The Truth About the FairTax
Like my cohort mentioned in his last post, Democrats in Georgia (and likely in other states as well) are using inaccurate or incomplete information regarding the FairTax to misrepresent their opponents position regarding taxes. Since many Americans simply don’t bother to educate themselves on the issues in an election, most will see this ad and think that Saxby Chambliss wants to increases taxes by increasing the sales tax. And that’s not the case. Here’s a brief explanation of the FairTax. Eventually, I’ll do a detailed post (maybe around April 15th), but for now, here’s the basics.
The first thing you should know is our current tax code is incredibly complex. If you don’t believe me, try doing your taxes by hand next year (using Turbo Tax doesn’t count as “by hand”). The code is written in several thousand pages and can be confusing even for the smartest CPA’s to follow and know all the ins and outs of the code. The FairTax would eliminate all those complexities. It’s very simple to understand and easy to follow. When signed into law, the FairTax would repeal the: individual income tax, the alternative minimum tax (AMT), corporate and business income taxes, capital gains taxes, social security taxes, medicare taxes, the self-employment tax, estate taxes and gift taxes. All of those taxes (and the associated tax codes) would be replaced by a simple consumption tax – a single-rate sales tax on new goods and services.
This single-rate tax will be about 23%. Consumers will pay an embedded personal consumption tax (the 23%) at the retail level (it will not be imposed on the sale of used goods). Now you are probably saying “So the price of goods will go up 23% – how is this good?” Well, that’s not the case. Under the current tax code, companies are required to pay a corporate income tax. I hate to break it to you, but companies don’t pay income taxes – you pay them for the company. Companies embed their taxes in the price of the goods they sell (much like your trash pick-up company passed along the increased cost of gas to you by raising rates), so they are able to pass along their tax burden to you.
Under the FairTax, companies would no longer pay corporate income taxes. If they aren’t paying those taxes, then they have nothing to pass along to the consumer (you and I). By not having these corporate taxes (and some other stuff) embedded in the price of the goods you buy, the price of goods would drop by roughly 23%. Now where have we heard 23% before? That’s right! The tax rate of the FairTax is 23%. So, while you would see a 23% sales tax on goods, the price of goods would not increase (they would most likely drop slightly) under the FairTax plan.
Now, I haven’t gone through the full FairTax plan, but that’s by design. I just wanted to address the incomplete information in Jim Martin’s campaign ad. Jim Martin is correct that the FairTax plan supported by Saxby Chambliss will implement a 23% increase on everything we buy. What it leaves out is that this same plan will abolish the income tax burden on corporations – a burden they pass along to you and I. By eliminating this, the prices of goods and services will drop by roughly 23% (if not more). So the 23% would be a wash in terms of the price you will be charged for retail goods.
Be on the aware America – politicians are trying to deceive you. They will use your ignorance against you by passing off lies and half-truths as fact. Don’t let them get away with this – be informed about the issues. Time to educate yourself, America.
(PS – I’ll do my best to educate you, so check back later for a complete break down on the FairTax. In the mean time, check out www.fairtax.org or The FairTax Book by John Linder and Neal Boortz.)
Liars and snakes…
So this morning I heard a country jingle on my local News-talk station that caught my ear. Mainly because there was no way that it was ‘bumper music’ in the middle of a stack of commercials. So, I decided to turn it up and listen. That, I believe was one of the shortest amounts of time that I have taken to become absolutely enraged to the point of profane verbal outburst… good thing the kiddos were elsewhere. It was a jingle for Jim Martin, Democrat hopeful for the office of Senator in my home state of Georgia. He is currently running against the Incumbent Saxby Chambliss, who despite his conservative title is not one of my favorite politicians. (Something about voting for an unnecessary and undeserved government bailout that has done, and will do NOTHING for the economy… but that is a different post altogether). Today’s target for the high caliber load of vitriol that I am packing is Mr. Martin. The jingle capped what has been a growing ire with Jim (from here on out I’ll use his given name because he is unworthy of the respect that is implied with any title, even one as benign as “Mr.”) throughout the campaign season. I watched the first of his ads on TV with slack-jawed amazement. You know, now that I think about it, all these ads were paid for by the DSCC (Democratic Senatorial Campaign Committee) and were ‘not approved by any candidate or candidate’s committee”. Whatever. He’s the beneficiary and has said nothing to the contrary… guilty by complacency. The ad accused Saxby Chambliss of supporting a 23% tax INCREASE on everything that we buy, and then went on to ‘calculate’ what that would add to a bag of groceries, a tank of gas, and (my favorite) a trip to the movies… cause nothing says ‘basics of living’ like a $20.00 trip to a theater. Idiots. Now, here’s the fun part… it’s all a lie, and here’s how:
The 23% tax ‘increase’ that they mention is called the ‘Fair Tax’ and would REPLACE all the taxes that you pay on those items anyway. The tax is revenue neutral (meaning that it would not increase or decrease the amount of income the government received versus the present iteration of ‘income confiscation policy’). I’ll let Beezer be the one to post on the guts of the Fairtax, since finances are his arena, but if you want to know more about this INSANELY GOOD idea, hit the website www.fairtax.org and learn something. You could also buy The Fair Tax Book (which is a very entertaining and informative read) by Neal Boortz and John Linder. But I digress…back to the lies…
So the driving point of the commercial is that Saxby wants to ‘add‘ a 23% tax to all these things, which is a purposefully untruthful statement. That folks is the reason that Democrats must be stopped. They are, as demonstrated here, entirely dependent upon deceit, fallacy and the ignorance of the US populous to gain office. Never mind all the positive effects that this new tax policy would have, they must oppose it, vilify it and demagogue it at every opportunity because its fundamental principal is that the government would no longer have control over WHO pays more taxes. Did you catch that? The power returns to the people… For a political party that is currently trying to undo the very letter of the Constitution and make it an instrument of governmental plunder and punishment, the idea is absolutely poisonous. ‘Jim’ (and David Scott, another catastrophically ignorant Democrat representative from Georgia) are both equally guilty of LYING to the public. How can this not disqualify them from office? Oh that’s right, their constituents are completely inept at explaining or even describing how the US government is supposed to operate under the Constitution. I mean, ‘David’ (the same rule applies) replaced Cynthia ‘Slap a Capitol Guard’ McKinney… so we know what kind of voters we’re dealing with. They have a long track record of Constitutionally ignorant, financially self serving decisions in the voting booth. These men disgust me beyond words. There aren’t keys on this keyboard to describe how this infuriates me… but then again, the truth doesn’t require foul language. These people deserve tar and feathers, not power and respect. For the sake of the nation, keep them out of office, I beg you.
Update – Here is the ad:
Biden wants your 401(k)
You can kiss your 401(k) account goodbye if Obama and Biden are elected. As Kristian stated in his previous post, Biden has gone on record as stating that he wants the money from your 401(k) plan. He, along with all the other House Democrats, want to eliminate the tax breaks given to 401(k) accounts and redirect those into mandatory, government run accounts.
More specifically, all workers would receive a $600 annual inflation-adjusted subsidy from the U.S. government but would be required to invest 5% of their pay into a guaranteed retirement account administered by the Social Security Administration. The money in turn would be invested in special government bonds that would pay 3 percent a year, adjusted for inflation. The current system of providing tax breaks on 401(k) contributions and earnings would be eliminated.
What does that mean for you and I?
One of the big draws of 401(k) plans for employees is the company match. Many companies match your contributions at various rates (anywhere from $.50 for every dollar put in, up to as $1.50 or more for every dollar put in) up to a certain percentage of your income. For example, depending on company performance, my company will match up to $1.50 for every dollar I put in, up to 5%. Even in the very worst years of company performance, my company will match at $.50 for every dollar I put in. That’s a 50% ROR on my money, even in trying economic times like these. If you can find a better rate right now, let me give you my cell phone number so that you can tell me where.
Under the plan that Biden and House Democrats are proposing, tax breaks for employers would be eliminated. Many employers match 401(k) funds to receive these tax breaks on their own defined-contribution plans. Without those tax breaks, employers will have no incentive for matching 401(k) contributions. Like most Americans, I really enjoy the match that my employer gives me because it helps grow my retirement account much faster. Without that match, I would likely have to work longer to have the kind of lifestyle I want to have in retirement.
Sadly, not having the company match is not even the worst part of this plan. Take a look at that second paragraph again. You will be required to put 5% of your pay into a retirement account administered by the Social Security Administration.
Read that one more time, just to be sure that you understood it. The government will require you to direct 5% of your pay into an account administered by the SOCIAL SECURITY ADMINISTRATION. This is the same group that runs the current Social Security system that, at best, will be bankrupt in 2042 and at worst will be bankrupt within the next 10 years. Under the proposed plan, they will be squandering even more of your money. More specifically, the money that you will need in retirement. If that doesn’t scare the liberal out of you, I don’t know what will.
On top of that, the money will be invested in government bonds that will earn 3% a year, adjusted for inflation. For comparison, here’s my 401(k) returns, by year, for the past 5 years:
2004: 38.3%
2005: 27.8%
2006: 7.5%
2007: -1.8%
2008 YTD: -44.5%
3% blows. Sure, the last 2 years have been crappy, but take a look at the other 3 years. All of them are over 3%. If all I wanted was 3%, I’d stick my money into a savings account or a CD. I have it in my 401(k) because I can invest in equities, which, over time, will provide me with much greater returns. Granted, the risk is higher (as evidenced by that 2008 YTD number), but I’m willing to take it in order to achieve the other numbers.
And risk is what this is all about. With all the uncertainty in the markets these days, people are shying away from risk out of fear. And Democrats are like dogs – they sense fear and feed off it. Democrats are using the American public’s fear of the markets and of risk to scare the public into allowing Obama, Biden and their Socialist Posse to steal even more of Americans hard earned money and use it for their own Socialist vote buying programs.
I’ll leave you with this. If you don’t think that Obama, Biden and other Democrats actually will “spread the wealth around”, take a look at this quote from Teresa Ghilarducci, professor of economic-policy analysis at the New School for Social Research in New York, the woman who is the mastermind of the above plan. When speaking of this new plan, she had this to say: “I want to spend our nation’s dollar for retirement security better. Everybody would now be covered.”
Not “the individual will spend their dollar for retirement security”. Not “if you work hard and put money in, you will get money out. No. She and other Democrats think that they know what’s best for you and they will remove your money from your paycheck in order to spend it in a way that they see fit – which includes covering everyone, even if they have done nothing to contribute towards their own retirement.
Democrats don’t think you are smart enough to handle your own money. They think they know how to take care of you better than you know how to take care of yourself. But what it really comes down to is that Democrats are salivating (again, like dogs) at the prospect of spreading your wealth around to buy votes that keep them in power.
One has to wonder if the American public will take it head out of its ass long enough to keep this from happening or if they’ll simply remove it so that Obama and Biden can screw them.
More Communism….
Ok, so if you took the time to read my last post, you got a pretty good exposure to Communist ideals. Well, now we have Biden talking about taking away the idea of the 401K and replacing it with a government run plan. Not only that, Biden said he is going to go after the retirement plans of highly paid CEO’s of failing companies! George Miller, democrat congressman stated that the government was subsidizing 401K’s by giving it a tax deductible status! Did you hear that? He says that by letting me keep my own money that the government is losing ‘its money’. That money NEVER belonged to government!!! I worked for it, I earned it. You, the government, take it at MY pleasure according to the constitution. Lets review Communist tenets from the previous post… centralization of all capital… elimination of inheritance rights… Oh yes, that’s been mentioned too. Not by Biden in particular by by the hacks that helped them come up with this policy. Watch out, people. You are all in the crosshairs. I fear that Freedom and liberty will soon collapse entirely to the sound of ignorant applause.
“The Politics of Robin Hood”
Recently, in a discussion with a plumber, presidential hopeful Barack Obama stated that his plan to raise taxes on wealthy individuals was to ‘spread the wealth around’. Now, I think that we can all agree that this tax plan is meant to appeal to and, ostensibly, benefit the lower and middle classes of this nation. Strangely enough that description sounds a lot like the activities of the folk hero Robin Hood. My question is, is that even constitutional, and does it conform to the ideals that formed this nation?
To ascertain this, we must first examine what powers the government of the United States holds in regards to taxation. In Article I, Section 8 of the US Constitution, the powers of Congress to impose taxes are outlined:
The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;
You will take note that the text does not mention a tax on income. The taxes described in the passage are intended to be levied on products or services. This would have been the most prudent method of collecting taxes at the time, as the maritime shipment and trade of goods was a massive part of the US economy. Each ship could be levied a tax on its goods as it came to port.
In fact, it wasn’t until February of 1913 that the 16th amendment was passed, allowing the federal government to collect income taxes directly from the citizenry. The following is the text of the 16th Amendment.
“The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.”
So there you have it. The government does have the right under law to collect taxes as it sees fit. Of course, most of us already know this due to the rather torturous process of filling out tax forms each year or shelling out some of those hard-earned dollars to have someone else do it for you. Having established this fact, let us return to the text of Article I, Section 8.
The specific reasons given for the application of a tax or duty by the federal government are as follows:
…to pay the Debts and provide for the common Defence and general Welfare of the United States…
So taxes, as the US Constitution states, can only have a few specific purposes. Paying the debts of government is certainly reasonable, as it is the duty of our government to do business abroad for the citizenry.
At the time of the creation of the Constitution, the US was most certainly still in debt to a number of Dutch and other European sources that were tapped for loans to finance the War of Independence. One of the chief duties of President John Adams during the war (prior to his service as Chief Executive) was to parlay with Dutch Banks in an effort to acquire loans for this very purpose. Having used these monies to defend the United States, we come to the second reason for the imposition of taxes.
Providing for the common defense of this nation is one of the stated duties and purposes of the federal government as outlined in the Preamble of the document:
We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.
It is therefore reasonable and rational to expect and submit to taxation for the purposes of defending the nation. Many of the strongest advocates for ratification of the Constitution were very clear on this point. State militias would not be a sufficient force to repel foreign invaders or quell armed conflicts between the states. It was in the best interest of the States to provide for a common army for this purpose.
Likewise the third enumerated reason for taxation is listed in the preamble and repeated in Article I, Section 8, although the wording is slightly different in the two iterations: “promote the general Welfare” and “provide for the general welfare of the United States” respectively. This is where the verbal contortions begin. What is the definition of “the general welfare”?
Following the above quoted portion of Section 8 is a list of activities that congress shall have power to do (most of which would require monies provided by taxation). The list includes such things as providing a post office, encouraging scientific and artistic work and providing for copyright, the creation of roads, and a number of others that relate to raising, arming and governing military forces of differing types. All of these things add to the general welfare of a nation. Without roads, commerce will stagnate, without a post office sufficient to serve the many states, communication would be awkward and unnecessarily slow and the encouragement of scientific advancement will benefit the industry and artistry of the nation. There are not however any powers mentioned in this list that pertain to distribution of wealth to anyone other than those people or departments of government appointed to the several tasks. In fact, there is a statement to the contrary:
“No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or Enumeration herein before directed to be taken.”
So, Section 8 of the Constitution states that any other direct tax levied must be proportional to a census. It would only make sense that each state would pay a tax in proportion to the number of its inhabitants since that would affect the amount of services (postal, road related or otherwise) that each state would make use of. Still, there is a conspicuous lack of wording regarding personal incomes or the rates at which income levels should be taxed.
In fact, it wasn’t until February of 1913 that the 16th amendment was passed, clarifying the federal government’s ‘right’ to collect income taxes from the citizenry. The following is the text of the 16th Amendment.
“The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.”
Voila. The government now has the right under law to collect taxes from individual incomes regardless of the source. Of course, most of us already know this due to the rather torturous process of filling out tax forms each year or shelling out some of those hard-earned dollars to have someone else do it for you.
It is at this point that we must turn to the now bulging Federal Tax Code. According to the Tax Foundation the first income tax levied looked like this:
“a person earning from $600 to $10,000 per year paid tax at the rate of 3%. Those with incomes of more than $10,000 paid taxes at a higher rate.”
This is an example of a graduated income tax. Although the type of tax or structure of the tax that Government can levy is not specifically mentioned in the Constitution, a graduated income tax is mentioned in another politically based document written in1883. That document is called the Communist Manifesto. Amongst the planks of the communist manifesto you will find the following:
“A heavy progressive or graduated income tax.”
Wow. Now we have communist doctrine being inserted into the Federal Government through the vehicle of the US Tax Code. To follow this doctrine to its conclusion, however you must examine the rest of the list of tenets that underlie communist theory:
Abolition of property in land and application of all rents of land to public purposes.
A heavy progressive or graduated income tax.
Abolition of all right of inheritance.
Confiscation of the property of all emigrants and rebels.
Centralization of credit in the hands of the State, by means of a national bank with State capital and an exclusive monopoly.
Centralization of the means of communication and transport in the hands of the State.
Extension of factories and instruments of production owned by the State; the bringing into cultivation of waste-lands, and the improvement of the soil generally in accordance with a common plan.
Equal liability of all to labour. Establishment of industrial armies, especially for agriculture.
Combination of agriculture with manufacturing industries; gradual abolition of the distinction between town and country, by a more equable distribution of the population over the country.
Free education for all children in public schools. Abolition of children’s factory labour in its present form. Combination of education with industrial production, &c., &c.
Some of (if not most of) these tenets are directly in conflict with the principles that are described in our Constitution, specifically, the right to own land and property. If this tax system is part of a list of theories that can be specifically shown to be in direct conflict with the founding documents of our nation, how can it be that they are applied under our laws?
The simple answer to this is “wealth envy“. A progressive income tax can be offered to the nation-at-large by use of a very simple tactic: if you make less, you pay less. Sounds simple right? The rub comes in when you realize that there are far more people in this nation at the lower end of the scale than there are at the top. That means that when a tax of this type is implemented, it is almost impossible to reverse. The majority of people will almost never agree to pay more than they are now unless the wealthy minority are also taxed at a higher rate. This has taken other forms within the various states. In California for instance, there is a “Millionaire’s Tax”. Now that ‘everyman’ has a vote, why not tax the affluent minority?
Now we have come full circle to the policies of Barack Obama. Barack wants to raise taxes on those people who make more than $250,000 per year. If you consider the current tax brackets as levied by the federal government, that puts those people in the 33-35% tax brackets, (based on how you file) which are the top two brackets. How many people can claim to ‘reside’ in that bracket? Not many. In the most recent data available from the IRS, (from 2005) taxpayers that earned more than $200K in 2005 represented *almost* 4% of total returns, however, the top two tax brackets paid almost 42% of all taxes! How’s that for their ‘fair share’? If you add the ‘upper middle class’ of America, well over 50% of all taxes are being paid by the wealthiest of us! (Just for the sake of housekeeping, all of the foregoing tax information was pulled from the IRS website)
http://www.irs.gov/pub/irs-soi/05inrate.pdf
It appears that the wealth is already being ‘spread around’ pretty well to me. How is it that Barack now (even withstanding the Bush tax cuts) wants to raise my taxes even further? Remember the wording from the Manifesto a “heavy” graduated income tax.
With every day that passes, that income tax is going to get heavier and heavier until the system folds and the only group large enough to pick it up is the federal government. Barack is a Marxist. He has admitted himself that he was fond of Marxist professors and student groups in college and he is now openly promoting Marxist theory on the campaign trail. It only follows that he is amenable to the application of Marxist theory in other realms of government.
Now, to answer our questions from the beginning of the post, is this kind of taxation constitutional? If you are of the ‘school of limited government’ as most of our founders were, you will say “no” on the basis that there is no specific enumeration of power that makes the federal government the final arbiter of wealth. Nothing in this document even hints at the idea that the federal government should be in the business of making sure that the wealth of the nation is ‘fairly’ distributed. In fact a word search of the Constitution returns zero occurrences of the word ‘fair’ anywhere in the document. Clearly, that eliminates any mention of ‘fair distribution’ of wealth. So we look for the word ‘wealth’…again, the search returns no occurrences. The Constitution stands mute on the issue of wealth redistribution. Could it possibly be that the founders of this great nation left that out on purpose?? Was it a gigantic oversight by the wise (and I believe divinely inspired) men who shaped our system of government? Hardly. The men who founded this nation made very clear what the purposes of the Government would be and specifically left all other powers to the respective states in the 10th amendment in 1791:
“The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”
These men who founded this nation wanted as little federal government intrusion into the life of the states or people as is possible. Clearly, the Marxist ideal is in direct conflict with this line of thought.
So, all you Barack supporters who aren’t bothered by his ‘spread the wealth’ comment, be aware of what you are supporting. The preamble clearly puts such Marxist ideals at direct odds with the spirit of the US Constitution:
“We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America”.
Liberty is the bane of Communism. That is why communist governments despise the USA. The very concept of liberty and personal betterment undermines the entire concept of the “communist utopia”. So, now that we have established the field of ideological warfare, are you for the US, or against it?
As far as this voter goes, Barack Obama is an Enemy of the State…