Americans want our elected representatives to solve problems without bankrupting our children and grandchildren. The problem is they think that the way to solve problems is to tax everything and now they want to tax soft drinks and medical devices. It’s time for this insanity to stop. It is possible to fund all of the federal and state governments WITHOUT TAXES and I have the solution! Retirement saving accounts phased in over a 40 year period …..That’s it…… nothing else after the 40 year phase in period would be needed. By now you must think……. WOW! This guy is a real nut case! Well let me show you how it could be done, and I have the data to support my conclusions!
For more information please visit my website http://www.NoTaxUntilDeath.com

-Mary

Thanks for posting your findings on your situation. As you can tell, they serve as an excellent talking point for this forum. I can certainly understand your position prefering a no-loop hole income tax system (you used the term no-deduction).

The last item I would like you to consider is the impact on your estate given the existing system. That is, the estate tax (or death tax). This too goes away under Fair Tax.

As such, not only does life for everyone become simpler while they are alive but it becomes simpler for their kids when the time comes to pass the family fortune on to the next generation.

You mentioned a scenario wherein a cash-only company could “cheat the system.” This is actually nothing new. Such businesses are already incented to do so under the income tax system. If we would agree that no man-made system can be perfect, perhaps we could also agree that this scenario is not something that any system could eradicate. State and local tax authorities have, do, and would continue to have jurisdiction and incentives to find and punish such viloations as part of their on-going sales tax collection efforts.

Thanks again for giving us your case as a talking point!
—Joe

Lets hear it for hope and change,
Kevin

The points you pose, unfortunately, reveal what is true of most Americans today and that is the failure to understand just how much federal tax we ALL pay and particularly on EVERY product or service that we buy, and especially through your doctor. In the case of a doctor, and lets say a self-employed one, in that bill you or your insurance company pays (and you pay for the insurance) is 15.3% of the doctor or doctors’ salary that he has to pay for both the employee and employer’s share of his or her payroll taxes. Then add in all the income taxes he pays as self-employment taxes or corporate taxes. Now, add in the employer’s share, 7.65%, for payroll taxes for every employee he employs. Next add in the payroll taxes, corporate taxes and huge tax compliance costs of every company that made every single nut and bolt of every piece of equipment and supplies the doctor uses, plus the lease, rent or mortgage on his building, all with embedded taxes that have been “cascading “ to you since they were raw materials. Also add in all the insurance that doctor pays for general and malpractice liability insurance each of which has one or both explicit and implicit taxes in the premium the doctor pays and passes that right to you, the customer-patient. Oh, you also pay embedded taxes too in all the health insurance as well as other insurances you purchase, you just never see a receipt for it.

Al, if you have not heard this before, this is one thing you must understand, only one entity pays taxes in this country and that is a wage–earner, YOU, the final consumer. Just like your doctor, I, as a small business owner, dump every bit of the tax I am expected to pay in the price I charge for my services. I do not provide products, I provide services much like your doctor. In my case, I pay 15.3 % inclusive (18% exclusive) payroll taxes, plus another 20% inclusive (25% exclusive) income taxes on my services. (Did you stop to think that when you pay income taxes you also pay (or paid) income taxes on the payroll tax you paid, because it is not deductable … that is double taxation !!!) I am retired and the additional income places me in the 20% marginal tax bracket. So, I have to collect from my customers 35% inclusive (54% exclusive) additional fees to cover my taxes, plus the additional consideration I give to what I pay in the average 22% of goods and services I purchase. Bottom line, I charge my customers a minimum of 40% to 45% inclusive (67% to 82% exclusive) more above the basic service charges just cover my taxes!!! If I had the FairTax, I would not be paying the 15.3 % payroll taxes, the 20% income taxes and the other embedded taxes, especially on my business-to-business services. So on every $100 I want to make today, I charge a minimum of $167 which under the FairTax I can reduce that amount to $130. Your doctor is doing the same thing, as well as everyone else that provides him goods and services, some more, some less and he may have the same advantage as I to drop his costs too. But, only 2 things determine prices, the amount of money the government prints (its valuation) and the market price … period!

So, you are paying, if I interpreted your figures correctly, 8.7% “average” income tax which I again assume you mean the “inclusive” rate (9.5% exclusive) and at least 22% inclusive (28% exclusive) embedded taxes on every good and service you buy. Under the FairTax, and I will assume you are a 2-person household, you will pay NO Federal taxes (except excise taxes that will continue as they do today) until you have exceeded purchases amounting to a total of more than $21,660 (prebate allowance) and then you will pay 23% on the new products and most all services that you buy … you will come out ahead with the FairTax over what you would pay through the current system of federal revenue collections.

As to your mention about the IRS employees, of which there are over 90,000 employed solely by the IRS within the Dept of the Treasury, which costs the American people annually over $10 billion to operate, nearly $5 billion of that for enforcement operations alone, being able to collect more of the outstanding taxes due is another misunderstanding of the American public. It is not always those that cheat the system that place a greater burden on the honest taxpayer, but the system that cheats the average-wage earning American taxpayer that is the problem too. In 2007, the IRS reported 7,389 tax returns with an income in excess of $200,000 in which the filer had no taxes due … legally!!! That does not include the tens of thousands more that made considerably more income than you and yet paid many times less than you and again, all legally. Why … because of special credits, exemptions, deductions etc that the system provides the means to do if you have a good accountant to figure it our for you, but even then, he is most likely wrong as you have been too over the years and never knew it, but that is another novel on another day!

The used car issue is one that comes up often and is easily explained. If you buy a used car from a business or private party and the taxes were paid either under the current system or paid under the FairTax on a previous sale, then no new taxes are due. However, if that party say is Hertz that bought that car as a business-to-business purchase for their rental business and never paid tax on it as is not required under the FairTax, then Hertz will be required to collect taxes from you equal to 30% of the Fair Market Value of that car at the time of purchase by you. Now, if you go buy a used car on which the taxes have been previously paid and buy it from a bona fide, registered dealer you also will not pay another Federal sales tax on that car, but (always a but) you will pay a 23% inclusive (30% exclusive) tax on the servicing and all new parts added to that car. So, if the dealer got the car for $1,000 and sold it to you for $1,500 then he owes tax on the amount over $1,000 which is $500 x .23 = $115 leaving him with $385 for the sale of the vehicle. As to people rushing out to buy only used products is a hypothetical situation that has not and will not occur in America because we are a culture that prefers new things over old things.

As to cheating the system under the FairTax, it will be more difficult and there are, for once, incentives not to do so. Under the FairTax, we go from the 178 million tax filers today to about 30 million since only businesses and taxable employers file tax reports and remit taxes. Also, the states will be responsible for collecting the FairTax unless they defer to the new “Sales Tax Bureau” within the Dept of the Treasury to collect the tax. Every bona fide seller of both taxable and nontaxable goods will be required to be registered with their state’s “Administering Authority” or the Sales Tax Bureau and this creates a “chain” on the flow of goods that leads from the seller back to the producer or importer. So every stage would require a cheater to defeat the process and that is difficult to accomplish. Next there is the incentive to be honest about the taxes due because each seller of taxable goods and services is entitled to a minimum of $200 or .25 of 1% of all taxes due each month assuming that both amounts exceed 20% of the taxes due, then the less amount under $200 is paid. Also, there is a hotline to be set up to anonymously report abusers of the system to which the caller may receive a reward. So, all in all, orders of magnitude easier to enforce and greater expectation for more compliance than with the current system.

This got too long, but hopefully, you will see that your contemplation of how much tax you actually pay is far beyond what you think and the ability to cheat the system is far more difficult too.

Best Regards

Kerry Bowers
Co-District Director
Panhandle District
Florida FairTax Educational Association

Some of the major points for seniors I address to audiences with respect to the FairTax include:

1. Any income you receive from any source will not be taxed by the Federal Government in the form of an income tax as it is under the current Internal Revenue Code of 1986.

2. Social Security will be indexed using the “national sales tax factor” in conjunction with the “Consumer Price Index” to compensate for changes to the CPI resulting from the transition to the FairTax. This will be used to increase or decrease the annual cost of living (COLA) adjustment to Social Security payments as may be affected by the FairTax after implementation.

3. The typical 2-person senior family on Social Security will receive, in the first 3 days of each month, a prebate/rebate of $415 ($4,982 annually) using the 2009 prebate figures, and this is in addition to their full Social Security payment.

4. Only new items will be taxed at the 23% inclusive / 30% exclusive sales tax rate, used items will not be taxed if the subject item has been previously taxed under either the current tax code or the code as amended by the FairTax Act of 2009.

5. Any money that seniors may wish to give to anyone and with special consideration to family members, there will be no tax on that gift regardless of the amount as gift taxes are repealed by the FairTax Act.

6. Seniors will not have to do costly time and money financial planning for bequeathing money to their heirs upon their death as there will be no more estate (death) taxes.

7. The embedded taxes in products and services today are made up of hidden costs that include employer-share payroll taxes, corporate taxes, and tax code compliance costs that will be eliminated or significantly reduced under the FairTax to provide a wider margin for competitive price decreases among goods and services sold in America.

8. There will be no need for IRAs and other similar tax exempt/deferred programs since there are no taxes on investments and savings and their benefits in the form of dividends or gains.

9. As individual taxpayers, there will be no federal tax filing and if still running a business as a senior, the filing is significantly reduced plus there are incentives paid to those businesses filing their monthly report and remitting taxes on time.

I can go on and on, but, hopefully, that paints a good picture of the FairTax benefits vs the current tax code which, in addtion to the marginal individual income taxes, loads the sale of every good and service in America today with multiple, cascading taxes.

For an outstanding compilation of the Americans For Fair Taxation research on the benefits of the FairTax, please go to the Florida FairTax Educational Association, Panhandle District website at http://www.fairtax.org/florida-panhandle. You will also find here a unique 63-slide presentation in both Power Point and pdf format and an accompanying script in pdf format that provides a 3-part program … An Abbreviated History of Taxation in America, The Impact of the 16th Amendment, and The Better Way –The FairTax. Read this and H.R. 25, also available on the site under the heading “Undergraduate Level Training” in the OnLine FairTax Training section, and you will be more knowledgeable than most Americans with regard to Federal taxes and the Fairtax.

Best Regards,

Kerry Bowers
Co-District Director,
Panhandle District
Florida FairTax Educational Association

I went back to 2006. My income was higher then due to much higher interest rates. I paid 8.7% of my adjusted gross in tax. Ignoring medical expense I would have paid about 6% more in a 23% Fair Tax which I might be willing to do to get rid of all the paper work needed for the IRS. If medical services are taxed than the numbers are absurd even if the tax is only on the dollars I pay out of my pocket. Now this also does not take into account the prebate. If the prebate is 23% of the poverty level then things are more even
Still I prefer my no deduction income tax. Since the IRS would need far fewer people to process these returns they could use the excess people to investigate unreported income and as a result tax collections should rise a great deal. That way there is much less chance of unintended consequences popping up. What happens to the demand for new cars and the price of used cars for instance. Although it does not affect me what happens to casinos which must reduce the odds of winning in order to pay the tax. What happens if sellers go to an all cash basis, fudge records and under report there dollar sales volume?