Chairman’s Report - March 8, 2019

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  • Source: FAIRtax
  • 04/09/2021
Chairman’s Report - March 8, 2019
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CONGRESSMAN LARSON AND 200 OTHER CO-SPONSORS SHOULD FAVOR THE FAIRTAX

On January 30, 2019, Congressman Larson, the Chairman of the Ways & Means Social Security Subcommittee introduced the Social Security 2100 Act, H.R. 860.  His bill has 200 co-sponsors.

 

 

In an article that appeared on the website for BenefitsPro, Nick Thornton summarized some of the facts about Social Security and how the proposed legislation would be implemented.  Here are some facts about Social Security:

  • When Social Security was established in 1935, half the country lived in poverty.
  • By 1946, 11 million Americans were 65 or older.
  • Today about 46 million Americans are over 65, and that’s projected to more than double by 2060, according to the Population Reference Bureau, a non-profit think tank.
  • Mortality has also vastly improved over Social Security’s lifetime. In 1950, life expectancy was 68; by 2013 it was 79.
  • 67 million people in 2017 received payments from the Social Security Administration.
  • Last year’s SSA Trustees’ Report said reserves in the Old-Age and Survivors Insurance Program would run out by 2034.  If no changes to funding, in 2034, retirees will see an across-the-board 23 percent reduction in monthly checks.
  • Permanently reducing benefits by 17 percent is one approach to putting Social Security on sound actuarial footing.
  • Increasing payroll taxes from 12.4 percent of income to 15.18 percent is another possible solution. 

The article summarizes the main points of Larson’s proposed legislation: 

  • A phased increase over 23 years of the payroll tax from 12.4 percent to 14.8 percent.
  • The Medicare tax of 2.9% would not change and the combined rate for an employee would be 8.85% and 8.85% for the employer,
  • For self-employed, the rate would increase from 15.3% to 17.7%.
  • The current retirement age for benefits will not change.
  • Increase the combined income for an individual from the present $25,000 to $50,000 before Social Security benefits are taxed.
  • Increase the combined income for a married couple from the present $32,000 to $100,000 before Social Security benefits are taxed.
  • These new thresholds would allow an additional 12 million Social Security recipients to pay no tax on their benefits.
  • Presently there are no Social Security taxes owed on wages above $132,000 annually, but the bill will rapidly raise the amount subject to the Social Security tax to $400,000 and then be unlimited after a number of years.
  • Increase the minimum benefit in accordance with the definition of the poverty level. 


THE PROBLEMS OF THE PAYROLL TAX SYSTEM
 
While many of us applaud Congressman Larson for trying to get Congress to confront the growing problem with Social Security solvency, doing it with the payroll tax system is not the way.The following graph was developed by Veronique de Rugy,  a Senior Research Fellow at the Mercatus Center that shows the number of workers contributing money to pay the benefits of each retiree. 
 

According to Ms. Rugy, by 2030, there will be only two workers for each retired worker.
 
Also, who actually pays the employer share of Social Security that is matched by the employee?According to a study by the Tax Foundation, almost all of the amounts paid by the  employer’s share of Social Security and Medicare taxes are actually paid by the business’ employees because their wages are almost the same amount less.  Even though the employee is told that they only pay one-half of the Social Security tax, it is another example of the way the Swamp and Congress have actually hidden the amount of tax paid.

Unfortunately, the unintended consequence of Congressman Larson’s legislation is that he is raising taxes and limiting wage increases on many of the workers he intends to help. 

THE FUTURE OF SOCIAL SECURITY UNDER THE FAIRTAX
 
The payroll tax is eliminated by the FairTax which collects the money to fund Social Security.  Here is what the FairTax does for Social Security:

  • It does not depend on workers but on spending by everyone in the U.S.
  • With the prebate (tax credit), workers will have the amount of spending up to the poverty level for them free of any tax.
  • Prices for new retail goods and most retail services will be 10% to 20% less than they are today.
  • All of the money they earn will not be reduced by federal payroll taxes or income taxes.
  • The economy will grow more rapidly, foreign investment will flow into the U.S. and create more and more higher paying jobs for American workers.
  • All of the income from Social Security will not be reduced by taxes and retirees will get 100% of their benefits.
  • If Social Security funding needs to be increased, it can be done with an increase to the 23% rate—if enough Americans agree because it will not be hidden from anyone. 
CONCLUSION

Congressman Larson and his cosponsors are trying to address a problem, but unfortunately they are trying to repair a failing system that is way beyond the “use by” date.  The payroll tax is a very regressive system.  It taxes all workers from dollar one without regard to the amount of money they make and the size of their family. 

This is another U.S. problem that the FairTax will address and provide a solution that is good for everyone in America other than the Swamp and many of their minions in Congress.
 
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.


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