Answers To “Alabama Economic Freedom Act” Questions
The following article was written by Mary Lynn Bailey, Wife of Chuck Bailey. Chuck is on the AFFT Board Of Delegates and is the Alabama FAIRtax State Director. Since the pre-filing of HB4 - The “Alabama Economic Freedom Act”, there have been several mischaracterizations and misunderstandings about the bill. Here is Mary Lynn’s response.
Understanding The “Alabama Economic Freedom Act”
The “Alabama Economic Freedom Act”, aka The Alabama FairTax, is a new and improved way for the state to collect our taxes.
- It's a consumption tax levied on the retail purchase of all NEW goods and services.
- It's an inclusive tax replacing ALL current income and sales taxes
- Including individual and corporate income-taxes
- County and local level sales taxes
- Inheritance taxes
- Gift taxes
- Business-to-Business taxes.
- Once an item has been taxed once, it is never taxed again. Used goods having already been taxed once, are never taxed again.
- The individual Alabama resident will have no requirement to save receipts for tax purposes, and no need to fear audits, since there will be no more Alabama state income-tax.
To better understand the Alabama FairTax, let’s take an example of a new item priced at $100 on the shelf. When you take it to the register, you will pay $100. The Alabama FairTax of $8.03 is included in the price of the item. The state would get $5.75, and the remainder would be split 60% for the city and 40% for the county on a per capita basis.
Because we think no legal Alabama resident should be taxed on the necessities of life, we have included a prebate, which is a monthly refund of all taxes you would pay on your spending up to the poverty level.
- A single person can spend up to $12,490 before paying any Alabama FairTax out of his or her own pocket.
- The prebate is paid at the 1st of the month before you spend any money and is based on household size not income.
- To receive the prebate, you must be a legal US and Alabama resident and annually fill out the only form required of individual taxpayers.
- The form asks for household size, address, and valid Social Security numbers for each member of the household.
- Receipt of the prebate is totally optional.
- Those who wish to remain anonymous do not need to apply for the prebate.
The size of the prebate is based on Health & Human Services poverty level guidelines published at the beginning of every year.
- $12,490 is the 2019 poverty level for a single person. That figures out to be $1,041 per month.
- A single legal Alabama resident would receive $84 monthly to cover the taxes paid on their first $1,041 of spending each month.
- A single person could spend $1,041/month without incurring any state, county or local tax liability.
- The amount of the prebate for a couple would be twice of a single person.
- For a family of 4, a couple with 2 children, the poverty level is $33,840.
- The prebate for this family would be $226/month received on or before the 1st of the month.
The prebate eliminates the tax liability for all legal Alabama residents up to the poverty level.
- A single person who spends $12,490 or less per year will pay no consumption tax out of his or her own pocket. The prebate will reimburse them 100% of the tax collected from them on that level of spending.
- If that person spends 2x that amount, he or she will pay an effective tax rate of 4% on all his or her purchases.
- To actually pay an effective tax rate near the 8.03% FairTax rate, the person would have to spend 128 times that amount or $1,598,720.
- A couple with 2 dependents would have to spend $4,328,960 annually to pay an effective tax rate of 7.96%
Retailers will collect the tax and remit it to the state. They will be paid for the collection and be subject to audit by the state. The form retailers fill out for tax remittance is short and based on inventory sold per collection period. It is possible, and actually most likely, retailers will lower their prices because of lower costs and competition. Wal-Mart is a good example of how competition drives lower prices.
Farmers and businesses selling their products to other businesses incur no business-to-business tax. For example, a Farmer who sells to another business would pay no tax on the machinery used to grow and produce their product. However, a Farmer who sells produce at a Farmer’s market or on the side of the road would be responsible for collecting and remitting the tax. Taxes are collected only on end products at retail.
The Alabama FairTax is a win for all legal Alabama residents. It has been pointed out residents of some cities and counties have chosen to pay more local or county tax to raise funds for roads, schools, or other projects. With the Alabama FairTax everyone will pay a uniform 8.03% plus any extra voted on by the community. You will have the chance to decide just how you think this tax will affect you. In order to implement this tax, there will have to be a vote on a constitutional amendment to abolish the current income-tax. You will have a chance to talk to your legislators and let them know how you feel about a total change in the way taxes are collected in our state.
Rep. Mike Holmes, Alabama House District 31Elmore County, Wetumpka, AL 36093
Rep. Mike Holmes began his 1st full term in the Alabama House Of Representatives 11/4/2014. He was born in Crenshaw County. After completing public education he attended Troy State University earning a B.S. degree and attended graduate school at Penn State University. Rep. Holmes is a former high school teacher and coach who went into agricultural sales, marketing, and operations. Eventually he became the chief executive of 2 different agri-business corporations. He is also an entrepreneur having founded and successfully operated a Real Estate Brokerage, specializing in land and small business acquisitions. Rep. Holmes is married to the former Shirley Russell. They have 2 children and 4 grandchildren.
Mary Lynn Bailey
FAIRtax Volunteer
Alabama State Director
irLaserman@sprynet.com
256-479-4350
Conclusion
The “Alabama Economic Freedom Act” will demonstrate to everyone how implementing tax reform (founded-modeled upon H.R. 25 - "The Fair Tax Act”) at the state level will help Alabama. Also, the fact it's gaining traction sends waves of anxiety to The Swamp in D.C.
How could these upstarts in Alabama actually threaten us? Don’t they understand we know best?
Alabama is showing us that the people, given the choice, will make the right choice.
The Alabama and national FAIRtax are going to help everyone!
Anyone who truly cares about the American people say, “It is time to pass The FAIRtax, the only “Fair Tax”!
The author George Bernard Shaw said, "You see things; and you say “Why”. But I dream things that never were; and I say “Why Not”.
We say to you President Trump, “Embrace The FAIRtax and real tax reform! Stand up to The Swamp. They will oppose you anyway because they see you as a threat. What have you got to lose?”
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.”
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Read Evasion Study Summary
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This week's Episode #172 - "We Have A Winner!"
Our judges have spoken and they have selected the best IRS Slogan which was submitted during our contest. Tune in to see who won and what’s the slogan.
We had a number of good entries and these entries demonstrate what American’s think of the IRS. Here’s a hint, it’s not positive!
This is another information packed episode of FTPR and whether you listen to the podcast or watch the video, you’ll be more up to date with our Volunteer Grassroots Supporter’s efforts to pass The FAIRtax.
Tune in to see who is the focus of Jim Bennett’s Grassroots Corner. Then we have great news from Alabama. And what’s up with Congress? They have already proposed almost 1,000 changes to the tax code!
But fear not! The FAIRtax will come to our rescue one day and The FAIRtax Guys, following up from last week, discuss several more very important advantages of The FAIRtax over the current byzantine system.
We try to provide something in every episode to help our viewers and listeners become educated about The FAIRtax. So please do what you can to help us create a groundswell of support for The FAIRtax across the entire country. Enjoy this episode and please Share it with others you know.
What Can Each Of Us Do?
Call the local and DC offices of your Representative and 2 Senators. Use the following script:
- I am sure Representative ____ or Senator ____ is in favor of everyone obeying the income tax laws.
- After they assure you 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 10 years.
- Since most will say they don’t believe their boss has seen the study, drop off a copy, email a copy or click Read Evasion Study Summary and copy/paste the link into an email.
- 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 simplifying the income tax will handle the problem.
- Explain, when people evade income taxes, they are also evading the 15.3% payroll/Medicare tax and state income tax. So, it’s unlikely they are going to pay 30-40% when they were paying 0% because they have already decided it’s okay to cheat.
- Say, 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 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 the way to handle evasion without unleashing the IRS audits is The FAIRtax.
- If you meet with your Representative or attend a town hall and ask these questions, you will be even more effective.
American's Big Solution - The FAIRtax Primer America Needs
Hard to believe but there still are people who have not heard of The FAIRtax. For those people, America’s Big Solution provides a starting point in their study of The FAIRtax and is meant for any age.
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 The Florida FAIRtax Educational Association. You can buy an electronic version for only $2.99 for the Amazon Kindle, the Barnes & Noble Nook and Apple iOS. You can purchase a print copy at the same Amazon link above for $9.25.
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