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.
Thursday, September 13, 2007
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 It is a good explanation of why the FairTax needs to be passed before the 16th amendment is repealed.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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