In the article Ending Special Tax Treatment for the Very Wealthy by Alexandra Thornton and Galen Hendricks posted on Center For American Progress, the authors make the argument the very wealthy are not paying their “fair share” of taxes. They advocate for increasing income tax rates and expanding the definition of “income”, so more of their wealth will be taxed.
Some of the arguments made by the authors are:
- America’s tax code no longer adheres to the core principle of ability to pay—the idea taxes should be based on a person’s capacity to pay taxes.
- When other sources of income are counted, like self-employment, business, capital gains, interest, and income from government programs, nearly 1/4 of U.S. income goes to the Top 1% of income earners, while a mere 14% goes to the bottom half of income earners.
- Not only are top tax rates on ordinary income low, the wealthy accumulate capital assets which grow and aren't taxed until sold.
- The wealthy receive income from their capital assets, subject to a much lower 20% tax rate.
- Capital assets don’t have to be sold to be used. The authors refer to the $10 billion line of credit negotiated by Oracle CEO Larry Ellison, secured by Oracle stock. This has been used by Ellison to make purchases which are made federal income tax-free.
- The rich use their wealth to influence the U.S. political system to skew policy in their favor, including giving themselves even more tax cuts.
The Opposing Side, Why The Existing System Will Not Make Either Side Happy.
- Some people reject the authors’ solutions of raising taxes on the wealthy and taxing more of their wealth. This side argues increasing the requirement for higher income earners to pay more taxes will discourage the activities of these people who create jobs and opportunity. They point to the economic growth after the Reagan & Trump tax cuts.
- Both sides have a problem accomplishing what they advocate—the existing income-payroll tax system. At first, this seems counter-intuitive. It seems raising or lowering income tax rates is advocated by both sides.
- As discussed earlier, increasing the taxes on the wealthy will create many problems. The changes favored by the groups wanting to tax the wealthy don’t just involve higher tax rates. The wealthy can avoid those unless there is a radical change in the definition of “income”. While this may seem simple on paper, in practice it will dramatically change the way taxes are calculated for more than just the wealthy.
- For example, many groups, like the authors of the article and several Democrat presidential candidates, advocating higher amounts paid by the wealthy, want to eliminate capital gains benefits and tax the annual increase in value of their capital assets.
- For example, if a person had assets worth $500,000, each year they would be required to value the assets and if there was gain say of 6% or $30,000, they would report this on their income tax return and pay ordinary income tax rates on an additional $30,000 even though they have no additional cash unless and until they sell the capital assets.
However, there are obvious problems with this proposal.
- Who is going to appraise the assets and determine the amount of gain? If the assets are traded securities, this is easy. You have a liquidation value in January and a liquidation value on December 31st and if it is higher, then this is the amount of income you add to your personal return.
- However, what if the assets are not publicly traded—like a small business? Who does the valuation? If each of us come up with a value and the IRS challenges the amount, which will certainly happen, how is it resolved? Does it go to court to be disputed for years? Are we just required to accept the IRS valuation?
- The way the income-payroll taxes have historically been applied, is to start off only affecting the higher income groups, or in this case, the higher wealth groups, but have begun to apply to lower and lower income and wealth groups.
- We can anticipate the definition of “wealthy” will continue to be lowered and affect more of the middle class.
- The annual increase in the value of our home, the largest investment many of us have, will be affected and the gain in value will be added to our taxable income each year.
- When the “definition of wealth” starts to be reduced to people who have assets of $200,000 for example, the following story might start to apply for many who wanted to “tax the rich”.
Huey Long, the populist governor and U.S. Senator from Louisiana, was campaigning one year and he said, “If a person has 2 homes, we will take 1 of the homes and give it to a family who doesn’t have a home”. The audience applauded. Then he said, “If a person has 2 cars, we will take 1 and give it to a family who doesn’t have an automobile”. The audience applauded. He continued, “If a person has 2 hogs, we will take 1 and give it to a family who doesn’t have a hog”. Most of the audience was silent. A man wearing overalls yelled, “Huey that ain’t right. I got 2 hogs”.
- Another problem for all of us making decisions which may affect us for many years is any change to the income tax-payroll tax system can be changed with each new administration. This means we will always be uncertain a decision of the Swamp and their allies in Congress make today will be the same tomorrow.
- This makes it very difficult for all of us to make investment decisions and basic decisions, like whether to purchase or rent a home.
Why Is The Fairtax The Answer?
The FAIRtax takes the position, the purpose of a tax system is to collect money for the government in the easiest and most efficient manner with the least disruption to the parties paying the tax. Instead of adding complexity, the FAIRtax will actually satisfy both sides of the argument.
For the people who object to the wealthy being able to live lives of splendor without paying their “fair” share of taxes, unlike today, these people will pay each time they spend their money. Because people with more money spend so much more than lower income people, they will obviously pay much more with The FAIRtax.
- For those who believe it is “fair” to remove restraints on production by not taxing earnings and investment income, there will be no punishment for hard work and savings because the tax is only levied on sales of new consumer goods and retail services.
- Because of the prebate, or tax credit, lower income taxpayers will be “untaxed” and the resulting lowering of retail prices will benefit everyone.
- By removing the financial subsidies for imports and punishment for U.S. exports existing under the present income-payroll tax system, more and more high-paying jobs will be created in the U.S.
- More jobs mean workers are more valuable and more scarce, and companies will have to pay more to hire and retain good workers.
- The economy will grow much faster, more money will be spent and revenues to D.C. will grow much faster.
- Increased revenues will allow Congress to create more programs benefitting needy Americans.
- All of these gains will not require more complication but instead will introduce greater simplification in all of our lives.
- No longer will Congress and the Swamp sell income-payroll tax benefits to the highest bidder.
Conclusion
Of course, many in Washington are eager to see a major fight about “fairness”. They plan to take money from all sides for as long as they can. Then the side who offers the most will win, but the Washington Swamp will ensure the losers know with more money the issue can be resolved in their favor.
Isn’t it time to reject the interests of the Swamp and their allies in Congress who only want to benefit themselves? People say it isn’t going to change. It will not change if we wait on the Swamp and their allies in Congress. We will have to force the change by demanding it!
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?”
Isn’t it time for us to ask, “Why not?” Isn’t it time to take back control from D.C.?
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?”
It's 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 the local or D.C. office of your House Member and 2 Senators and you can 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 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 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 is unlikely they are going to pay 30% or 40% when they were paying 0% because they have already decided it is 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 can see your Member or attend a town hall and ask these questions, you can be even more effective.
The FAIRtax Power Radio Podcast & Digital TV Show
#163 The FAIRtax Guys Q&A With Grad Students
At the invitation of Jade Walle, a CPA from Colorado, Alumnus of Oklahoma State University and the Presenter of the quarterly FAIRtax Webinar, The FAIRtax Guys joined him in a Practicum offered to graduate level CPA students at OSU. On May 24, 2019, The FAIRtax Guys conducted a two hour question and answer session with 24 students.
The FAIRtax Guys interviewed Jade Walle several years ago on FAIRtax Power Radio.
Mr. Walle and his co-presenter, Arron Lawson, were invited by Sarah Johnson, professor at the School of Accounting at OSU, to present this Practicum to her students. Mr. Walle has been involved in this Practicum for several years and has become quite an expert on the FAIRtax.
After last year’s Practicum, he offered to have The Guys conduct a question and answer period as part of the course this year. Jade and Arron spent time, prior to the arrival of The FAIRtax Guys, explaining the basics of the FAIRtax.
But wait, there’s more! However, you have to listen to the podcast or watch the digital TV show to find out.
We have been Live streaming FTPR to Facebook every week for almost a year now. But now, FAIRtax Power Radio will be Live streamed to YouTube also. Watch for announcements and then go to our YouTube Channel.This is a great alternative if you’re not a Facebook user.
If you are a Facebook user, check out our Live stream at 11:30am ET on facebook.com/fairtax. Remember, Live stream also means Live comments. Join the show.
However, if you can’t catch the Live show, just go to FAIRtax Guys to see our latest effort in getting the FAIRtax news spread far and wide. This new website is open to everyone; no subscription or “joining” is necessary. Just dive right in!
FTPR podcasts for each show are posted on Spreaker, iTunes & iHeart Radio every Friday morning. Since it’s a podcast, you can download it and play it whenever it’s convenient for you. A free FAIRtax Power Radio app is available for iOS and Android.
If you believe the FAIRtax is good for America, PLEASE let others know by turning them onto FAIRtax Power Radio - the ONLY weekly FAIRtax digital TV show in the country! Watch every Wednesday at 11:30am (ET) on Facebook LIVE. And look for us on our YouTube Channel. If you can’t watch live or you don’t use Facebook, go to FAIRtax Guys to watch the show and keep up with the latest events.
Please help us educate as many Americans about the FAIRtax as possible. Be sure to tell everyone you know about this great format for FAIRtax Power Radio. Whether you watch the weekly TV show or listen to the weekly podcast, this is a great way for more Americans to learn about the best tax reform plan in Congress at this time.
Remember, FTPR digital TV every week on Facebook and YouTube followed by the podcast on Friday morning and the new website FAIRtax Guys anytime. Please watch, listen and tell everyone you know about FAIRtax Power Radio. The FAIRtax: Once You Understand It, You’ll Demand It!
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.
Americans for Fair Taxation
The FAIRtax Guys
Americans for Fair Taxation Facebook Page
The FAIRtax Guys Facebook Page
Americans for Fair Taxation Twitter Page
PopVox - The People’s Voice on all things legislative
Americans For Fair Taxation YouTube Channel
The FAIRtax Guys YouTube Channel
Official FAIRtax Logo Store
Read Evasion Study Summary
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 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.
Do you know someone who would like an introduction to the FAIRtax and would prefer to read about it in a booklet 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, the Barnes & Noble Nook and Apple iOS.
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!
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