HOW THE FAIRTAX AFFECTS THE PURCHASE OF A CAR
While some of us might not be making a purchase of a home after the passage of the FAIRtax, almost everyone will be buying a vehicle for personal use.
According to a report issued by Edmunds, used car sales climbed to an all-time high of 39.2 million vehicles in 2017. A report by Kelley Blue Book stated that there were about 17.2 million new cars and trucks sold in 2017. This is a total of 56.4 million new and used vehicles sold. 70% of the vehicles were used and 30% were new.
Under the current system, when you purchase a vehicle you pay for it with the dollars remaining after you have paid the federal income tax and, if you are employed, the Social Security and Medicare taxes. If you are in a state that levies an income tax, then the amount you have remaining is further reduced by the amount of the state income tax. The amount remaining is called “after-tax dollars.”
Under the present payroll/income tax system, when you purchase a vehicle it doesn’t matter if it is used or new. You are using after-tax dollars to purchase either one. This is a major difference under the FAIRtax—the purchase of a used vehicle will not be subject to the FAIRtax.
For example, if you were to purchase a $20,000 new vehicle and compare the price under the present system and the FAIRtax, the following table shows the results assuming a combined federal and state income/payroll tax rate of 20% (7.65% FICA and 12.35% Income Taxes) and the FAIRtax rate of 23%.
Amount of Earnings to Purchase $20,000 New Vehicle
|Present Income/Payroll Tax System||FAIRtax System (23%)|
Amount of Earnings to Purchase $20,000 Used Vehicle
|Present Income/Payroll Tax System||FAIRtax System (23%)|
As you can see, if the FAIRtax was in effect and the price of the new car stayed the same, the purchaser would have paid $1,000 more. However, the purchaser of the used vehicle would have paid $5,000 less.
WILL THE PRICE OF THE NEW CAR STAY THE SAME UNDER THE FAIRTAX?
There are generally two types of critics of the FAIRtax. The first type is someone who has impressive credentials but is a servant of the Swamp. This type understands the FAIRtax but sees it as a great threat to their livelihoods and control over us. Privately they may agree that it is a better plan but in public they energetically attack the FAIRtax.
The second type are normally well-intentioned people who just don’t understand the FAIRtax and have bought the argument that all prices are going to increase by 23%. When the second type is educated as to how the FAIRtax actually works, they almost always become supporters of the FAIRtax.
One of the certainties of the FAIRtax is that the prices of new retail goods and many retail services will decrease. Is it because of the generosity of the people producing and selling the new goods and providing the retail services? Maybe in some cases, but in most cases it will be due to the competition of others selling similar products.
When it comes to vehicles, we see the “incentives” offered that seem endless. If you are a senior citizen, you get $1,500 off. If you are a Costco member, you get $1,500 off and the list goes on and on. If the auto dealers can reduce their prices and still make the same profit, there is no doubt that they will reduce their prices because they know their competitors surely will.
Toyota says that there are about 30,000 parts in a car—including items like screws. One thing that is true is that under the present system every producer of these parts had to pay income/payroll taxes and had to earn enough money to stay in business. This means that at each step of the production cycle, the costs of the income/payroll tax and an amount to cover the income tax on the company’s profit is included. At each step of the production process, these costs are increased and the increases compound like compound interest.
That is why there is no doubt that the elimination of these costs will allow prices to be reduced while the producer is making the same profits. Some believe that a new vehicle price will be reduced by 20%. However, there is almost no way that a vehicle’s price will not be reduced by 10%.
Assuming a 10% price reduction, the new vehicle will cost not $20,000 but $18,000. The FAIRtax will be $5,400 for a total price of $23,400 as compared to $25,000 under the present system. Of course, if the vehicle price was reduced by 15%, which is more likely, the new vehicle would cost $17,000 and the FAIRtax would be $5,100 for a total of $22,100 compared to $25,000.
The cost of the used vehicle will not be subject to the FAIRtax, but to be competitive used vehicle prices will be reduced because if the cost to purchase a new vehicle is too close to the cost of a used vehicle, normally people will purchase the new vehicle.
Under the FAIRtax we will have the ability see vehicle prices go down—even with the 23% tax. This of course does not factor in the effect of the prebate which will reduce the cost for most of us even more.
It is time that we began concentrating more on the second type of FAIRtax critic—the one who just doesn’t understand how the FAIRtax works. We are advised by the media and the “intellectuals” that we have to persuade the first type—those that are beholden to the Swamp.
In the past 28 years, I have gone to Washington, D.C. about once a month and tried to persuade the Swamp denizens that they should do what is right. While we made many gains and have been able to change the way that taxes are viewed, we got not real reform but what the Swamp labels as “generational tax reform.” It still is the income tax, many of the complexities are still there and nothing was done to really address the huge problems created by rewarding imports to the United States and punishing our exports.
As William Jennings Bryan, the great populist of the 19th and early 20th century said, “It is useless to argue with a man whose opinion is based upon a personal or pecuniary interest; the only way to deal with him is to outvote him.”
By educating our fellow citizens who are not beholden to the Swamp, we can have a sane tax system. No one disputes we need some taxes for the government, we just need the right type of taxes.
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
#134 State Taxes, The FAIRtax and (Hate) Mail
Which are the best/worst states to do business in and how does this relate to the FAIRtax? The FAIRtax Guys find a positive correlation between tax friendly states and the FAIRtax. To no one’s surprise, some tax policies are the reason many people are voting with their feet as seen by the exodus from high tax states to other states with business friendly tax systems.
Then The Guys turn their attention to mail from our listeners/viewers. Some people have serious questions about the FAIRtax and how it will work with various segments of our economy. In responding to these questions, we all learn more about the most thoroughly researched tax proposal ever presented to Congress.
And then there’s the hate mail; the guy who demonstrates by his questions and comments that he truly does not understand how the FAIRtax will work and apparently believes that dropping the f bomb helps him make his case. Even a guy like this provides a teachable moment.
Please get engaged and help others learn about the value of the FAIRtax by turning them onto FAIRtax Power Radio - the ONLY weekly FAIRtax digital TV show in the country! Watch every Wednesday at 11:30 AM (ET). We are streaming to Facebook LIVE (www.facebook.com/fairtax). If you’re not a fan of Facebook, you can watch FAIRtax Power Radio on xcluded.tv at the same broadcast time - or any time.
FTPR podcasts for each show are posted on Spreaker (http://bit.ly/2oesbk7), iTunes & iHeart Radio every Friday morning. A free FAIRtax Power Radio app is available for iOS and Android. Since it’s a podcast, you can download it and play it whenever it’s convenient for you.
The Facebook videos are saved to a number of pages:
FAIRtax Official (https://www.facebook.com/FairTax/)
The FAIRtax Guys (https://www.facebook.com/thefairtaxguys/)
Democrats for FAIRtax (https://www.facebook.com/DemocratsForFairTax/)
and many others.
Xcluded.tv is a subscription based site which costs $30 per year and features a number of other shows along with FTPR with no commercial interruption.
Please help us educate as many Americans about the FAIRtax as possible. Be sure to tell everyone you know about this great new format for FAIRtax Power Radio. Whether you watch the weekly video 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.
Tune into our video broadcast each Wednesday. Or, if you prefer, you can 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!
AMERICA’S BIG SOLUTION - A BASIC INTRODUCTION TO THE FAIRTAX
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. 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!
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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