tax system would be most acceptable to the American public. The studies they paid for cost millions of dollars, included hard economic research by respected scholars, and were subjected to critical peer review.
The result is a proposal, since introduced as legislation in Congress, now known as the FairTax. What emerged from this research is that a national retail sales tax is a preferred method of taxation among most Americans surveyed. Another is that the tax would have significant benefits for the nation's economy. Why? Because it eliminates income taxes and payroll taxes (for Social Security and Medicare), which are costly to collect and end up as "embedded" in the price of everything we buy.
Along with getting rid of the Internal Revenue Service and the complexities of the income tax code, the FairTax would eliminate the distorting effect that income and payroll taxes have on the economy. Research on the price of consumer goods reveals that up to 20% of all prices today represent hidden income taxes and payroll taxes. Once these taxes are repealed and replaced with the FairTax, it is likely that market pressure would force retail prices to fall.
Eliminating embedded taxes will also do something else -- it will remove significant price disadvantages suffered by American producers competing with tax-free imports. Eliminating corporate income taxes and capital gains taxes, which the FairTax would do, would likely make the American economy the most desirable place in the world to do business.
Another benefit of the FairTax is that, unlike other sales taxes, it would not hit the poorest Americans the hardest. The FairTax proposal calls for sending every American a "prebate" check to offset the cost of the national sales taxes paid by those living in poverty. This feature would effectively exempt those living below the poverty line from paying taxes to the federal government, and provide all taxpayers with a reimbursement of a portion of taxes paid.
The FairTax rate is 23% on retail sales when calculated "inclusively," as are income tax rates. It will, in a fairer, more transparent and less-expensive way, raise the same amount of money the federal government now collects through the income and payroll taxes. Because it would be levied on consumption at the final point of sale, instead of on earnings, it would dramatically expand the tax base.
The FairTax would collect revenue from the underground economy. Even illegal immigrants and the 40 million foreign tourists who visit the U.S. each year would pay it. The distributional effects of the FairTax have been extensively studied, and although the proposal has distinct advantages for investors and wealth creation across the income spectrum, the greatest benefit of the FairTax is to low- and moderate-income Americans.
The effect of eliminating regressive payroll taxes is commonly overlooked when analyzing the FairTax, but it would have a very significant impact, as these taxes represent the single largest tax burden on these income earners. Significantly, the FairTax eliminates all loopholes, gimmicks, exemptions and deductions from the federal tax system. Under the FairTax, Congress would no longer be able to reward friends, punish enemies or manipulate behavior through the tax code.
The FairTax would also eliminate the lucrative tax lobbying practices that represent more than 50% of all lobby dollars spent annually in Washington. It's no surprise, then, to see that vested interests have argued against the FairTax and in favor of keeping the mortgage interest deduction. But wouldn't it be better for everyone to stop the IRS from withholding from paychecks; to see the price of new homes -- and all other goods -- drop by removing embedded costs; and to have interest rates fall as the savings rate increases?
Is it really in everyone's interests to keep the income-tax system so that one-third of taxpayers can go on deducting a portion of their mortgage interest from their federal taxes? There have been many tax reform proposals over the years, but most of them simply call for reforming around the margins of the existing tax system.
The President's Advisory Panel on Tax Reform was assembled by the Bush administration and concluded its work a few years ago. Instead of seriously looking at the FairTax, the panel looked at a very different type of consumption tax, riddled with exemptions, and then declared that it would be too expensive and that the rate would have to be far higher than the FairTax rate.
Politically, the FairTax will only become law once enough citizens demand that it be enacted, overcoming the self-interest that members of Congress and others have in holding onto the current system. It is debatable whether a modern, citizen-led tax revolution is possible. But the growing popularity (even among presidential candidates) of the FairTax suggests that another Boston Tea Party may be at hand.
Mr. Linbeck is CEO and cofounder of Americans for Fair Taxation.
If you agree with the idea of the FairTax, go to my link on signing the petition and DO IT. We need all the support we can get to get our congressmen to listen to us instead of the lobbyists.
Friday, December 21, 2007
SOME ANSWERS A FAIRTAX CRITIQUE
A reader named Derek has done an excellent job of answering Hayden Kepner’s summary of James Taranto’s critique of the FairTax in the Wall Street Journal. I’m pasting Derek’s answer below. Hayden, thanks for the summary.
"Little David", this may answer some of your questions. Also, there are some glitches in the new FairTax Calculator. They are working them out, so you might try your figuring a little later. I will let you know on this blog when the problems are fixed.
1. “If someone’s tax goes down, somebody else’s need to go up.” Complaints along these lines rely upon a belief that the current tax system is set up perfectly, and that are placement is judged based on whether or not it taxed everyone the same as the old system. If that was the point of a replacement, why replace it?
The fact is, the current tax system taxes income, while the FairTax taxes consumption over the poverty level. So of course, it will go up for some and down for others. However, claims that the poor and middle classes get hard by this are ridiculous.
First,the FairTax removes all tax burden for those at or under the poverty level. They can spend 100% of their income on consumption and pay zero taxes, whether explicit or embedded in the price of the products. This is not true today, where even the poorest payabout 22% of all of their consumption spending on hidden, embedded tax costs. Anyone who argues that the poor will be adversely affected by the FairTax either doesn’t understand it or is purposely being deceptive.
For the middle class, the degree to which they get hit by the FairTax is completely dependent on the degree to which they spend money beyond the poverty level. So for those just beyond poverty, there is very little tax cost. For those spending at 2x times poverty, which probably covers most people, their tax cost is half of the FairTax rate (11.5% of their spending).
The full FairTax rate is only felt once you get to spending far beyond the poverty level, at which point you are probably no longer considered middle class. In addition to paying the correspondingly-lower sales tax rate, as explained above,middle class taxpayers will (like all taxpayers) benefit from a reduction in the embedded taxes in our current prices ... which will vary from one industry to the next, but in some circumstances are as high as 20% of the current price of goods.
Also, like everyone else under the FairTax, the middle class — which is increasingly savvy about investing their money — will be able to make their investments 100% tax-free. This makes it even easier for middle class families to become upper class families.For these reasons, it’s actually pretty mind-boggling to me why anyone would claim that the middle-class will be hardest hit.
The folks who are hardest-hit will be those who currently pay little-to-no income tax (e.g., trust fund babies, drug dealers, etc) but who live lavishly and spend a lot of money.
2. The underground economy is a lose some, gain some. We currently have no way to tax underground income now (taxing income of prostitues and drug dealers) - under theFairTax, we won’t be able to tax underground consumption (taxing the payment of prostitutes and purchases of drugs). There’s really little difference there. You move the imposition of income tax on the person purchasing an illegal product or service to imposition of consumption tax on the person spending the money achieved through illegal activities.
I agree that this isn’t a reason to enact the FairTax, but it’s not a reason to criticize it, either. In theory, though, it does bring more elements of the underground economy in line since even a drug dealer has to buy food at the grocery store, buy gas for their car, etc., all of which is participation in the taxable economy.
The amount of money that these people spend each year is no trivial thing, incidentally. Some knowledgeable estimates put it as high as a trillion dollars annually. Currently that money is not subject to the income tax, but it would be subject to the FairTax —potentially raising billions in revenue.
3. Economic growth. “When you reduce tax rates to zero...” Tax rates are not reduced to zero. They are replaced by consumption taxes. And in that scenario, businesses will no longer have to focus on the tax costs of their decisions, and it will free up businesses to make decisions based on growth and profitability without worry about taxes.
It also makes US companies much more competitive globally — our current tax structure is a major impediment to US economic growth.
4. “When you tax consumption, people spend less.” Is it assumed that the only reason people spend money is because it’s already been taxed as income? Certainly tax decisions influence consumption decisions — but the desire, need, and drive to consume will always be there. If people decide to spend less and give more to charity to avoid paying consumption taxes, isn’t this true under our current system? And if people decide to spend less and save more to avoid paying consumption taxes, doesn’t this help create jobs and expand the economy?
“The tax will hit hardest on those who NEED to spend money.” And it will only hit money spent beyond the poverty level. And that is consistent no matter how much you spend. And if you don’t spend it, you can only either give it away or save it. Both of them are positive things.
5. “The yacht industry suffered under a 10% ‘luxury tax;’ just imagine what would happen under a 30% FairTax.” The reason luxury taxes don’t work is because it shifts incentives from one category to another. If you raise taxes on a specific luxury (or class of luxuries), then other items because more favorable because they are taxed less.
So rather than buy a yacht, maybe I’ll consider a 2nd home since that won’t be taxed as much. TheFairTax avoids this because all products and services are taxed equally. It is, inreality, completely different from a luxury tax and the comparison doesn’t hold.
"Little David", this may answer some of your questions. Also, there are some glitches in the new FairTax Calculator. They are working them out, so you might try your figuring a little later. I will let you know on this blog when the problems are fixed.
1. “If someone’s tax goes down, somebody else’s need to go up.” Complaints along these lines rely upon a belief that the current tax system is set up perfectly, and that are placement is judged based on whether or not it taxed everyone the same as the old system. If that was the point of a replacement, why replace it?
The fact is, the current tax system taxes income, while the FairTax taxes consumption over the poverty level. So of course, it will go up for some and down for others. However, claims that the poor and middle classes get hard by this are ridiculous.
First,the FairTax removes all tax burden for those at or under the poverty level. They can spend 100% of their income on consumption and pay zero taxes, whether explicit or embedded in the price of the products. This is not true today, where even the poorest payabout 22% of all of their consumption spending on hidden, embedded tax costs. Anyone who argues that the poor will be adversely affected by the FairTax either doesn’t understand it or is purposely being deceptive.
For the middle class, the degree to which they get hit by the FairTax is completely dependent on the degree to which they spend money beyond the poverty level. So for those just beyond poverty, there is very little tax cost. For those spending at 2x times poverty, which probably covers most people, their tax cost is half of the FairTax rate (11.5% of their spending).
The full FairTax rate is only felt once you get to spending far beyond the poverty level, at which point you are probably no longer considered middle class. In addition to paying the correspondingly-lower sales tax rate, as explained above,middle class taxpayers will (like all taxpayers) benefit from a reduction in the embedded taxes in our current prices ... which will vary from one industry to the next, but in some circumstances are as high as 20% of the current price of goods.
Also, like everyone else under the FairTax, the middle class — which is increasingly savvy about investing their money — will be able to make their investments 100% tax-free. This makes it even easier for middle class families to become upper class families.For these reasons, it’s actually pretty mind-boggling to me why anyone would claim that the middle-class will be hardest hit.
The folks who are hardest-hit will be those who currently pay little-to-no income tax (e.g., trust fund babies, drug dealers, etc) but who live lavishly and spend a lot of money.
2. The underground economy is a lose some, gain some. We currently have no way to tax underground income now (taxing income of prostitues and drug dealers) - under theFairTax, we won’t be able to tax underground consumption (taxing the payment of prostitutes and purchases of drugs). There’s really little difference there. You move the imposition of income tax on the person purchasing an illegal product or service to imposition of consumption tax on the person spending the money achieved through illegal activities.
I agree that this isn’t a reason to enact the FairTax, but it’s not a reason to criticize it, either. In theory, though, it does bring more elements of the underground economy in line since even a drug dealer has to buy food at the grocery store, buy gas for their car, etc., all of which is participation in the taxable economy.
The amount of money that these people spend each year is no trivial thing, incidentally. Some knowledgeable estimates put it as high as a trillion dollars annually. Currently that money is not subject to the income tax, but it would be subject to the FairTax —potentially raising billions in revenue.
3. Economic growth. “When you reduce tax rates to zero...” Tax rates are not reduced to zero. They are replaced by consumption taxes. And in that scenario, businesses will no longer have to focus on the tax costs of their decisions, and it will free up businesses to make decisions based on growth and profitability without worry about taxes.
It also makes US companies much more competitive globally — our current tax structure is a major impediment to US economic growth.
4. “When you tax consumption, people spend less.” Is it assumed that the only reason people spend money is because it’s already been taxed as income? Certainly tax decisions influence consumption decisions — but the desire, need, and drive to consume will always be there. If people decide to spend less and give more to charity to avoid paying consumption taxes, isn’t this true under our current system? And if people decide to spend less and save more to avoid paying consumption taxes, doesn’t this help create jobs and expand the economy?
“The tax will hit hardest on those who NEED to spend money.” And it will only hit money spent beyond the poverty level. And that is consistent no matter how much you spend. And if you don’t spend it, you can only either give it away or save it. Both of them are positive things.
5. “The yacht industry suffered under a 10% ‘luxury tax;’ just imagine what would happen under a 30% FairTax.” The reason luxury taxes don’t work is because it shifts incentives from one category to another. If you raise taxes on a specific luxury (or class of luxuries), then other items because more favorable because they are taxed less.
So rather than buy a yacht, maybe I’ll consider a 2nd home since that won’t be taxed as much. TheFairTax avoids this because all products and services are taxed equally. It is, inreality, completely different from a luxury tax and the comparison doesn’t hold.
Wednesday, December 19, 2007
I ADDED A PICTURE!
I added a picture today of my great grandson, Wyatt. I imagine a lot of you people out there are getting just about as tired as he is. Well, hang in there - Christmas is almost here.
I couldn't resist putting this picture in my blog today. It says so much about why I am doing this. I won't be getting near the benefits that Wyatt will when he starts earning a paycheck, if the FairTax is in place by then. I hope we don't have to wait that long.
I appreciate the open discussions possible in this blog and I appreciate the fact that you are not abusing my blog with name calling and bad words ("bathroom language", as my Dad used to call it). I think we can all agree on one thing - we certainly do need a change in our tax system.
I would just like to see our politicians doing something - anything - of value to us while they are in office. They seem bent on one thing - lining their own pockets and getting on the government pension dole. They don't seem to care about fixing Social Security, Medicare, the Income Tax System, or anything else that benefits their constituents. I think it is time to write some letters and then back it up by going to the polls and voting these do-nothings out of office. They are treading on my freedoms.
Bah, Humbug.
Merry Christmas.
I couldn't resist putting this picture in my blog today. It says so much about why I am doing this. I won't be getting near the benefits that Wyatt will when he starts earning a paycheck, if the FairTax is in place by then. I hope we don't have to wait that long.
I appreciate the open discussions possible in this blog and I appreciate the fact that you are not abusing my blog with name calling and bad words ("bathroom language", as my Dad used to call it). I think we can all agree on one thing - we certainly do need a change in our tax system.
I would just like to see our politicians doing something - anything - of value to us while they are in office. They seem bent on one thing - lining their own pockets and getting on the government pension dole. They don't seem to care about fixing Social Security, Medicare, the Income Tax System, or anything else that benefits their constituents. I think it is time to write some letters and then back it up by going to the polls and voting these do-nothings out of office. They are treading on my freedoms.
Bah, Humbug.
Merry Christmas.
Tuesday, December 18, 2007
IMPACT ON TAX LAWYERS, PREPARERS & CPA'S
Following are a couple of paragraphs taken from a FairTax Volunteer letter. We discussed the impact on tax lawyers, tax preparers and CPA's a while back and I thought this was an interesting addition:
"I have talked to a couple of tax preparers and a CPA, and they are the first to admit our current system is way too complex. Blue ribbon economists have projected the Gross Domestic Product would jump 10% the first year, and continue at that rate for the foreseeable future. People with accounting skills should have no trouble finding new work in such an environment.
As far as the impact on the middle class is concerned, all except the very highest tax brackets would enjoy a net savings on their effective tax. The reason for that is that the FairTax opens up a much broader base to be taxed, including non-reported income, illegal activities, loopholes, and tourists. The FairTax is a win, win, win."
Also, I have posted a new FairTax Calculator in the links section. There are easy-to-answer questions that lead to a logical conclusion that gives you a side-by-side comparison of your own tax situation comparing the income tax with the FairTax. Give it a try.
"I have talked to a couple of tax preparers and a CPA, and they are the first to admit our current system is way too complex. Blue ribbon economists have projected the Gross Domestic Product would jump 10% the first year, and continue at that rate for the foreseeable future. People with accounting skills should have no trouble finding new work in such an environment.
As far as the impact on the middle class is concerned, all except the very highest tax brackets would enjoy a net savings on their effective tax. The reason for that is that the FairTax opens up a much broader base to be taxed, including non-reported income, illegal activities, loopholes, and tourists. The FairTax is a win, win, win."
Also, I have posted a new FairTax Calculator in the links section. There are easy-to-answer questions that lead to a logical conclusion that gives you a side-by-side comparison of your own tax situation comparing the income tax with the FairTax. Give it a try.
Monday, December 17, 2007
HERE'S MORE FOOD FOR THOUGHT
Thanks everyone, for keeping my blog active this week. You have had some good discussions and I appreciate the politeness and respect that goes along with it.
Below is an interesting letter from a fellow FairTax volunteer, Kenneth Van Dellen:
What do you think of this? I think we should put out an eye-catching leaflet that asks some good questions.Would you like a tax system that...
Below is an interesting letter from a fellow FairTax volunteer, Kenneth Van Dellen:
What do you think of this? I think we should put out an eye-catching leaflet that asks some good questions.Would you like a tax system that...
- Replaces the income tax, SS tax, etc., with a fairer tax?
- Lets you buy used items (houses, cars, clothes) with untaxed dollars?
- Lets you buy basic necessities with untaxed dollars?
- Completely untaxes the poorest?
- Taxes others according to what they are able to spend?
- Lets you give gifts to churches, charities, family members, and friends with untaxed dollars? (I don't think family and friends will qualify for untaxed dollars - Bobbie)
- Lets you use untaxed dollars for educational expenses?
- Does not require you to keep income and expense records if you want some of your tax payments back (as a tax refund)?
- Does not require you to pay an accountant to be sure you pay what you should and get refunded what you should get?
- Does not require you to reveal all kinds of private information to a government agency?
- Does not cause you any concern about being audited, investigated, or worse?
- Lets you pay your tax when it is due, not before you get the money?
- Makes it impossible to pay too much and have to wait months for a refund, or to not pay enough and have to send a check to the IRS?
And the list goes on…You get the idea. Rather than telling folks all about it, which we can do later, let's arouse their curiosity. Then tell them how to get more information.Perhaps my "50 Reasons Why I Like the FairTax" could be turned into 50 questions. I haven't studied that. The above items were pretty much off-the-cuff, and could possibly be worded better in some cases.
Monday, December 10, 2007
FAIRTAX – WELL, WHICH IS IT-23% OR 30%?
I keep getting letters and seeing articles about whether the FairTax is really 23% or maybe 30%.
The FairTax advocates like to say 23% (inclusive) for one simple reason – comparing it one on one with the current income tax (also inclusive). All of our taxes now are taken out of our gross paycheck, before anything else – right off the top. It is a certain percentage, based on your gross income. It is not added on top of your gross. Get it? (Of course, your income tax is arrived at after many individual deductions, but that is another story)
The FairTax naysayers like to say 30% for one simple reason – to kill the whole idea of the FairTax by making it sound worse than the FairTax advocates call it. The 30% is an “exclusive” tax, which does not compare at all with the present income tax.
Now let’s complicate things a bit. Let’s make a fair comparison with the present income tax. That’s where it gets confusing, people’s eyes cross and their minds go blank.
It is easy to take 23% of someone’s gross income (well, easy for the government), but let me show you how that would have to come about if, say, you were selling your house. Your Realtor comes and says your house is worth $100,000. Well, you look the Realtor in the eye and say “Fine, add your commission to the top of that and I will list with you”. So the Realtor gets out his trusty calculator, puts the $100,000 into it and divides that by 94% and comes up with $106,382.98, rounds it up to $106,400 and gets the listing. When the Realtor finds a buyer for $106,400, he shows you the amount you will gross after his commission: $100,016. That makes you happy and you sign the papers to sell. The Realtor is happy because he gets his 6% commission. The buyer is happy because he gets the house he wants. The lender is happy because it appraises up to price.
What we have just done is make the price of this home “inclusive” of the Realtor’s commission, whereas the homeowner had told the Realtor to make it “exclusive” (add the commission on top of my price). You see, the Realtor has to talk full price; therefore, the price of the home had to “include” his commission.
When the merchant sells his goods, he has an amount he has to gross. Let’s say he needs to gross $1.00. In order to do this, he has to add the amount of the tax to his gross profit, just like the Realtor had to add his commission amount. He gets out his trusty calculator, puts in $1.00 and divides it by 77% (1.00-.23=.77) which adds a 23% sales tax to his $1.00. Well, low and behold, that comes to $1.30 so naturally the naysayers call it a 30% tax. Well, if that were true, the merchant would have to charge $1.43 for his product in order to gross his $1.00 amount. Do the math. $1.30 - 23% = $1.00.
The merchant has to sell his goods and services at one price, a price that “includes” the sales tax. If you think it is worth it, you buy it; if you don’t, you won’t buy it. You make that judgment based on the total price, not the price the merchant wants, only to be hit with a 23% sales tax at the cash register. Your receipt automatically breaks out the tax amount so you will see exactly how much you spent in taxes. You don’t have to keep that receipt because you don’t need it to keep as a deduction when you file your taxes in April. Why? Because you won’t be filing (or paying!) taxes in April, ever again; therefore, you don’t need any deductions (including your home mortgage deduction)
The merchant has to keep that receipt, because he has to file a report along with the tax money he sends to the government every month. He gets paid for doing this, by the way, just like your tax account used to (only not nearly so much!)
These examples probably did not clear up the muddy waters for you. I think the only reason it made sense to me immediately is because I was a Realtor and many times have been told to add my commission to the top of the price I quoted to a seller. This is another example of embedded taxes, which is done all along the merchandising line, driving prices ever upward.
There are approximately 22% embedded taxes in every thing you buy. With the advent of the FairTax, this practice will stop, because goods and services are taxed only once: at the point of sale. How will it stop? Good old American competition. So if the prices go down by 22% and the FairTax is included in the price of goods and services (23%), it looks to me like you will be paying out 1% difference between the two, which isn’t going to change prices much at all, either up or down.
But you will be keeping 100% of your paycheck! No more payroll taxes and no more income taxes. Plus you will be getting a monthly prebate to help you stomach all of this .
This is terribly long today and the closer Christmas is, the busier I get. I am going to let you digest this for a week and comment on it. Also, go back and read my other blog on the 23%vs30% sales tax and maybe it will sink in. It’s a hard thing to grasp. I welcome your comments. Maybe someone else can explain it better than I. I have to relate it to something I know – real estate – and I thought these examples might be helpful to you also.
I noticed a number of interesting comments on my last blog - makes for good reading this week.
The FairTax advocates like to say 23% (inclusive) for one simple reason – comparing it one on one with the current income tax (also inclusive). All of our taxes now are taken out of our gross paycheck, before anything else – right off the top. It is a certain percentage, based on your gross income. It is not added on top of your gross. Get it? (Of course, your income tax is arrived at after many individual deductions, but that is another story)
The FairTax naysayers like to say 30% for one simple reason – to kill the whole idea of the FairTax by making it sound worse than the FairTax advocates call it. The 30% is an “exclusive” tax, which does not compare at all with the present income tax.
Now let’s complicate things a bit. Let’s make a fair comparison with the present income tax. That’s where it gets confusing, people’s eyes cross and their minds go blank.
It is easy to take 23% of someone’s gross income (well, easy for the government), but let me show you how that would have to come about if, say, you were selling your house. Your Realtor comes and says your house is worth $100,000. Well, you look the Realtor in the eye and say “Fine, add your commission to the top of that and I will list with you”. So the Realtor gets out his trusty calculator, puts the $100,000 into it and divides that by 94% and comes up with $106,382.98, rounds it up to $106,400 and gets the listing. When the Realtor finds a buyer for $106,400, he shows you the amount you will gross after his commission: $100,016. That makes you happy and you sign the papers to sell. The Realtor is happy because he gets his 6% commission. The buyer is happy because he gets the house he wants. The lender is happy because it appraises up to price.
What we have just done is make the price of this home “inclusive” of the Realtor’s commission, whereas the homeowner had told the Realtor to make it “exclusive” (add the commission on top of my price). You see, the Realtor has to talk full price; therefore, the price of the home had to “include” his commission.
When the merchant sells his goods, he has an amount he has to gross. Let’s say he needs to gross $1.00. In order to do this, he has to add the amount of the tax to his gross profit, just like the Realtor had to add his commission amount. He gets out his trusty calculator, puts in $1.00 and divides it by 77% (1.00-.23=.77) which adds a 23% sales tax to his $1.00. Well, low and behold, that comes to $1.30 so naturally the naysayers call it a 30% tax. Well, if that were true, the merchant would have to charge $1.43 for his product in order to gross his $1.00 amount. Do the math. $1.30 - 23% = $1.00.
The merchant has to sell his goods and services at one price, a price that “includes” the sales tax. If you think it is worth it, you buy it; if you don’t, you won’t buy it. You make that judgment based on the total price, not the price the merchant wants, only to be hit with a 23% sales tax at the cash register. Your receipt automatically breaks out the tax amount so you will see exactly how much you spent in taxes. You don’t have to keep that receipt because you don’t need it to keep as a deduction when you file your taxes in April. Why? Because you won’t be filing (or paying!) taxes in April, ever again; therefore, you don’t need any deductions (including your home mortgage deduction)
The merchant has to keep that receipt, because he has to file a report along with the tax money he sends to the government every month. He gets paid for doing this, by the way, just like your tax account used to (only not nearly so much!)
These examples probably did not clear up the muddy waters for you. I think the only reason it made sense to me immediately is because I was a Realtor and many times have been told to add my commission to the top of the price I quoted to a seller. This is another example of embedded taxes, which is done all along the merchandising line, driving prices ever upward.
There are approximately 22% embedded taxes in every thing you buy. With the advent of the FairTax, this practice will stop, because goods and services are taxed only once: at the point of sale. How will it stop? Good old American competition. So if the prices go down by 22% and the FairTax is included in the price of goods and services (23%), it looks to me like you will be paying out 1% difference between the two, which isn’t going to change prices much at all, either up or down.
But you will be keeping 100% of your paycheck! No more payroll taxes and no more income taxes. Plus you will be getting a monthly prebate to help you stomach all of this .
This is terribly long today and the closer Christmas is, the busier I get. I am going to let you digest this for a week and comment on it. Also, go back and read my other blog on the 23%vs30% sales tax and maybe it will sink in. It’s a hard thing to grasp. I welcome your comments. Maybe someone else can explain it better than I. I have to relate it to something I know – real estate – and I thought these examples might be helpful to you also.
I noticed a number of interesting comments on my last blog - makes for good reading this week.
Thursday, December 6, 2007
A GREAT LETTER TO THE WALL ST. JOURNAL
This letter is from a fellow Fellow FairTax volunteer. It makes some excellent points. It is nice that the media is starting to talk about the FairTax, but I do wish they would do their research and get it right. This letter goes a long way in setting them straight:
To: The Editor of the Wall Street Journal
Regarding: Article "The Huckabee Contradiction" December 5, 2007; Page A24
Dear Editor,
I'm responding to the comments made in your December 5 article on Huckabee where you say, "the fair tax would be worth consideration if we were writing a tax code from scratch. Realistically, we're not. The plan would require repealing the Sixteenth Amendment that allowed a federal income tax, and the chances of that happening are approximately zero."
The problem, plain and simple, is that the tax code has been manipulated for too long to benefit those who can afford to fund the 35,000 lobbyist army that descends on Capital Hill, year-in and year-out.
The solution, plain and simple, is that THE EXISTING TAX CODE MUST BE COMPLETELY SCRAPPED! No flat-tax or band-aid fixes will ever be true reform . A flat will simply revert us back to where our tax situation was 40-50 years ago, and any further tinkering with the tax code will just be more of the same abuse that we've endured over the past three decades.
The only answer to real tax reform is not reform at all, but replacement! The FairTax(sm), H.R. 25, is the only tax plan ever proposed that can and will lead us to eliminate the 16th Amendment, and here are just some of the reasons why:
A 23% consumption tax (calculated the same way as income tax today) on NEW goods and services will eliminate/replace all forms of personal and corporate income taxation, including inheritance tax, capital gains tax, AMT, and payroll tax.
No individual or business will ever file a tax return again. IRS forms and tax schedules will become a distant memory. The IRS as we know it will be obsoleted and eliminated, no longer needed to enforce a bloated, incomprehensible tax code that penalizes every hard-working American for their success with a graduated Marxist income tax that only the rich can afford to circumvent by paying a mere 15% in capital gains tax.
The simple monthly FairTax prebate will ensure that no household will pay taxes on their basic necessities of life up to the poverty level (as set by the US Dept. of Health and Human Services), making the FairTax the ONLY tax plan that will completely untax the poor while lowering the overall tax impact on middle income families. But the wealthier you are, the more you'll consume and the more you'll contribute to the federal revenue. That's fair.
Under the FairTax, anyone earning income under the table will no longer be able to get away without paying taxes, whether they are here legally or otherwise. No flat income tax proposal or "simple" reform plan will ever do that.
In addition, the FairTax will once-and-for-all prevent Social Security and Medicare from going bankrupt by providing a far more stable source of revenue (consumer spending vs. wages). Remember, consumers include EVERY living, breathing human being on American soil, including the 50 million+ visitors annually that come here to tour, go to our universities, or to fill temporary work visas.
Finally, in case you haven't seen it, Section 2.f. of H.R. 25 (attached here for your convenience), actually calls for the repeal of the 16th Amendment:
"SEC. 2. CONGRESSIONAL FINDINGS. (f) FINDINGS RELATING TO REPEAL OF PRESENT FEDERAL TAX SYSTEM.—Congress further finds that the 16th amendment to the United States Constitution should be repealed."
You can argue over the word "should" if you like, but all of the above will be a nail in the 16th Amendment's coffin, and there are many more to the FairTax than I've listed here. Rest assured, there will not be a soul in America that will want to revert back to the income tax once the FairTax is put into place.
Once the FairTax is enacted, the grassroots that helped make it a reality--the same grassroots that have been here long before Huckabee--will immediately turn attention to permanent repeal of the 16th Amendment. And we will prevail.
Until then, until you actually have a plan to replace the income tax, there's no chance for the 16th Amendment to be repealed.
THAT'S why the FairTax is the ONLY plan that will make the 16th Amendment history.
Best wishes,
Greg Dutton, Arizona Volunteer State Director
Americans For Fair Taxation
National Web Site: http://www.fairtax.org/
State Web Site: http://www.azfairtax.org/
Online Petition: http://www.fairtax.org/action/petition.aspx
eMail: StateDirector@AZFairTax.org
Phone: (480) 763-9791
Fax: (480) 718-8182
To: The Editor of the Wall Street Journal
Regarding: Article "The Huckabee Contradiction" December 5, 2007; Page A24
Dear Editor,
I'm responding to the comments made in your December 5 article on Huckabee where you say, "the fair tax would be worth consideration if we were writing a tax code from scratch. Realistically, we're not. The plan would require repealing the Sixteenth Amendment that allowed a federal income tax, and the chances of that happening are approximately zero."
The problem, plain and simple, is that the tax code has been manipulated for too long to benefit those who can afford to fund the 35,000 lobbyist army that descends on Capital Hill, year-in and year-out.
The solution, plain and simple, is that THE EXISTING TAX CODE MUST BE COMPLETELY SCRAPPED! No flat-tax or band-aid fixes will ever be true reform . A flat will simply revert us back to where our tax situation was 40-50 years ago, and any further tinkering with the tax code will just be more of the same abuse that we've endured over the past three decades.
The only answer to real tax reform is not reform at all, but replacement! The FairTax(sm), H.R. 25, is the only tax plan ever proposed that can and will lead us to eliminate the 16th Amendment, and here are just some of the reasons why:
A 23% consumption tax (calculated the same way as income tax today) on NEW goods and services will eliminate/replace all forms of personal and corporate income taxation, including inheritance tax, capital gains tax, AMT, and payroll tax.
No individual or business will ever file a tax return again. IRS forms and tax schedules will become a distant memory. The IRS as we know it will be obsoleted and eliminated, no longer needed to enforce a bloated, incomprehensible tax code that penalizes every hard-working American for their success with a graduated Marxist income tax that only the rich can afford to circumvent by paying a mere 15% in capital gains tax.
The simple monthly FairTax prebate will ensure that no household will pay taxes on their basic necessities of life up to the poverty level (as set by the US Dept. of Health and Human Services), making the FairTax the ONLY tax plan that will completely untax the poor while lowering the overall tax impact on middle income families. But the wealthier you are, the more you'll consume and the more you'll contribute to the federal revenue. That's fair.
Under the FairTax, anyone earning income under the table will no longer be able to get away without paying taxes, whether they are here legally or otherwise. No flat income tax proposal or "simple" reform plan will ever do that.
In addition, the FairTax will once-and-for-all prevent Social Security and Medicare from going bankrupt by providing a far more stable source of revenue (consumer spending vs. wages). Remember, consumers include EVERY living, breathing human being on American soil, including the 50 million+ visitors annually that come here to tour, go to our universities, or to fill temporary work visas.
Finally, in case you haven't seen it, Section 2.f. of H.R. 25 (attached here for your convenience), actually calls for the repeal of the 16th Amendment:
"SEC. 2. CONGRESSIONAL FINDINGS. (f) FINDINGS RELATING TO REPEAL OF PRESENT FEDERAL TAX SYSTEM.—Congress further finds that the 16th amendment to the United States Constitution should be repealed."
You can argue over the word "should" if you like, but all of the above will be a nail in the 16th Amendment's coffin, and there are many more to the FairTax than I've listed here. Rest assured, there will not be a soul in America that will want to revert back to the income tax once the FairTax is put into place.
Once the FairTax is enacted, the grassroots that helped make it a reality--the same grassroots that have been here long before Huckabee--will immediately turn attention to permanent repeal of the 16th Amendment. And we will prevail.
Until then, until you actually have a plan to replace the income tax, there's no chance for the 16th Amendment to be repealed.
THAT'S why the FairTax is the ONLY plan that will make the 16th Amendment history.
Best wishes,
Greg Dutton, Arizona Volunteer State Director
Americans For Fair Taxation
National Web Site: http://www.fairtax.org/
State Web Site: http://www.azfairtax.org/
Online Petition: http://www.fairtax.org/action/petition.aspx
eMail: StateDirector@AZFairTax.org
Phone: (480) 763-9791
Fax: (480) 718-8182
Tuesday, December 4, 2007
REPLY TO RICH LOWRY'S "MAGIC WAND OF TAX REFORM PLANS"
I have been reading e-mails about Rich Lowry's abomination of the FairTax in his opinion piece entitled "The Magic Wand of Tax Reform Plans. In it, he called the fair tax "daft", "politically unsalable", "so-called", "a bed-time story", "more complex than the current tax scheme".
His article was full of un-truths (lies) and I am submitting my reply to Mr. Lowry in the Oregonian as well as various other local newspapers in the area. I doubt if anything I send will reach print, so I guess that's what a blog is for: to state my views and refute the "big boys' lies".
Poor Rich Lowry, having to stoop to lies to turn us off the FairTax. We must be making progress with our grassroots campaign. Please allow me to address and correct Lowry’s Lies:
Lie #1: FairTax: “the most radical—and politically unsalable and substantively daft—proposal of any major presidential candidate of either party.”
Truth: FairTax: The most researched tax proposal to date, politically “salable” in that there are 72 members of Congress currently supporting this proposal. Lowry is calling the voting public “substantively daft”. I am not crazy—are you? Oh, and the FairTax reaches across the aisle, is non-partisan since everyone pays taxes and few, if any, like the IRS.
Lie #2: “The so-called (there we go again) FairTax would eliminate the income and payroll taxes and replace them with a (supposedly) 23% national sales tax.”
Truth: This statement is true except for the name-calling and the deliberate bashing of the 23% sales tax (Lowry says: “What they really are talking about is a tax of 30 cents on every dollar”). Doesn’t Lowry know the difference between an inclusive and an exclusive tax? The FairTax is being compared to the income tax on an “inclusive” basis, therefore it is 23%. It is like comparing apples to apples, Mr. Lowry.
Lie #3: “Nevermind that it is unworkable and would be politically deadly in a general election”.
Truth: The FairTax has been extensively researched by The Cato Institute, The Heritage Foundation, Fiscal Associates, Boston University, Stanford, Rice, MIT & other institutions. As for “politically deadly”, I say yes, only to the Lobbyists and the Senators and Representatives who want to control every aspect of our lives.
Lie #4: “The congressional Joint Committee on Taxation has estimated that the rate would have to go as high as 57%”.
Truth: With the FairTax, you will only be taxed once—at point of sale. No more embedded taxes added along the manufacturing line to cover the cost of payroll taxes and corporate taxes, which drives prices up and up. What we have now is a VAT tax PLUS and Income tax. And do you really think the Congressional Joint Committee wants to give up their control of you?
Lie #5: “it would amount to an incredibly regressive tax on even the most necessary purchases of low– and middle-income taxpayers.”
Truth: The FairTax would totally untax the poor and the elderly. The pre-bate makes this the most progressive tax of all the tax proposals on the table. As for middle-income taxpayers, you decide when and how much to pay in taxes.
Lie #6: “the government would send monthly “pre-bate” checks to all Americans based on income”.
Truth: The government would send monthly pre-bate checks to every head of household with a valid social security number, based on the annual poverty level determined by the Dep’t of Health and Human Services, NOT based on income. Remember, under the FairTax, no more income taxes, therefore no more reporting of income to the IRS..
Lie #7: “The mortgage deduction would be gone, and instead buyers would pay a 30% (at least) tax on their homes.”
Truth: There are two lies here: Yes, the mortgage deduction would be gone, but so would the income tax on every dollar you earn, therefore eliminating the need for a mortgage deduction. How much income tax deduction can you deduct from zero income tax? And yes, buyers would pay a 30% exclusive (Lowry used 23%, inclusive, in his other examples) tax on their homes, BUT only their NEW homes. Used homes and used goods are not taxed under the FairTax.
Lie of the day (#8): "Any of these points makes the FairTax so vulnerable to attack”…
Truth: Lowry is right about this point, and he knows just how to attack—with lies.
His article was full of un-truths (lies) and I am submitting my reply to Mr. Lowry in the Oregonian as well as various other local newspapers in the area. I doubt if anything I send will reach print, so I guess that's what a blog is for: to state my views and refute the "big boys' lies".
Poor Rich Lowry, having to stoop to lies to turn us off the FairTax. We must be making progress with our grassroots campaign. Please allow me to address and correct Lowry’s Lies:
Lie #1: FairTax: “the most radical—and politically unsalable and substantively daft—proposal of any major presidential candidate of either party.”
Truth: FairTax: The most researched tax proposal to date, politically “salable” in that there are 72 members of Congress currently supporting this proposal. Lowry is calling the voting public “substantively daft”. I am not crazy—are you? Oh, and the FairTax reaches across the aisle, is non-partisan since everyone pays taxes and few, if any, like the IRS.
Lie #2: “The so-called (there we go again) FairTax would eliminate the income and payroll taxes and replace them with a (supposedly) 23% national sales tax.”
Truth: This statement is true except for the name-calling and the deliberate bashing of the 23% sales tax (Lowry says: “What they really are talking about is a tax of 30 cents on every dollar”). Doesn’t Lowry know the difference between an inclusive and an exclusive tax? The FairTax is being compared to the income tax on an “inclusive” basis, therefore it is 23%. It is like comparing apples to apples, Mr. Lowry.
Lie #3: “Nevermind that it is unworkable and would be politically deadly in a general election”.
Truth: The FairTax has been extensively researched by The Cato Institute, The Heritage Foundation, Fiscal Associates, Boston University, Stanford, Rice, MIT & other institutions. As for “politically deadly”, I say yes, only to the Lobbyists and the Senators and Representatives who want to control every aspect of our lives.
Lie #4: “The congressional Joint Committee on Taxation has estimated that the rate would have to go as high as 57%”.
Truth: With the FairTax, you will only be taxed once—at point of sale. No more embedded taxes added along the manufacturing line to cover the cost of payroll taxes and corporate taxes, which drives prices up and up. What we have now is a VAT tax PLUS and Income tax. And do you really think the Congressional Joint Committee wants to give up their control of you?
Lie #5: “it would amount to an incredibly regressive tax on even the most necessary purchases of low– and middle-income taxpayers.”
Truth: The FairTax would totally untax the poor and the elderly. The pre-bate makes this the most progressive tax of all the tax proposals on the table. As for middle-income taxpayers, you decide when and how much to pay in taxes.
Lie #6: “the government would send monthly “pre-bate” checks to all Americans based on income”.
Truth: The government would send monthly pre-bate checks to every head of household with a valid social security number, based on the annual poverty level determined by the Dep’t of Health and Human Services, NOT based on income. Remember, under the FairTax, no more income taxes, therefore no more reporting of income to the IRS..
Lie #7: “The mortgage deduction would be gone, and instead buyers would pay a 30% (at least) tax on their homes.”
Truth: There are two lies here: Yes, the mortgage deduction would be gone, but so would the income tax on every dollar you earn, therefore eliminating the need for a mortgage deduction. How much income tax deduction can you deduct from zero income tax? And yes, buyers would pay a 30% exclusive (Lowry used 23%, inclusive, in his other examples) tax on their homes, BUT only their NEW homes. Used homes and used goods are not taxed under the FairTax.
Lie of the day (#8): "Any of these points makes the FairTax so vulnerable to attack”…
Truth: Lowry is right about this point, and he knows just how to attack—with lies.
Monday, December 3, 2007
THE FAIRTAX ALLOWS WAGE-EARNERS TO SAVE MORE MONEY, FASTER
The FairTax would allow wage-earners to save more money faster for home ownership, education, investments and retirement. The FairTax increases your purchasing power, making it easier to get ahead financially by eliminating:
the individual income tax
the payroll income tax
the estate tax and the gift tax
capital gains taxes
the alternative minimum tax
the self-employment tax
the corporate income tax
Each individual would have their entire paycheck to spend as they wish, save for a new home, pay their child's tuition, invest in the future, etc. Take a look at your pay check and add up the amount that is deducted each pay period for taxes. This is the amount you would be able to use to advance yourself monetarily in whichever way you choose.
The elderly would receive their entire social security check, not a check minus the deduction for medicare. (Medicare as well as Social Security deductions will be paid through the consumption tax) They would also have the prebate to help them with monthly expenses. Lots of older people don't spend more than a minimal amount for new goods and services. They already have a lifetime accumulation of furniture, dishes and "things", so the consumption tax is not going to be a problem for them.
The poor do not spend a lot on new goods and services, because they don't have the money to spend. The prebate will be a god-send for them. The poor buy used cars, clothing and "things", which will be exempt from the consumption tax. They will actually be better off and may even be able to get ahead in this world, for a change.
The rich will continue to spend as they have become accustomed to. They are used to buying the newest and the best and they will continue to do so. In fact, they will be paying their fair share for the first time in their lives because they can't hide their money in tax loop-holes or off-shore accounts. Well, they can, but they can keep it here now, circulating in the U.S.A. because they are no longer penalized or taxed to the max for having it.
None of us will be penalized for earning a living, as we are now. To read more about the FairTax, go to http://www.fairtax.org/ and read the basics or read the bill itself (HR25 & S1025)
I believe workers should keep their whole paychecks, don't you? www.FairTax.org
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