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Chairman's Report - May 17, 2019

Chairman's Report - May 17, 2019
Photo Credit: Fairtax by is licensed under OG n/a
THE CHINA TARIFF DISPUTE—LARGELY UNNECESSARY
 
In the news is a dispute that will greatly affect not only the United States but also the citizens of China—the trade negotiations and tariffs on products of both countries.
 
In an article published at thebalance.com entitled China's Economy and Its Effect on the U.S. Economy, The Surprising Ways China Affects the U.S. Economy, by Kimberly Amadeo, these facts about China—US trade were explained:
  • China has 1.38 billion people but the standard of living for most of its people is much lower than in the US and allows Chinese wages to be much lower than in the US.
  • In 2017 China exported $2.2 trillion of production and shipped 18% of these exports to the US in 2018 while the US exported $1.6 trillion and the EU $1.9 trillion.
  • In 2018 the US imported $540 billion from China and exported $120 billion, leaving a $420 billion trade deficit.
  • As of December 2018, the Chinese held $1.2 trillion of the $15.87 trillion of outstanding US Treasury Notes.
The following numbers were compiled by the U.S. Census Bureau of U.S. exports and imports:
 
NOTE: All figures are in millions of U.S. dollars on a nominal basis, not seasonally adjusted unless otherwise specified. Details may not equal totals due to rounding. Table reflects only those months for which there was trade.
Month Exports Imports Balance
January 2018 132,240.8 206,689.8 -74,449.1
February 2018 135,206.3 212,003.9 -76,797.6
March 2018 139,590.6 208,933.7 -69,343.1
April 2018 139,822.5 208,039.8 -68,217.2
May 2018 143,463.8 208,975.0 -65,511.2
June 2018 141,760.2 210,486.3 -68,726.0
July 2018 139,465.5 212,330.4 -72,864.9
August 2018 137,773.8 213,954.0 -76,180.1
September 2018 140,538.1 217,638.6 -77,100.5
October 2018 140,155.6 217,874.8 -77,719.2
November 2018 138,907.7 210,323.2 -71,415.5
December 2018 135,057.4 215,433.8 -80,376.4
TOTAL 2018 1,663,982.3 2,542,683.1 -878,700.9
 
If the total budget deficit in 2018 was $878.7 billion, China at $420 billion represents almost half of the total.  
 
WHAT DO WE IMPORT FROM CHINA?
 
According to the Office of the U.S. Trade Representative, here are the categories of things we imported from China in 2018:
  • China was the United States' largest supplier of goods imports in 2018.
  • The top import categories in 2018 were: electrical machinery ($152 billion), machinery ($117 billion), furniture and bedding ($35 billion), toys and sports equipment ($27 billion), and plastics ($19 billion).
  • U.S. total imports of agricultural products from China totaled $4.9 billion in 2018, our third largest supplier of agricultural imports. Leading categories include: processed fruits & vegetables ($1.2 billion), fruit & vegetable juices ($393 million), snack foods ($222 million), spices ($167 million), and fresh vegetables ($160 million).
  • U.S. imports of services from China were an estimated $18.4 billion in 2018, 5.5% ($963 million) more than 2017, and 68.3% greater than 2008 levels. Leading services imports from China to the U.S. were in the transport, travel, and research and development sectors.
WHY DO WE IMPORT FROM CHINA?
 
Up to now, most of the imports from China were not because of direct sales from Chinese sales representatives.  No, most of the imports from China were the result of U.S. manufacturers like Apple contracting to have iPhones, iPads and Mac computers produced and/or assembled in China and then imported into the U.S. for sale.
 
An article posted on the internet at Aljazeera.com looks at how Apple contributes to the China trade deficit.  These numbers were provided by IHS Markit, the London-based global information provider:
  • IHS Markit estimates the components of the iPhone X cost a total of $370.25.
  • $110 goes to Samsung Electronics in South Korea for supplying displays. Another $44.45 goes to Japan's Toshiba Corp and South Korea's SK Hynix for memory chips and to other suppliers.
  • The actual payment to a Chinese contract manufacturer that assembles the phone is estimated to be between 3% and 6% of the total cost.
 
However, the entire $370.25 is added to the import number from China when over 90% of the $370.25 was attributable to purchases from other countries.  There may be many reasons why the President is demanding that China clean up their act, but it seems that more questions need to be answered. 
 
Why is Apple buying iPhone parts from other countries and not the U.S.? 
 
The simple answer--the price is lower.  However, what is ignored is one of the major reasons for the lower price--the subsidy for foreign goods created by the present income/payroll tax system. 
 
For example, Apple imports the iPhone for a cost of about $400 and sells it for $1,000.  There is a gross profit of $600 but from this is subtracted all of the expenses associated with the Apple Store and overhead.  If Apple has a net profit of 10%, then they would owe corporate taxes on $100.
 
If the FAIRtax replaces the income/payroll tax system, then life is different.   They will not pay the FAIRtax on the $400 imported phone, but if they want to sell the iPhone for a total price of $1,000, they will need to reduce the list price of the phone to $770 and collect $230 for the FAIRtax for a total of $1,000. 
 
If Apple wants to keep the list price at $1,000, it will have to collect $1,300 from purchasers.  Of course, if you look at how much you have to earn under the present income/payroll tax system, you would need to earn at least $1,300 to net $1,000.
 
So if the actual cost to consumers is not increased by the FAIRtax, and it isn’t, what is the effect?  The effect is that U.S. manufacturers are not going to be punished by having to include the cost of the income/payroll tax system in the prices of what they produce.  This means that they will be able to charge Apple between 12% and 20% less for their products and still make the same profits.
 
The imported goods are no longer subsidized by the income/payroll tax system but are treated the same way.  This means that Apple may be able to source more of their components in the U.S. and, after deducting the costs of shipping, at a price very close to what they are now paying foreign suppliers.
 
CONCLUSION
 
Many of the large U.S. companies are now moving their assembly and production contracts from China to other Asian countries.  President Trump’s move to add tariffs will not reduce the overall trade deficit.  It will just add direct costs to the prices American’s pay.
 
For example, if there is a 25% tariff imposed on $1,000 Apple phones, then the price will no longer be $1,000 but $1,250.  When you assume that you have to earn $1.25, pay the income/payroll taxes, then  net a dollar under the present income/payroll tax system, the real cost is $1,562.
 
This is a terrible result when the trade deficit could more efficiently be balanced by eliminating the subsidy to imports and penalty on U.S. exports by passing the FAIRtax. Under the FAIRtax, prices don’t go up and more Americans have high paying jobs and the U.S. is once again competitive without the income/payroll tax penalty.
 
 Isn’t it time to stop looking at band-aids and start looking at curing the problem?
 
The author George Bernard Shaw said these words in a play he wrote, 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.?
 
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 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 PODCAST & DIGITAL TV SHOW
 
#160 America Without the Income Tax
 
Imagine what life in America would be if we never had an income tax.  How different would it be compared to our current situation? 
 
The FAIRtax Guys help you stretch your mind to think outside the income tax box we find ourselves in.  With no income tax there would be no IRS and no April 15th deadline.  But it’s much more than that.
 
The income tax, and all the baggage that comes with it, has been around all of our lives so it’s rather difficult to imagine life without it.  Using the last chapter in the second FAIRtax book by Boortz & Linder, The FAIRtax Guys devote this episode of FAIRtax Power Radio to helping you look beyond the income tax to a better America. 
 
Listen to the podcast or watch the digital TV show and enjoy.
 
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 at: http://bit.ly/1PZUFVU  This is a great alternative if you’re not a Facebook user. 
 
At this time, we are experimenting with different times of the day and days of the week for our Live streams.  And remember, Live streams are accompanied by Live comments in which you can get involved. 
 
However, if you can’t catch the Live show, just go to fairtaxguys.com 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 (http://bit.ly/2oesbk7), 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 (www.facebook.com/fairtax).  And look for us on our YouTube Channel at: http://bit.ly/1PZUFVU.  If you can’t watch live or you don’t use Facebook, go to fairtaxguys.com 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 Wednesday on Facebook and YouTube followed by the podcast on Friday morning and the new website (fairtaxguys.com) 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. AMERICA’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 (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!
 
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