Imagine keeping 100% of your paycheck

Neal Boortz said something about this column yesterday on his Radio show, this is the first time I have had a chance to look at it. Explains very nicely the Fairtax Act in very simple terms.

Two weeks ago a man stood up at a George Bush campaign appearance in Florida to ask about a piece of legislation known as HR25. Many, including myself, were pleased to hear Bush respond with some positive thoughts about the Fair Tax plan, a movement to replace the federal income tax with a national retail sales tax.
Washington is a city of inertia, and right now the inertia belongs to our present method of funding the operations of our government, the income tax. Politicians will not easily surrender a funding mechanism that lends itself so well to political demagoguery and which can be used to reward political allies and punish enemies.
The Fair Tax plan deserves a thorough public examination and debate. John Kerry seems dedicated to making sure this doesn?t happen. Soon after Bush cited the national retail sales tax as something worthy of further exploration, Kerry stepped forward with the typical class warfare rhetoric of the left. Acting as if he actually knew what was he was talking about (he didn?t), Kerry announced that the Fair Tax would amount to the largest increase in the tax burden on poor and middle income Americans in our history.
John Kerry was wrong. He was either speaking out of ignorance, or he was deliberately lying about the Fair Tax proposal in order to gain a political advantage. A politician lying in order to gain political advantage — imagine that.
This column is lengthier than the norm, but I promise you that if you will invest the time it takes to read it you will be well on your way to becoming yet another rabid supporter of the Fair Tax plan. You will know that the poor and middle income Americans would be the prime beneficiaries of the proposal. You may even organize your own neighborhood march on Washington to demand that HR25 receive a fair hearing. In the next two minutes I?m going to turn you into a HR25 Fair Tax zealot. Read on:
First ? the briefest of overviews: Simply put, HR25 would provide for the repeal of the 16th Amendment (the income tax amendment) and the dismantling of the IRS. All personal and corporate income taxes would end, as would all payroll taxes. There would not be one cent of federal taxes of any nature taken out of your paychecks. No more Social Security taxes. No more Medicare taxes. You earn $2,000 a payday; you get $2,000 a payday. The federal government would be funded through a national sales tax on goods and services sold at the retail level. No taxes on investments. No taxes on savings. You only get taxed on what you spend at the retail level. Store your earnings in a shoebox if you wish. They won?t be taxed.
When originally proposed, calculations showed that the sales tax would have to be in the area of 23%. A complete economic study is now being completed that is expected to bring that total to under 20%. For the purposes of this column, we?ll stick with the 23% figure.
OK ? let?s put on our sensitivity hats for a few minutes here and think of the consequences of the Fair Tax Act on our nation?s poor, poor, pitiful poor. After all, they can hardly afford a 23% sales tax when they?re living paycheck-to-paycheck in the first place, right?
Bear in mind that for the most part those whom we define as ?poor? aren?t paying any income tax anyway. In fact, many of them are getting checks from the government; a form of outright income redistribution. The absurdly named Earned Income Tax Credit, for example. How can these people survive going from a no-tax situation to paying a 24% sales tax on all their retail purchases?
The implementation of the Fair Tax would fail in short order if, as the question presupposes, nothing were to change except that all of us would be paying today?s prices for a gallon of milk or a loaf of bread, plus a 23% sales tax. But ? that?s would be far from the reality under the Fair Tax. Under the Fair Tax the poor won?t only survive, they?ll positively thrive! The Fair Tax could turn out to be the best poverty-fighting tool devised in this country since the concept of hard work.
Let?s begin by considering two realities.
First, remember, please, that the poor, along with everybody else, will no longer have Social Security taxes or Medicare taxes withheld from their paychecks. Whatever they earn, they get on payday. For the poor this means an immediate 12 to 15% increase in their earnings.
Second. Don?t forget the 22% in imbedded taxes. These embedded taxes exist in virtually everything poor Americans or any other Americans have to buy. These embedded taxes represent all of the corporate and business income taxes and payroll taxes that the companies involved in the production, manufacture, marketing, distribution and sale of the goods and services must pay in the course of business. As soon as these taxes are gone, and after the competitive forces of the free market work their magic consumers, including the poor, will be paying at least 20% less for virtually everything they buy. This includes such basics as food, clothing, shelter and transportation. Yes… they?ll have to pay the new national sales tax, but when you factor in the lower prices caused by the disappearance of the embedded taxes you?ll see that the total price paid for consumer goods in terms of real dollars will fall or will remain very nearly the same.
So ? just considering these factors, the Fair Tax delivers a winning hand to people living in or near to what we call poverty. They get every penny they earn on payday, amounting to a 12 to 15% pay raise, and when you factor in the Fair Tax and the lower prices, they?re actually end up spending less of their money for a retail purchase than before. What John Kerry calls the greatest increase in the tax burden on the poor in the history of our country is, in reality, their greatest tax reduction.
You need a clearer picture? Pull out your calculator. Let?s say that a single mother with two children spends $45 a week on groceries. The removal of the 22% embedded tax would bring the price of those groceries down to $35.10. The sales tax at 23% would be $8.07. This brings the total price to $43.17. That?s less than would have paid under today?s tax system. This single mother, whom we?ll consider ?poor,? has just received a 12% to 15% increase in her weekly paychecks, and she?s paying less at the grocery story for her basic necessities.
So far, so good. At this point you should be thoroughly convinced that the Fair Tax would actually benefit, rather than harm the poor. But, then again, maybe not. Here?s the convincer. Brace yourself for the knockout punch.
The Rebate
Under the Fair Tax plan every consumer, rich and poor alike, will receive a check or an electronic credit to their bank account from the federal government every single month equal to the sales tax that person or that family would be expected to pay on the purchase of the basic necessities of life for that month. The size of the monthly payment will be based on the government?s published poverty levels for various sized households.
Here?s an example of how the rebate payments would have worked in 2003.
Let?s say you?re a married couple with two children. The Fair Tax Act sets forth a formula for computing the poverty level, based on government figures, which negates any marriage penalty. If the Fair Tax Act had been law in 2003 you would have been granted an annual consumption allowance of $24,240. This is what the government would assume you would have had to spend during that one year to buy the basic necessities of life for your family. The sales tax on this amount would equal $5,575. The government would have rebated this amount to you in 12 equal monthly installments of $465. What about a single woman with one child? Her monthly rebate in 2003 would have been $232. The lowest payment would be to a single person with no dependents. That person would have received $172 per month.
Now ? bear in mind, this rebate isn?t only paid to the poor. It is paid to everyone, rich and poor alike. The purpose here is to make sure that no American has to pay the Fair Tax sales tax on the basic necessities of life. Unlike the present income tax system, the Fair Tax treats each and every person in this country exactly the same. This, of course, presents somewhat of a problem to politicians who like to use the tax code to foment class distrust or outright warfare.
OK ? let?s add it up for America?s lower income citizens:
1. They get their entire paycheck.
2. Even with the sales tax, and considering the drop in prices, they?ll be paying essentially the same or less for everything they buy.
3. They get a check from the federal government every month to rebate any sales taxes they had to pay on life?s basic necessities.
Are you beginning to see just how far off-base John Kerry was with his intemperate criticisms?
Though most of the poor don?t have what we would call complex tax returns, let?s also include the time these they (all of us, really) will save by not having to keep tax records or file tax returns.
If you?re looking for some reason to oppose the Fair Tax plan, you?re going to have to find a better excuse than its effect on the poor. John Kerry might find it politically expedient to demagogue the issue for votes, but now you know enough to know what he?s up to.
For more comprehensive information on The Fair Tax you can visit
Neal Boortz is a lawyer and nationally syndicated radio talk show host.

2 throughts on "Imagine keeping 100% of your paycheck"

  1. So, you support the Fair Tax proposal?
    American Constitutional Research Service

    It is saddening to learn that there are so many who support the so called fair tax proposal. Perhaps those who support it have not had time to study the proposal in depth, its consequences, and then compare it to our founding fatherâ??s original tax plan to raise a federal revenue, which is the tax plan which a freedom loving people would support.

    Not only is our founding fathers tax plan based upon a number of principles to disburse the costs of our federal government in a fair and equitable manner, but it also includes a number of necessary checks and balances designed to constantly encourage Congress to adopt sound fiscal and economic policies.

    There are a number of half truths and outright inaccuracies being proffered by some of those who support the FT. For example, in an article titled ANSWERING A FAIR TAX QUESTION Neal Boortz wrote:

    â??It doesn’t matter that paying taxes will be voluntary under the Fair Tax plan. It doesn’t matter that nobody pays the retail sales tax on the basic necessities of life.â?

    But the truth is, all consumers pay the tax on the basic necessities of life under the so called fair tax. What Neal is referring to when he claims nobody pays tax on the basic necessities of life is the planâ??s concocted â??family consumption allowanceâ??, a clever part of the proposal which is a monthly check given to each American household by government to offset taxes paid on the basic necessities of life by the householdâ??s members..

    In essence, the so called fair tax proposal rations tax-free basic necessities of life by the dollar amount of the family consumption allowance which will be given to each American household, and, the consequences in giving each American household a monthly government check is, it cleverly puts every American household on the government dole and makes the majority of Americans dependant upon this monthly government check. How nice!

    What the fair tax proposal promises to do is give Senator Ted Socialist Kennedy a very valuable gift called the family consumption carrot, which he, and his socialist disciples in Congress will promise to increase during election time to buy millions of votes and remain in power, just as these socialists now do with the minimum wage, social security payments, aid to families with dependant children, and even corporate welfare___ the only difference is, the family consumption allowance promises to extend the tentacles of socialism to every American household in America with a monthly government check for their subsistence, completing the socialist takeover of America!

    Were we not warned by Hamilton in the Federalist Papers that control over a man’s subsistence is a control over his will?

    In addition to making American households dependent upon a monthly government check, the fair tax proposal expands the number of tax gathers to include individual tradesmen and entrepreneurs, and, even ordinary working people engaged in self employment, forcing them to all “register” with folks in government in order to pursue a livelihood [ see SEC. 502. REGISTRATION]. In short, the FT proposal would require these poor souls to become a modern-day regiment of enlisted tax gathers for government, increasing the number of tax gathers throughout the United States to an all time high, and compelling each to maintain burdensome and inquisitorial records and reports under a penalty of perjury [just as is now done with the income tax] to satisfy the wants and fancies of tyrants in government___ all the above to be implemented under the pretext of the “Fair Tax Reformâ??, a reform which promises to abolish the IRS and income taxation, but in substance and truth will only tighten the iron fist of government around the peopleâ??s productivity, while demanding the people to shamefully kneel to the iron fist of government, to receive their monthly government check .

    Another glaring defect in the proposed legislation,H.R.25, and, S.1493 is, if adopted by the House and Senate today, legislation which would not bind a future Congress, and, Congress would be free to tinker with the proposal and manipulate it, just as is now done with the current system. It should also be noted that the architects of the Fair Tax proposal, to the best of my knowledge, have yet to propose any specific wording for a constitutional amendment which would, in a constitutional sense. preclude and forbid Congress from laying taxes calculated from â??incomeâ?. But yet, the fair tax is pimped as a means to end income taxation!

    Make no mistake, even if the 16th Amendment was repealed, as the architects of the FT promise, Congress would still have the constitutional authority to impose taxes calculated from income, impose taxes calculated from the profits and gains of corporations, from investments, impose death taxes, inheritance taxes etc., and do so under Congress’ power to lay excise taxes as established in the Flint vs. Stone Tracy Case, which was decided prior to the adoption of the 16th Amendment!

    Absent a constitutional amendment being ratified with specific wording to forbid Congress to lay â??anyâ? tax calculated from profits, gains, interest, salaries, wages, tips etc., i.e, forbid any tax calculated from any lawfully realized money, but which the architects of the FT proposal are suspiciously not promoting, Congress will still maintain the dormant and residual power to calculate taxes from income via its power to lay an excise tax..

    Why does Neal and so many others support the adoption of meaningless and unenforceable legislation containing utterances which amount to nothing more than a whimsical promise? Were we not warned by Thomas Jefferson: “In matters of Power, let no more be heard of confidence in men, but bind him down from mischief by the chains of the Constitution”?

    So what should freedom loving Americans be promoting? A return to our Founding Fatherâ??s original tax plan which can be accomplished by a simple amendment to our Constitution to the effect that: The Sixteenth Amendment is hereby repealed and Congress is henceforth prohibited to lay any tax or burden which is calculated from profits, gains, interest, salaries, wages, tips, etc., i.e, forbid Congress to calculate any tax from any lawfully realized money.

    For an outline of the Founding Fatherâ??s original tax plan CLICK HERE and scroll down to :

    American Constitutional Research Service Before the
    Committee on Ways and Means
    United States House of Representatives
    June 1995

    Mr. Chairman and Members of this Committee:

    Before carrying the ball for the so called fair tax, I suggest those interested in the adverse effects of the fair tax proposal study:
    The Fair Tax: A Trojan Horse For America
    John William Kurowski, Founder
    American Constitutional Research Service

    ..with all these blessings, what more is necessary to make us a happy and a prosperous people? Still one thing more, fellow-citizensâ??a wise and frugal Government, which shall restrain men from injuring one another, shall leave them otherwise free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned.This is the sum of good government, and this is necessary to close the circle of our felicities__. Thomas Jefferson, First Inaugural Address

  2. Another Tax plan

    This was posted to the comments here last night, and although I find fault with some of it, it is a pretty thoughtful post. Looks like a canned response to anyone who supports that Fairtax bill, and I am sure…

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.