PRESIDENT TRUMP IS MAKING IT EASIER TO ENACT THE FAIRTAX
An article by Andrew Biggs published on the American Enterprise Institute web site makes the following points:
An article by Andrew Biggs published on the American Enterprise Institute web site makes the following points:
- President Trump made it clear in an Aug. 12 news conference that his ultimate goal is to eliminate the Social Security payroll tax and fund Social Security with income taxes.
- In 2019, the federal government collected about $1.7 trillion in individual income taxes, versus nearly $1 trillion in Social Security employee and employer matching payroll taxes.
- Even if the President’s plan would replace only the employees’ 6.2% Social Security tax and not the employer match of 6.2%, that would mean an additional $500 billion in income tax revenues would be needed to maintain the current level of funding.
- The payroll tax reinforces the view that Social Security is an “earned benefit” that recipients have paid for rather than a government welfare plan. However, most Democrats have already given up on the idea of truly earned benefits. Their Social Security proposals focus on lifting the payroll tax cap and making the rich carry more of the load without increasing their benefit accordingly.
- While only about 15% of employees earn salaries above the present $137,700 payroll tax ceiling after which Social Security taxes are no longer withheld or matched, almost half of total income taxes are paid by households with incomes above that level. More than one-third of income taxes are paid by the top 1% alone.
- A retirement safety net funded by income taxes need not be nearly as expensive as the current Social Security program. For instance, Australia’s Age Pension costs around one-fifth of what Social Security does, because it merely supplements households’ own savings to ensure a minimum standard of living in retirement. Canada and New Zealand also use income tax-financed programs to provide a strong base of retirement income.
CONCLUSION
President Trump actually has another argument for eliminating the payroll tax—it is arguably the most regressive federal tax there is. There is no standard deduction. It’s taken out of the first dollar a worker earns. It doesn’t matter if that worker makes $1,000 a year or $100,000 a year, and there’s no allowance for family size. The payroll tax hits hardest on the families who can least afford to pay it.
In spite of all of its other faults, the income tax at least recognizes differences in family size and earnings levels. Of course, the FAIRtax prebate does an even better job of protecting low income workers from having to pay taxes they can’t afford. So, from a “fairness” standpoint, the President is on solid ground in wanting to eliminate the payroll tax. He’d be on even firmer footing if he would support enacting the FAIRtax.
Some people have raised objections to the way the FAIRtax would fund Social Security. They somehow believe that eliminating the payroll tax and funding Social Security from general revenues is an attack on seniors and workers.
Of course, this attitude ignores the financial realities—the Social Security Trust Fund is going broke and, in the future, there are not going to be enough workers contributing to the system to keep it afloat. If we retain the current system, there is just not going to be enough money coming in to continue paying benefits at current levels.
The FAIRtax accomplishes what the President wants to do and more. It gets rid of the payroll tax, but it also eliminates both corporate and individual income taxes. By expanding the tax base from just people working for a paycheck to everyone who buys things, the FAIRtax ensures the future solvency of Social Security in a way that no other tax plan can.
Is funding Social Security from the income taxes the best idea? No, but it is much better than the present system. However, the only way that really makes sense is to scrap the present income/payroll tax system and pass the FAIRtax—the only really fair tax.
President Trump has taken a good first step. He seems to very much agree with Albert Einstein who said,
The person who follows the crowd will usually go no further than the crowd. The person who walks alone is likely to find himself in places no one has ever seen before.
Please go to Whitehouse.gov/contact and send a message to President Trump to champion ending all payroll taxes with HR-25 FairTax.
Then contact your Members of Congress and the President and demand that Congress pass -the FAIRtax—the only fair tax.
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.”
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?”
Thank you for staying FAIRtax strong!
Yours In Liberty! Yours In Freedom!
Steve Hayes
Chairman, Americans For Fair Taxation
Websites & Online-Social Media - can be accessed by clicking here
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