This statement may seem whimsical at first but it is not. Some things that are logical and should be done are politically impractical for one political party. One example was the recognition of mainland China. Democrat presidents were concerned about looking “soft on communism.” However, Richard Nixon, a Republican who was prosecuting the Vietnam war, could not be accused of being soft on communism. Nixon visited mainland China in 1972 and this visit led to China being recognized by the U.S.
Although Hillary is very wealthy, a Democrat who supports a tax provision that seems to benefit wealthy people is not criticized while a Republican would be attacked as harming the lower income groups to help the wealthy. As discussed in last week’s column, one of the problems facing Trump if he is elected president is that if he works to pass the FAIRtax, he will be attacked as benefitting wealthy people like himself at the expense of everyone else—even though this is not the case.
It is true:
- Wealthy people generally spend more than people less wealthy.
- Many people accumulate more wealth than they can spend.
- Until this wealth is spent, it would not be subject to the FAIRtax.
- Most very wealthy people pay very little income tax now.
The basic reason is why many things are done by any political party—survival. If you look at the groups who are the primary supporters of the Democratic party, you would list the following:
- Union members
- Lower income employees of businesses
- Local, State and Federal Government workers
- Schoolteachers
- Younger people
A recent IRS study about income/payroll tax evasion estimates that the number has grown to $458 billion in 2010. Evasion is rapidly growing and credible studies indicate that it is now exceeding $600 billion per year. Since the federal deficit was $439 billion in 2015, if there was no evasion, there would have been no deficit in 2015.
Evasion Will Get Worse
The Government Accountability Office predicts that 40% of the work force will be free lancers, contractors or other types of part-time workers by 2020. Looking at the IRS report, they point out that compliance by W2 employees is very high but compliance by independent contractors is much less—they can improperly deduct things as business expenses and they can also elect to conceal some of their income.
Because the IRS audit rate is about 1% and most of these people will be making less income, unless they do not include income for which they received a 1099, their audit risk is much less. Because of the complexity of the Internal Revenue Code, many of these contractors who simply use Turbo Tax may not even know that some of their deductions are not proper.
Reducing Income/Payroll Tax Evasion
While there will be evasion under any tax system, the only way to reduce evasion of the payroll/income tax system will be to greatly increase not only the number of taxpayer audits but also the punishment of taxpayers who evade taxes. In 2015, there were 3,208 indictments for criminal tax fraud. Does anyone believe that of nearly 240 million tax returns filed in 2015, only 3,208 were actually committing criminal tax fraud?
The problem with this solution is that no politician is interested in being the person responsible for perceived abuse of taxpayers by the IRS.
Tax Increases
There is no doubt that as evasion increases, it will be necessary to raise the income tax rates. This will collect more money but the pain will be largely felt by W2 workers and the remaining “honest” taxpayers. The people evading taxes are not likely to stop evading because the government needs money. They have already decided that it is “ok” to evade taxes. We have to remember that when they evade the federal income tax they are also evading the Social Security and Medicare taxes and any applicable state income taxes.
The increase in taxes and resulting decrease in a person’s income available to spend will create growing resentment of the great numbers of people who are openly evading the income/payroll taxes. This will lead to demands for a new solution.
The Solution
The FAIRtax is the solution. Here are some of the reasons:
- Evasion will be greatly lessened and people will believe that all are treated the same
- More and better jobs will be created in the United States
- Wages will increase
- U.S. exports will be increased and foreign imports will be reduced
- The IRS will be eliminated
- The economy will grow much faster
- Prices will come down by 10% to 15%, making the net effect of the 23% FAIRtax rate between 8% and 13% when looking at current prices and even lower when the Prebate is factored into the equation
- The Prebate will allow all purchases up to the poverty level to be tax-free
- Government revenues will increase and the budget deficit can be eliminated at current levels of spending
Ironically, a President Hillary Clinton may have an easier time passing the FAIRtax than a President Trump. Most of the criticism in Congress of the FAIRtax has come from Democrats and they will likely not be critical of a Democrat President. Once passed, the resulting economic and social benefits of the FAIRtax will make the President and her or his party very difficult to defeat in future elections.
America’s Big Solution
It is interesting that almost everyone that learns about the FAIRtax says, “That makes a lot of sense.” The few people who don’t see the FAIRtax as a huge benefit mostly live in or around D.C. Many of our elected officials run around and complain about problems but have not shown that they can actually solve problems. For big problems we need big solutions and the FAIRtax is a big solution.
We have a 20th century tax system when we need 21st century tax system. Please send your friends to AFFT.org and Bigsolution.org.
1040 Club and Contributions
To those of you not familiar with the 1040 Club, AFFT is asking people to contribute $10.40 per month to AFFT. This provides a steady funding platform and allows us to spend our time not trying to raise money but actually working with groups to help make passage of the FAIRtax a reality. Thanks to each of you who have joined the 1040 Club. You are ensuring that Americans For Fair Taxation can continue to promote the FAIRtax.
If you are not a member of the 1040 Club, or if you are a member but want to join for someone else, please go to this link and sign up.
If you believe that all you can contribute to our efforts is $10, please go to AFFT.org and donate. We have our best chance now and need your help. Many of us prefer to make one donation as opposed to monthly donations and this greatly helps.
FAIRtax Power Radio
The FAIRtax Guys am pleased to announce that FAIRtax Power Radio is now available on iTunes and Spreaker. A new episode will be posted every Friday morning but you can listen at any time by going to one of these sites. There is no cost to listen. Soon they will be on iHeart Radio.
Recently Bob and Ron decided to start from scratch discussing the many problems with the current income tax system and the reason why REAL tax reform is so desperately needed in our country. In episode 3, Thomas Jefferson paid them a visit and gave his opinion of our federal income tax. As you might guess, he wasn’t very happy with what he saw. Then they searched for “the perfect tax system”.
In future episodes, you will hear from Bob “Paxworthy” famous for his “You Might Be A FAIRtax Fan!” routine. Bob and Ron are always open to your thoughts and opinions. You can contact them at thefairtaxguys@gmail.com.
Our episodes are still available on SoundCloud and YouTube but Spreaker is the site that let's us branch out to other, more popular sites that cater to podcasting.
Bob and Ron have vowed to continue with FAIRtax Power Radio until HR 25 becomes the law of the land in 2017. After that, I’m sure our episodes will go into the Radio Hall of Fame! Please share this information with your constituents and anyone else you care to. The more people we educate about the FAIRtax, the better the chances are that it will become a reality next year.
AFFT National LOGO Store
Rudy who runs the AFFT National Logo Store has announced that the Autographed FairTax Book” is SOLD OUT.
THE FAIRTAX® LOGO STORE
SPECIAL PROMO OFFER MAY 17th thru May 23rd
Summer SUN means FAIRtax Hat and Visor time
For every FAIRtax Port Authority Hat or Visor purchased from the Store during the time period May 17th through 23rd, you will receive FREE Folding Malibu Sunglasses, one ABS Pocket Calendar, and twenty-five ABS Business Cards. Our embroidered logo FAIRtax hats and visors are available in three colors (red, white, or blue), your choice. A special within a special, a baker’s dozen. Order any combination of 12 hats and visors and get one free hat.
When visiting the Store, don’t forget to order a supply of FAIRtax Palm Cards. Besides handing out palm cards at meeting and events, whenever you send mail through the post office, consider including at least one FAIRtax informational palm card in the envelope - keep spreading the word.
Thank You For Opening The FAIRtax Chronicles, Our Sponsored Mailings
We plan to do several of these mailings each month. If you take a minute to open the sponsored emails and click through to the website, you are making an in kind contribution to AFFT. It is not required to actually make a purchase, but your minute of time will ensure that AFFT is paid ever larger amounts from people paying for us to send their offers to our supporters.
Again, we are making every effort to ensure that we work with only reputable companies. If you feel that any FAIRtax-sponsored email is objectionable, please email us at info@fairtax.org and tell us why. You can also opt to not receive these sponsored email messages but still receive FAIRtax emails.
Thank you for staying FAIRtax strong!
