Chairman’s Report - April 26, 2019

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  • Source: FAIRtax
  • 04/09/2021
Chairman’s Report - April 26, 2019
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THE OPPORTUNITY ZONE--HOW THE SWAMP BRIBES THE WEALTHY

The 2017 Tax Cut and Jobs Act created opportunity zone investments and tax benefits for those investing in them.  While this sounds good—use the income tax code to help bring investments to needy areas-- it is really designed to bribe higher income people.

This information is provided by the IRS:

  • An Opportunity Zone is an economically-distressed community where new investments, under certain conditions, may be eligible for preferential tax treatment. Localities qualify as Opportunity Zones if they have been nominated for that designation by the state and that nomination has been certified by the Secretary of the U.S. Treasury via his delegation of authority to the Internal Revenue Service. 
  • Opportunity Zones are designed to spur economic development and job creation in distressed communities. 
  • Opportunity Zones provide tax benefits to investors. First, investors can defer tax on any prior gains invested in a Qualified Opportunity Fund (QOF) until the earlier of the date on which the investment in a QOF is sold or exchanged, or December 31, 2026.   If the QOF investment is held for longer than 5 years, there is a 10% exclusion of the deferred gain.  If held for more than 7 years, the 10% becomes 15%.  Second, if the investor holds the investment in the Opportunity Fund for at least ten years, the investor is eligible for an increase in basis of the QOF investment equal to its fair market value on the date that the QOF investment is sold or exchanged. 

WHO INVESTS IN OPPORTUNITY ZONES AND WHAT DO THEY RECEIVE?

The question to ask when you look at gifts from the Swamp and their allies in Congress, like the opportunity zone legislation, is, “Who benefits?”  This is an easy answer.

The people who benefit are the people who have made sales of assets and have capital gains.  For example, a person selling Apple stock in April of 2019 and receiving a $10 million capital gain will ordinarily owe approximately $2 million in U.S. capital gains tax.  Then the person will have $8 million to reinvest.
 
This same person can invest the $10 million in an opportunity zone property in May of 2019 has these results:

  • Defer paying the $2 million in capital gains tax until 2026. 
  • Be able to use this interest-free loan of $2 million to invest in a property not $8 million but $10 million.
  • If the investor does not liquidate the opportunity zone property until after ten years, the person will be able to sell and realize no income tax from the sale.
So, the answer to the question, “Who benefits?”, the people who have large capital gains and can afford to re-invest those where they are illiquid in an investment for ten years—the more affluent among us.

The Swamp and their compliant members know that the way to stifle criticism of the income/payroll tax system is to bribe the people who might be its most effective critics.  People who have capital gains and who can tie up their money for ten years can also afford to contribute to politicians and may even control companies that can direct even more money to politicians.

If these people opposed the present income/payroll tax system, they could add a lot of energy to the efforts by most of us who don’t have these resources.
  
However, by providing these groups a benefit that is, by reducing taxes that would otherwise be paid, putting the burden to pay these deferred taxes on the rest of us, they hope to buy their silence.  By giving these parts of our society this tax benefit, they are also sending a message to the same groups that if these people do not keep from attacking the Swamp, the benefits can be taken away and these people can be punished with higher rates.

FORGET THE OPPORTUNITY ZONE--THE BETTER WAY

When the FAIRtax passes, there will be no income/payroll tax.  A person who is fortunate to have a $1,000 capital gain or $10 million capital gain will pay no federal tax unless and until they decide to spend the money they received on new goods or retail services.

The Swamp and Congress will not be able to use the tax dollars of the rest of us to “reward” someone that they want to silence and direct where these people should invest their money.

The FAIRtax will allow people to make investments that they believe make sense—not ones motivated by a desire to save some tax dollars.

People say, “Isn’t the purpose of the opportunity zone legislation to help bring investment to areas that are not doing well economically?”

The answer is of course yes, but the FAIRtax can do it better.  The FAIRtax is the most efficient and least harmful way of funding the government.  Of course, by showing the cost of government on every purchase of new goods and retail services, the Swamp fears that people will see how much their federal government is costing them and rebel at the ballot box.

However, since the FAIRtax will help the economy grow more rapidly, it will generate far more money for the federal government. 

The purpose of Congress is to appropriate money.  If Congress wants to help develop certain “opportunity zone” areas, then it can appropriate money to loan at very good rates to developers or provide other benefits.

Any appropriation by Congress will be open for all to see.  If Congress is wasting our money, they can be forced to explain why they are doing it and not hide behind the fog created by providing benefits through the income tax.


CONCLUSION
 
We understand that the Swamp and the bureaucracy in D.C. believe that they are smarter than the rest of us and should make decisions for us. 
 
We understand that the Swamp and the bureaucracy in D.C. depend on their ability to set up complicated ways to control us for their livelihood.
 
Even though Congress and the Swamp don’t want to have their actions in the open for all to see, don’t we deserve to really see what is happening with our money? 
 
However, they need to understand that their feeding frenzy at the public trough is coming to an end as more and more Americans wake up to the truth—they are receiving the scraps while the Swamp and their friends dine elegantly but we get to pay the full bill.
 
Nothing will send a message to the Swamp and Congress that they are not the masters like the FAIRtax.
 
Is passing the FAIRtax something that we can do?   We believe so because the more light that is cast on the Swamp and Congress, the more that people conclude that enough is enough.
 
As Nelson Mandela said about his decades-long fight against apartheid, “It always seems impossible until it’s done.”
 
Isn’t it time to take back control from D.C.?
 
President Trump, “Embrace the FAIRtax and real tax reform!  What have you got to lose?”
 
It is time to PASS THE FAIRTAX! 
 
The truth is the truth.  Remember, if we don't continue to tell the truth and demand a change, then this quote from George Orwell's 1984 may foretell our children's future:

“If you want a picture of the future, imagine a boot stamping on a human face—forever.”


WHAT CAN EACH OF US DO
 

Call up the local or D.C. offices of your House Member and two Senators and you can use the following script:
  • I am sure that Representative ____ or Senator ____ is in favor of everyone obeying the income tax laws.
  • After they assure you that their boss is not in favor of anyone breaking the law, ask if they are aware of the Cebula study showing $9 trillion of evaded income/payroll taxes over the next ten years.
  • Since most will say they don’t believe their boss has seen the study, either drop off a copy or get an email address and send a copy to them for their boss.
  • Say you are going to call back in a week and ask what the Representative or Senator is going to do to stop this evasion.
  • In a week, call back and ask specifically what the Representative or Senator is going to do to enforce the law.
  • They probably will say their boss believes that simplifying the income tax will handle the problem.
  • Explain that when people evade income taxes, they are also evading the 15.3% payroll/Medicare tax and state income tax.  So it is unlikely that they are going to pay 30% or 40% when they were paying 0% because they have already decided it is okay to cheat.
  • Say that the only way to reduce evasion is to increase by tens or hundreds of thousands the number of comprehensive IRS audits done each year.
  • Point out that Evaders do not self-identify by putting an “E” on their income tax return.
  • 80% of the people likely to be audited are trying to comply, but they will be forced to endure these IRS audits as well.
  • Ask if the Member is in favor of this?
  • If they say no, then ask again how the Member proposes to stop people breaking the income tax laws.
  • Then explain that the way to handle evasion without unleashing the IRS audits is the FAIRtax.  

If you can see your Member or attend a town hall and ask these questions, you can be even more effective.


FAIRTAX POWER RADIO

#157 Trump’s Tax Returns
 
There are many opinions about Congress’ demands for President Trump’s tax returns.  “Well, if he’s got nothing to hide, what’s the big deal.”  or  “Congress does not have the authority to demand the President’s tax returns.”  And how about: “He did release his tax returns! - to the IRS.” 
 
What does the Bill of Rights have to say about this? 
 
The FAIRtax Guys approach this question from every angle. Plus they make the point that with the FAIRtax, this issue will never arise again.  With the FAIRtax, Congress can spend its time perusing initiatives that actually help the American people, not just the politicians. 
 
Please enjoy this lively discussion and Share widely.  And you can Share each episode our new website with everyone you know. 
 
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For those people, America’s Big Solution provides a starting point in their study of the FAIRtax and is meant for people of any age.  And you can download it to your tablet or smartphone right now.  It’s also available in print form.  See below.
 
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