An excellent picture of what is going on today with politicians and taxes, submitted by a FairTax Volunteer:
POLITICIANS ONLY GIVE LIP SERVICE TO TAX REFORM
“There you go again.” At a recent presidential debate, this statement made famous by Ronald Reagan, should have been directed to both Senator Obama and Senator Clinton when each of them spoke of changing the tax code to penalize some groups and give relief to others. Both were campaigning on the promise of unifying Americans and changing the way business is done in Washington DC. As far as promoting unity, using changes in the tax code to favor one voting bloc while punishing another is a divisive tactic which has long been a staple policy of the Washington DC establishment. Thus, in one breath they champion unity and change and in their next they propose doing business the same old way. Witness the fact that our congresses have made some 16,000 changes in the tax code in the last 24 years! These changes have simply been a “carrot and stick” approach by republican and democratic legislators to win votes and increase their power to control their constituents. Obama and McCain have proven themselves by their own proposals, viz. change the tax code, to be part of the same old approach to solving America’s problems. If they were sincere they would promote the passage of the FairTax bill. This would unify Americans under a system that would eliminate income taxes and the 16th amendment. This system would fund the government at its current or higher level and be simple, transparent, and fair to every American. We need to demand that all of our candidates and congressmen first educate themselves and their constituents on the FairTax bill and then take a stand on it. All of our legislators need to make a fair and truthful evaluation of the FairTax Bill and stop giving only lip service to tax reform.
Imagine what a boost the American economy would experience if taxpayers were handed a virtual $400-billion-per-year tax cut! This amount of extra money in our pockets would work to grow the economy. Further imagine that even with this virtual tax cut, the government would continue to be funded at its current level. The treasury would merely have to collect federal taxes by a simpler, more transparent, and fairer system than that of our current tax code. The Fair Tax bills before Congress would replace the IRS with just such a system.
To look at the money spent just to comply with the current tax code from the point of view of its purchasing power, I will quote the report of President Bush’s Advisory Panel on Federal Tax Reform published in late 2005. The report states that the money spent by Americans filling out their tax forms would fund “the Department of Homeland Security, the Department of State, NASA, the Department of Housing and Urban Development, the Environmental Protection Agency, the Department of Transportation, the United States Congress, our federal courts, and all of the federal government’s foreign aid.”
This same advisory panel noted that widespread noncompliance costs each honest taxpayer an extra $2000 in taxes yearly. It further notes that due to the arbitrariness of the code increasing your income by 50% can increase your tax burden by 140%. It shows that marginal income tax rates can now rise over 30% for a family earning just $30,000 per year. That’s does not include the 15% payroll tax. A 45% marginal rate on a $30,000 yearly income is happening today! This comes straight from the advisory panel experts. Who in his right mind can prefer the current system to the 23% Fair Tax?
Sunday, June 29, 2008
Tuesday, June 24, 2008
THE COST OF PAYING INCOME TAXES
This came from a FairTax Volunteer - a good read and the hard truth...............
American tax payers bear a financial burden over and above what they pay in federal taxes. This extra burden consists in covering the tax gap and both the time and money spent to comply with the tax code. For 2001 alone the 130 million Americans who filed tax returns paid on average $2,649 extra to fill the gap created by Americans who did not pay their share. This means that the tax bills paid could have been 32.1% LOWER! These 130 million compliant tax payers paid on average $8,265when they should have paid only their fair share of $5,616.
The compliance burden hangs like a huge stone around the necks of all tax payers. It consists of all the time and money wasted on filling out forms, maintaining records, studying tax rules and other tax-related chores. Since 1913 the tax code has grown from 400 pages to over 67,000. In 2005 individuals, businesses, and non-profits spent 6 billion hours and over $265.1 billion to comply with the tax code. The hours spent represent a work force larger than the combined populations of Dallas, Detroit, and Washington DC and more than the total of workers employed in the auto, computer manufacturing, airline manufacturing, and steel industries.
Compliance costs are very regressive, hitting the poorest hardest. Adjusted gross incomes of less than $20,000 pay 5.8% of income while those of over $200,000 pay only 0.45%.
Small businesses bear an unfair burden in compliance costs. As far back as 1991 corporations with under $1 million or less in assets (90% of all corporations) paid $382 in compliance costs for every $100 they paid in income taxes. Corporations with $250 million or more in assets paid about $3 in compliance costs for each $100 paid in income taxes. In 2004 the average American business taxpayer spent $894 per employee on tax compliance activities, but small employers (less than 20 employees) spent $1,304 per employee.
The compliance costs for the private sector are 30 times what the compliance expenses of the IRS are.
The FairTax plan in Congress would slash compliance costs. It would decrease the number of tax filers by 80%. The replacement of the income tax with a national retail sales tax would reduce compliance costs by 95%. This would reduce the cost of doing business and lower the prices of goods while enabling businesses to hire more workers and pay higher wages. It is a cruel hoax when politicians say they are going to raise taxes on businesses. The result of this is to decrease employment and wages and raise the prices businesses charge to the consumers of their products and services.
American tax payers bear a financial burden over and above what they pay in federal taxes. This extra burden consists in covering the tax gap and both the time and money spent to comply with the tax code. For 2001 alone the 130 million Americans who filed tax returns paid on average $2,649 extra to fill the gap created by Americans who did not pay their share. This means that the tax bills paid could have been 32.1% LOWER! These 130 million compliant tax payers paid on average $8,265when they should have paid only their fair share of $5,616.
The compliance burden hangs like a huge stone around the necks of all tax payers. It consists of all the time and money wasted on filling out forms, maintaining records, studying tax rules and other tax-related chores. Since 1913 the tax code has grown from 400 pages to over 67,000. In 2005 individuals, businesses, and non-profits spent 6 billion hours and over $265.1 billion to comply with the tax code. The hours spent represent a work force larger than the combined populations of Dallas, Detroit, and Washington DC and more than the total of workers employed in the auto, computer manufacturing, airline manufacturing, and steel industries.
Compliance costs are very regressive, hitting the poorest hardest. Adjusted gross incomes of less than $20,000 pay 5.8% of income while those of over $200,000 pay only 0.45%.
Small businesses bear an unfair burden in compliance costs. As far back as 1991 corporations with under $1 million or less in assets (90% of all corporations) paid $382 in compliance costs for every $100 they paid in income taxes. Corporations with $250 million or more in assets paid about $3 in compliance costs for each $100 paid in income taxes. In 2004 the average American business taxpayer spent $894 per employee on tax compliance activities, but small employers (less than 20 employees) spent $1,304 per employee.
The compliance costs for the private sector are 30 times what the compliance expenses of the IRS are.
The FairTax plan in Congress would slash compliance costs. It would decrease the number of tax filers by 80%. The replacement of the income tax with a national retail sales tax would reduce compliance costs by 95%. This would reduce the cost of doing business and lower the prices of goods while enabling businesses to hire more workers and pay higher wages. It is a cruel hoax when politicians say they are going to raise taxes on businesses. The result of this is to decrease employment and wages and raise the prices businesses charge to the consumers of their products and services.
Friday, June 20, 2008
WHO GETS THE FICA DEDUCTIONS? EMPLOYER OR EMPLOYEE?
Here is some interesting correspondence between a couple of FairTax Volunteers:
I have always been assuming that we would see a 7.5% increase in take home pay with the FairTax due to no personal deductions for Fica and Medicare. The employer would seem a reduction in payroll costs of the same amount for their contribution as well as unemployment.
I see detractors saying that the employees would see a reduction in their wages. Are they considering the employer contribution to be part of the employees "wages" instead of a tax the employer pays?
Daniel P. Alston, DDS, PC
Dan,
I agree with your assessment (we will get a 7.5% increase in take home pay)
at least for the short term after the FairTax goes into effect.
There is no feature of the current FairTax Bill that would compel any other outcome.
Without such a feature both the employer and employee will get to keep their respective portions of FICA and MediCare taxes as well as the Income taxes.
Employers will try and keep the eliminated taxes as additional profits, however market forces will drive them to cut prices the 5% or so that these taxes add to the selling price of their products.
The mythical 21% price deduction that Neal Borts talks about so much relies on
the business keeping all of the tax reductions of both the business and the
employees. That flat out will not happen. We will have more money in our pockets
that we will need to spend to pay the FairTax added on to the slightly lower prices.
It's not a Free Lunch. Most people will end up with nearly identical standards of
living(consumption). Some at the low end of the income scale will benefit some
will pay more. Those that have no savings and are living hand to mouth will benefit
due to the prebate. Those that are living well off of savings and have no income
will likely pay more (the retired Rich). The retired living modestly with some savings will not be affected much due to the gross up in SS benefits and Prebate. Those currently borrowing to finance an extravagant lifestyle (currently tax free) will be hit hard by the FairTax. High earners accumulating wealth by saving and investing will benefit most.
I believe these effects are as they should be protecting the weak, rewarding the builders and punishing the takers.
Ron Woodward, PE
Yorktown, VA
I have always been assuming that we would see a 7.5% increase in take home pay with the FairTax due to no personal deductions for Fica and Medicare. The employer would seem a reduction in payroll costs of the same amount for their contribution as well as unemployment.
I see detractors saying that the employees would see a reduction in their wages. Are they considering the employer contribution to be part of the employees "wages" instead of a tax the employer pays?
Daniel P. Alston, DDS, PC
Dan,
I agree with your assessment (we will get a 7.5% increase in take home pay)
at least for the short term after the FairTax goes into effect.
There is no feature of the current FairTax Bill that would compel any other outcome.
Without such a feature both the employer and employee will get to keep their respective portions of FICA and MediCare taxes as well as the Income taxes.
Employers will try and keep the eliminated taxes as additional profits, however market forces will drive them to cut prices the 5% or so that these taxes add to the selling price of their products.
The mythical 21% price deduction that Neal Borts talks about so much relies on
the business keeping all of the tax reductions of both the business and the
employees. That flat out will not happen. We will have more money in our pockets
that we will need to spend to pay the FairTax added on to the slightly lower prices.
It's not a Free Lunch. Most people will end up with nearly identical standards of
living(consumption). Some at the low end of the income scale will benefit some
will pay more. Those that have no savings and are living hand to mouth will benefit
due to the prebate. Those that are living well off of savings and have no income
will likely pay more (the retired Rich). The retired living modestly with some savings will not be affected much due to the gross up in SS benefits and Prebate. Those currently borrowing to finance an extravagant lifestyle (currently tax free) will be hit hard by the FairTax. High earners accumulating wealth by saving and investing will benefit most.
I believe these effects are as they should be protecting the weak, rewarding the builders and punishing the takers.
Ron Woodward, PE
Yorktown, VA
Monday, June 16, 2008
WAKE UP AND SMELL THE TAXES!
Or should I say "Wake up and SEE the taxes?" The following is from a FairTax Volunteer and really lays out the "hidden taxes" we pay in addition to income and payroll taxes. A good eye-opener:
Federal income taxes represent only 42 percent of the total tax burden of U.S. taxpayers. The remainder is hidden, distorting taxpayers’ awareness of their real tax burden and of the true cost of government. Only fundamental tax reform with an emphasis on visibility can ensure a fair tax code that allows taxpayers to evaluate whether they are getting their money’s worth from government.
Despite all the attention given to federal income taxes, they represent only 42 percent of the total tax burden Americans carry each year. There is at least $657.5 billion in additional “hidden” taxes—$2,642 per person—that is not visible to the taxpayers. If more Americans realized that their total tax burden equaled 56 percent of annual personal consumption spending, there might be a second Revolution.
Unlike sales taxes that appear on a cash register receipt, hidden taxes are those charges that are not expressly clear to the taxpayer. One example is fuel. The average price of a gallon of gas last August was$1.49 and 43 cents of that amount represented taxes. That 37% tax rate does not appear on your receipt. In recent years fuel taxes have become the fastest-growing federal tax imposed on middle-income Americans, amounting to $220 a person.
“Sin” taxes are also great sources of revenue. For instance, tax revenues from liquor are many times higher than the total profits of distillers. Nearly half the cost of a six-pack of beer is tax, and cigarette taxes alone will generate $45 billion through fiscal year 2005.
There are also hidden taxes on a litany of products and services ranging from inoculations to firearms to travel expenses. Almost half the cost of an $80 hotel room is tax as is 40 percent of a $159 airline ticket. And the typical monthly utility bill includes 25% tax. With the rise in telecommunications subsidies and Internet commerce, Americans will be feeling—but not necessarily seeing—even more of a tax bite.
Not all taxes are hidden in the cost of goods and services. Some are even more surreptitious. Payroll taxes, including income tax withholding, “employer share,” and unemployment and workers’ compensation taxes not only mask the true burden of paying taxes but also raise the cost of hiring workers, which in turn actually lowers wages and conceivably threatens jobs.
Payroll taxes have increased dramatically since 1937. Today over 90 percent of American workers pay more in payroll taxes (including the “employer share”) than they do in income taxes. Just since 1977, the payroll tax rate has grown by nearly one-third. And when combined with other mandated labor costs such as unemployment insurance and workers’ compensation taxes, the resulting burden actually raises the cost of hiring workers, lowers wages, and can even eliminate jobs.
When taxes are not visible, Americans are unable to evaluate whether they’re getting their money’s worth from the government. While not every hidden tax is responsible for every inequity contained in our current tax code, hidden taxes do contribute significantly to the most complex and inherently unfair system of taxation ever placed upon the American public.
Tax overhaul is imperative, but the fundamental focus of any reform must be on visibility. That’s because a hidden tax is an unknown tax, and an unknown tax is one that cannot be evaluated and judged by those who pay it. In the end, the consumer is left to wonder, How much tax did I really pay? - Read Full Report!
Source: http://www.ipi.org/ipi%5CIPIPublications.nsf/PublicationLookupFullTextPDF/3F31DF6F0D040EE986256AB700630B84/$File/PR160-HiddenTax-FINAL.pdf?OpenElement
This report makes me want to use fowl language!
Federal income taxes represent only 42 percent of the total tax burden of U.S. taxpayers. The remainder is hidden, distorting taxpayers’ awareness of their real tax burden and of the true cost of government. Only fundamental tax reform with an emphasis on visibility can ensure a fair tax code that allows taxpayers to evaluate whether they are getting their money’s worth from government.
Despite all the attention given to federal income taxes, they represent only 42 percent of the total tax burden Americans carry each year. There is at least $657.5 billion in additional “hidden” taxes—$2,642 per person—that is not visible to the taxpayers. If more Americans realized that their total tax burden equaled 56 percent of annual personal consumption spending, there might be a second Revolution.
Unlike sales taxes that appear on a cash register receipt, hidden taxes are those charges that are not expressly clear to the taxpayer. One example is fuel. The average price of a gallon of gas last August was$1.49 and 43 cents of that amount represented taxes. That 37% tax rate does not appear on your receipt. In recent years fuel taxes have become the fastest-growing federal tax imposed on middle-income Americans, amounting to $220 a person.
“Sin” taxes are also great sources of revenue. For instance, tax revenues from liquor are many times higher than the total profits of distillers. Nearly half the cost of a six-pack of beer is tax, and cigarette taxes alone will generate $45 billion through fiscal year 2005.
There are also hidden taxes on a litany of products and services ranging from inoculations to firearms to travel expenses. Almost half the cost of an $80 hotel room is tax as is 40 percent of a $159 airline ticket. And the typical monthly utility bill includes 25% tax. With the rise in telecommunications subsidies and Internet commerce, Americans will be feeling—but not necessarily seeing—even more of a tax bite.
Not all taxes are hidden in the cost of goods and services. Some are even more surreptitious. Payroll taxes, including income tax withholding, “employer share,” and unemployment and workers’ compensation taxes not only mask the true burden of paying taxes but also raise the cost of hiring workers, which in turn actually lowers wages and conceivably threatens jobs.
Payroll taxes have increased dramatically since 1937. Today over 90 percent of American workers pay more in payroll taxes (including the “employer share”) than they do in income taxes. Just since 1977, the payroll tax rate has grown by nearly one-third. And when combined with other mandated labor costs such as unemployment insurance and workers’ compensation taxes, the resulting burden actually raises the cost of hiring workers, lowers wages, and can even eliminate jobs.
When taxes are not visible, Americans are unable to evaluate whether they’re getting their money’s worth from the government. While not every hidden tax is responsible for every inequity contained in our current tax code, hidden taxes do contribute significantly to the most complex and inherently unfair system of taxation ever placed upon the American public.
Tax overhaul is imperative, but the fundamental focus of any reform must be on visibility. That’s because a hidden tax is an unknown tax, and an unknown tax is one that cannot be evaluated and judged by those who pay it. In the end, the consumer is left to wonder, How much tax did I really pay? - Read Full Report!
Source: http://www.ipi.org/ipi%5CIPIPublications.nsf/PublicationLookupFullTextPDF/3F31DF6F0D040EE986256AB700630B84/$File/PR160-HiddenTax-FINAL.pdf?OpenElement
This report makes me want to use fowl language!
Subscribe to:
Posts (Atom)
