The Chairman’s Report August 5th, 2022

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  • Source: FAIRtax
  • 08/05/2022

REALLY SAVE SOCIAL SECURITY/MEDICARE---ENACT THE FAIRTAX


Of the 70 million Americans now receiving Social Security and Medicare benefits, few of them read the Summary of the 2022 Annual Reports published by the Social Security and Medicare Boards of Trustees.

The Summary made the following points:
  • The Old-Age and Survivors Insurance (OASI) Trust Fund, which pays retirement and survivors benefits, will be able to pay scheduled benefits on a timely basis until 2034. At that time, the fund's reserves will become depleted and continuing tax income will be sufficient to pay just 77 percent of scheduled benefits.
  • The Hospital Insurance (HI) Trust Fund, or Medicare Part A, which helps pay for services such as inpatient hospital care, will be able to pay scheduled benefits until 2028. At that time, the fund's reserves will become depleted and continuing total program income will be sufficient to pay just 90 percent of total scheduled benefits.
Of course, these projections were calculated based on lower inflation estimates, and the actual inflation we are now experiencing will shorten the above estimates. In addition, the estimates don’t tell us how long they can continue to pay the lesser amounts.  

Can Social Security pay 77% for five years or one year?  

It is anticipated that when the trust funds are no longer able to pay 100% of scheduled benefits, any shortfalls will be paid out of the US budget. However, that’s not guaranteed.

In a blog post for AEI, Mark Warshawsky believes the problem is far worse than the report shows.  Here is his conclusion:

As bad as recent experience has been, the draw from Medicare and Social Security is projected to get much larger in the next decade as the baby boom generation continues to retire and grow old and health care costs rise. Chart 3 shows the trustees’ projections, including the assumption that the HI and OASDI Trust Fund deficits will be filled by general revenue transfers past their projected exhaustion dates. The draw on the federal budget nearly doubles from 2.16 percent of GDP in 2022 to 4.04 percent of GDP in 2035, and to 4.37 percent in 2040. Stated another way, the federal budget responsibility for Medicare and Social Security alone from general revenues will be as large as a relatively bad government deficit year, with no consideration for other government programs, new or old.

Of course, the Supreme Court has ruled in Flemming v. Nestor, 363 U.S. 603 (1960) that Social Security benefits are not guaranteed.  It is up to Congress to pay the benefits and it is possible that when the trust funds run out of money, there could be limits on future Social Security and Medicare payments. 
 
CONGRESS TO THE RESCUE?

On June 9, 2022, the Social Security Expansion Act was introduced in the U.S. House and Senate.

An article in Forbes did an analysis of the proposed legislation:
 
  • Wages above $250,000 annually would be taxed at the same rate that workers currently pay in FICA taxes, 12.4%. 
  • This cut-off would not be adjusted for inflation, so as soon as the existing earnings ceiling exceeds this level, all wages would be taxed, but above the earning ceiling, workers would pay taxes without earning additional benefits.
  • Households with earnings above $200,000 (single) or $250,000 (joint filers), again unadjusted for inflation, would also pay tax of 12.4% on their investment earnings, similar to the additional Medicare tax implemented to fund Obamacare.
  • Active S-corporation officers and limited partners would pay taxes at the combined highest Social Security + Medicare rate, or 15.65%.
  • Social Security benefits will be increased by $200 per month.  A minimum benefit of 125% of the single-person poverty rate will be established.  A more generous CPI index will be adopted, and benefits for the children of disabled or deceased workers will continue up to age 22 rather than 18 for full-time students.
  • It is also increasingly clear that the old notion that “Social Security must be contributory because people will not stand for a welfare program for the middle class” no longer holds in many ways.
  • It is estimated that the new funding sources will increase the viability of the Social Security and Medicare system for another 75 years. 
While the proposed legislation may have little chance of being passed now, Congress is being forced to confront the fact that the Social Security/Medicare system is underfunded. This underfunding problem is greatly increased by inflation and will get much worse.  

It is projected that the cost-of-living adjustment (COLA) for Social Security recipients will result in an 8% increase in the benefits recipients are currently receiving.  Since the COLA adjustments for 2020 and 2021 were 3%, this is a huge change.  If inflation continues to drive benefits higher, this will dramatically shorten the amount of time for which the Social Security/Medicare system will be able to meet its full obligations.
 
THE BIG LIE

Americans are catching on to the fact that what comes out of DC these days simply can’t be trusted.  The DC elites make promises that sound good, but are just not grounded in reality.  The numbers they use to support their proposed programs are often wildly inaccurate.  Unfortunately, this proposed legislation to strengthen Social Security and Medicare makes statements that are just not true.

This legislation promises that benefits go up, the Social Security/Medicare system will become solvent and only the more affluent will pay.  That sounds good, but there’s just no way that’s going to happen.  No doubt there are computer models somewhere that say that’s the way it will be, but again, those computer models are not reality.

Missing from those models is the inevitable human reaction to these higher taxes.  People aren’t going to just pay the new taxes and accept a lower standard of living as a result.  If a business owner must pay an additional $15,650 dollars in taxes, he’s going to try to find ways to keep his net income at or near the same level as before.

That means that he will have to work harder, reduce his expenses like cutting his payroll or increase his prices.  If he increases his prices, who pays for the increase?   Obviously, it’s the people who buy his products or services.  It’s amazing how many people never seem to catch on to the fact that when businesses have to pay more in taxes, the extra money invariably comes out of every individual’s pocket.

In addition, if this proposal becomes law, there will be a number of people who will decide that they want to make just under $250,000.  They may just cut back on their work or, in some cases, create real or imagined deductions to reduce their income below the threshold.

This is the “big lie” that somehow, if someone else is paying income/payroll taxes, then that has no effect on everyone else.
 
THE FAIRTAX SOLUTION

There is absolutely no question that the FAIRtax will result in economic growth that’s unimaginable under the income tax.  Jobs will be created.  The demand for labor will significantly increase resulting in higher wages for more workers.  The booming economy will result in a stronger and more stable revenue stream for the federal government.

Since the FAIRtax legislation specifically sets aside a certain percentage of FAIRtax revenue for Social Security and Medicare, more money flowing into the federal treasury means more money for these two programs.

Currently, the only people supporting Social Security and Medicare are wage earners who are working for a paycheck and paying the payroll taxes.  The ultra-rich who make their money largely from their investments pay little to nothing to support Social Security and Medicare.  The FAIRtax changes that.  With the FAIRtax, everyone whose spending rises above the poverty level will be contributing to Social Security and Medicare.  With everyone contributing, the future solvency of Social Security and Medicare is assured.

There is no “big lie.”  If Social Security payments need to be increased, everyone can easily calculate how much the FAIRtax rate must be increased in order to generate the additional money needed to pay the higher benefits.  And those increased costs won’t be hidden from us.  They will be clearly shown on every retail receipt.

In addition, under the FAIRtax a family of four spending $30,000 per year will pay no FAIRtax out of their own pocket.  The prebate will reimburse them for all the FAIRtax collected from them at the cash register.  Under the present income/payroll tax system, this same family will pay $2,295 in payroll taxes.  

To make matters worse, not only does the present system reduce this family’s spendable income, it forces them to pay 12 to 20 percent more for everything they buy because the hidden costs of the income/payroll tax system are being passed along to them on every purchase they make.
 
CONCLUSION

One of the things that most of us value is honesty.  We want to be able to trust those with whom we interact.  If we go to a store that promises “no question refunds” but refuses to refund a purchase, we won’t go back to that store.

The FAIRtax is as honest as a tax system can be.  There are no hidden costs embedded in the prices we pay.  The full amount you are paying in federal taxes is clearly shown on every retail receipt.

By treating everyone equally with no exemptions, deductions or loopholes, the FAIRtax will make it harder for politicians to pit one income group against another.  People, not politicians, will decide how much tax they pay.  It’s expected that many wealthier people will pay much more in federal taxes under the FAIRtax than under the present income/payroll tax system, but that’s their choice based on what they purchase.

Under the FAIRtax, it is we the people who control what we pay in federal taxes, not the D.C. elites who dishonestly tell us that we’ll be getting benefits that someone else is going to pay for.  With the FAIRtax we will TAKE BACK CONTROL over our government and our lives. 

We will know what the federal government is costing us and that will enable us to make better decisions.  Isn’t that the way government is supposed to work?

As noted earlier, the FAIRtax will trigger an enormous economic boom and will result in an unprecedented uptick in federal revenues.  This in turn should create a real debate on what to do with the increased revenue.  Do we reduce the FAIRtax rate, use the increased revenues for more government spending, or maybe even start paying down our enormous national debt?

The income/payroll tax system is broken and no longer working—we can’t repair it but we can replace it with the FAIRTAX!

ALL AMERICANS MUST JOIN US BEFORE IT IS TOO LATE AND THE WONDERFUL COUNTRY WE LOVE IS FURTHER HARMED.

Join us and TAKE BACK CONTROL OF OUR COUNTRY—NOT WITH BULLETS BUT WITH THE ELIMINATION OF ONE OF THE BIGGEST THREATS TO OUR LIBERTY AND ECONOMIC PROSPERITY—THE INCOME/PAYROLL TAX.

We all should remember Edmund Burke’s warning that applies to our efforts to TAKE BACK CONTROL,
 
“Nobody made a greater mistake than he who did nothing because he could do only a little.”

We should also remember this quote from George Orwell's 1984, which, if we do nothing, may foretell your and your 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? 

We can write letters and make calls to our elected representatives and attend Zoom town hall meetings demanding that if they really want to allow Americans to “TAKE BACK CONTROL”, the first step is to eliminate the income/payroll tax system and enact the FAIRTAX!

TAKE BACK CONTROL!   Help us PASS THE FAIRTAX!

The IRS will be gone and we will pay our taxes when we make purchases.  

WE and not the Ruling Class and their minions in D.C. will decide how much federal tax we pay!

WE will know how much tax we and everyone else are really paying because taxes will no longer be hidden from us.  It will be clearly shown on every retail receipt.

If you have friends who don’t know about the FAIRtax, send them to  FAIRtax.org.  Have them watch the white boards under “How It Works” and, if they agree, ask them to please join us.

Then contact your Members of Congress and the President and demand that Congress pass -the FAIRtax—the only fair tax

Is it hopeless?  When confronted with a seemingly impossible problem, remember the statement attributed to the author George Bernard Shaw who 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?”  
 
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Social Security by twenty20photos is licensed under Envato Elements Envato Elements

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