THE FAIRTAX AND HEALTHCARE
In every election season, the airwaves are filled with misleading ads. There are various opinions of how to respond if you are a victim of these misleading attacks. Winston Churchill said, “The truth is incontrovertible. Malice may attack it, ignorance may deride it, but in the end, there it is.”
However, Churchill vigorously responded to any attacks on his actions. He believed that truth would win but he wanted to be sure it was a fair fight. In this he agreed with General George Patton who said, “Nobody ever defended anything successfully, there is only attack and attack and attack some more.”
One area of attack of the FAIRtax from Swamp supporters is regarding health care. The claims are the FAIRtax will add even more burdens on people who are sick. This is patently false. The following analysis was prepared by Karen Walby, Ph.D., Director of Research, Americans For Fair Taxation, and provides the truth.
There seems to be some confusion about how the FAIRtax would affect health care.
The first thing to understand is that as a tax on final consumption, the FAIRtax taxes each new good or service once, and only once. Under the FAIRtax, health insurance is taxable. When you pay the FAIRtax on your health insurance premiums, you are, in effect, pre-paying the FAIRtax on your health care spending.
So, when the hospital or your doctor submits a bill to your insurance company to get paid for their services rendered, there is no FAIRtax on this transaction. Taxing both the premium payments and the benefit payments would result in double taxation.
For example, if your monthly premium were $400 for health insurance including the FAIRtax, you would be paying $308 for the insurance and $92 for the FAIRtax. This is appropriate because it is a consumer service sold at retail. Of course, you have to compare this to the tax treatment under the existing income tax system. On average, most people have a combined federal income tax and payroll tax rate of 22.5%. This means that they will have to earn $398 in gross pay in order to net the $308 needed to pay their monthly health insurance premium.
If you purchase health care services directly from the doctor or hospital (for example, co-pays and deductibles), then the charges are taxable. If the insurance benefit is paid directly to you, it would include a credit (an additional amount equal to the taxes due) to prepay any taxes due as the benefit is spent. So, if you paid $100 for an exam ($77 for the exam and $23 in tax) and then filed an insurance claim, you would receive a benefit check of $100, $77 for the cost of the exam and $23 as a credit for the taxes paid when you paid the doctor directly.
The FAIRtax will reduce doctors’ cost of doing business substantially, thereby allowing for lower pre-tax charges. The FAIRtax eliminates the cost of employer payroll taxes, business income taxes, self-employment taxes, the cost of administering income tax withholding and payroll tax deductions for their employees, and their personal income taxes, as well the substantial compliance costs associated with these. Instead of paying all of these costs, health care providers will collect the FAIRtax only on direct payments for services from patients, and will remit the taxes collected on a monthly or quarterly basis (depending on volume) to their state sales tax authority. They retain one-quarter of 1 percent (0.25%) of the amount collected as an administration fee.
The FAIRtax treats health care services the same as the purchase of any other good or service in the market place. It makes no difference whether an employer or an individual purchases the health insurance; the tax treatment is the same. This helps to create a competitive market for health insurance and restores economic based decision-making free of tax distortions resulting in greater competition.
Under the income tax system, there is a tax deduction for employer provided health care. This tax expenditure is the largest “loophole” in the federal tax code, resulting in nearly $300 billion in forgone revenue in Fiscal Year 2012, according to the Office of Management and Budget. This means that employers can write-off the entire cost of their employees’ health insurance giving them no incentive to negotiate a competitive price with insurers. Likewise, they have no incentive to require workers to pay part of the premium or to pay co-pays. Such a system leaves individuals with little or no idea how much health care and medication actually costs. Under these circumstances, there is no way that they are effective consumers of health & medical services.
According to testimony to the President’s Tax Panel, health care expenditures would drop by 5 to 20% depending upon what type of tax reform was adopted. It was recommended that there be no income tax deduction for employer provided health care. Since the FAIRtax gets rid of all special treatment of health care expenditures, it would result in the greatest efficiency, thus putting its effect closest to the 20% mark.
Case Study: In 2013, my husband had colon cancer. During the course of his illness, he had colon surgery, a week hospital stay, and 6 months of chemotherapy, at least 3 colonoscopies and several PET scans and MRIs. His doctors and the hospital billed his insurance $202,333 in 2013. My husband's total out-of-pocket health care expenses (his Medicare and Medigap premiums, co-pays and deductibles) were approximately $7,100. Under the income tax system, since my husband was self-employed and in the 25% tax bracket, he had to earn over $11,894 in gross wages to net $7,100, making the effective tax cost nearly $4,794 ($11,894 – $7,100).
Although $202,333 in claims were billed to Medicare and his MediGap insurance, the insurers approved benefit payments to the doctors and hospital of only $45,000 [an example of just how distorted the market for health care services has become]. If the FAIRtax had been in effect then, neither the total $203,333 billed nor the $45,000 of benefits paid would have been taxable. The FAIRtax would have been paid on just $7,100, the total of my husband’s insurance premium payments and out-of-pocket expenses. So, out of a total of $52,000+ in premiums and benefits paid, the FAIRtax would have been $2,130 compared to a tax cost of $4,794 under the current system.
To sum up, the benefits of the FAIRtax to the insurance industry and consumers:
The pre-tax cost of insurance should drop as income and payroll taxes and their compliance costs are eliminated. The average American takes home their whole paycheck (no federal income tax withholding or payroll tax deductions). Health insurance benefits received are tax-free. Natural markets are restored to the purchase of health insurance, helping to control and even lower future health care costs.
CONCLUSION
A copy of Dr. Walby’s analysis should be shared with any of our friends who are concerned about the effect of the FAIRtax on healthcare. People can also be referred to this link.
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.
#120 FIGHTING BACK AGAINST A DISHONEST CAMPAIGN AD
The FAIRtax Guys were joined by FAIRtax Elaine since Bob was “beaming in” from parts yonder. But the Guys and Gal focused on a very deceptive campaign ad being run in a primary in Florida. Since demagoguing the FAIRtax can happen anywhere, we used this incident to discuss how to combat misinformation and missing information that some unscrupulous politicians might use to discredit an opponent who happens to be a cosponsor of the FAIRtax. Bob, Ron & Elaine approached this incident from all angles so you will know how to handle it if it happens in your area.
So after watching the FAIRtax Guys & Gal dissect this ad, would you like a crack at it? Watch the 30 second ad (https://youtu.be/Pk-uSSxBbrc) and see how someone must either lie about the FAIRtax or leave out important features to demonize it. Then write down how many ways this ad lied to the viewers or left out important information.
By the way, did you notice that comments for the ad have been disabled? Hmmm. I wonder why?
By the way, welcome to the interactive FAIRtax Power Radio.
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Be a part of this cutting edge news/talk show featuring The FAIRtax Guys. Read further for links to the podcasts.
VOLUNTEER TO HELP THE VOLUNTEERS
It is the American people who must demand REAL tax reform in Congress. Your FAIRtax volunteers are trying their best to inform America about the FAIRtax! Please help us.
Tune into our video broadcast each Wednesday. If you can’t watch live, then listen to the podcast of the show later. You can listen to FTPR on any platform - Mac or PC, iPhone or Android. And it’s 100% free. Listen on Spreaker.com (http://bit.ly/2oesbk7), iTunes (http://apple.co/1Te8VdF) or iHeart Radio (http://bit.ly/2eqEG7y) on your computer or smartphone. The easiest way to listen to FTPR on your smartphone is by downloading the free FTPR app. Just search for “FAIRtax Power Radio” in your app store, download the app and start listening.
Remember, FTPR digital TV every Wednesday at 11:30 AM (ET) followed by the podcast on Friday morning. Please listen and tell everyone you know about the FAIRtax Power Radio. The FAIRtax: Once You Understand It, You’ll Demand It!
THE FAIRTAX BOOK FOR NEWBIES - AMERICA’S BIG SOLUTION
America’s Big Solution is a basic introduction to the FAIRtax and is meant for people of any age. And you can download it to your tablet or smartphone right now. Also available in print form. See below.
Do you know someone who would like an introduction to the FAIRtax and would prefer to read about it rather than search online for Tweets, Posts and Shares? If so, America’s Big Solution is their best choice.
America’s Big Solution is an introduction to the FAIRtax written by Terry Tibbetts, author of A Spartan Game: The Life and Loss of Don Holleder, with help from Ron Maiellaro, President of the Florida FAIRtax Educational Association.
You can buy an electronic version of ABS as follows: AMERICA’S BIG SOLUTION is available for only $2.99 for the Amazon Kindle (http://amzn.to/1WIRHry), the Barnes & Noble Nook (http://bit.ly/1XeG8bH) and Apple iOS (http://apple.co/1tnqK0P).
You can purchase a print copy at the same Amazon link above for $9.25. Regardless of whether you choose the electronic format or the print format, you’ll find AMERICA’S BIG SOLUTION will give someone the boost they need to begin their study of the FAIRtax and the suggested resources to learn more. Buy AMERICA’S BIG SOLUTION now!
LINKS TO MORE INFORMATION
These links will help you promote and support the FAIRtax, make yourself familiar with the links below. We always do our best to keep our AFFT community up to date, and you can stay ahead of the curve using these convenient sites.
- The website of Americans for Fair Taxation (www.fairtax.org)
- Read the Summary of the Evasion Study.
- Welcome to the Online FAIRtax Community (member.fairtax.org)
- The website at which you can help make it happen. (www.bigsolution.org)
- The Facebook page for Americans for Fair Taxation
- The Facebook page for The FAIRtax Guys
- The Twitter page for Americans for Fair Taxation
- PopVox - Connecting people and lawmakers for more effective participation and better governing
- YouTube channel for AFFT
- YouTube channel for The FAIRtax Guys
- The Official FAIRtax Logo Store (www.fairtaxlogostore.org)
- Xcluded.tv - A new platform for FAIRtax Power Radio Video and other shows.
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