FEDERAL BUDGETING AFTER THE FAIRTAX IS ENACTED—WHAT A DIFFERENCE
wayhomestudio
Throughout history, different groups have tried to maintain their authority and protect their livelihoods by convincing everyone else that some area or information was too complicated to be understood by the rest of the people.
All too often, the ones trying to maintain their positions of power and authority are government bureaucrats.
All of us know that the people in D.C. believe that rules that apply to us in fly-over country (anywhere 50 miles outside of D.C.) don’t apply to them.
A glaring example of this is the willingness of the D.C. crowd to put our country’s future at risk by recklessly disregarding a basic principle of sound money management--you don’t spend more than you make.
Like the young couple in the picture above, the rest of us must carefully budget and ensure that we don’t spend more than we have.
Penn Wharton, a group of economists at the University of Pennsylvania, published their latest Budget Model.
Here are some of the points made in the report:
- The U.S. “public debt outstanding” of $33.2 trillion often cited by media is largely misleading, as it includes $6.8 trillion that the federal government “owes itself” due to trust fund and other accounting.
- The economics profession has long focused on “debt held by the public”, currently equal to about 98 percent of GDP at $26.3 trillion, for assessing its effects on the economy.
- We estimate that the U.S. debt held by the public cannot exceed about 200 percent of GDP even under today’s generally favorable market conditions.
- Larger ratios in countries like Japan, for example, are not relevant for the United States, because Japan has a much larger household saving rate, which more than absorbs the larger government debt.
- Under current policy, the United States has about 20 years for corrective action after which no amount of future tax increases or spending cuts could avoid the government defaulting on its debt whether explicitly or implicitly (i.e., debt monetization producing significant inflation).
- Unlike technical defaults where payments are merely delayed, this default would be much larger and would reverberate across the U.S. and world economies.
- This time frame is the “best case” scenario for the United States, under market conditions where participants believe that corrective fiscal actions will happen ahead of time.
- If, instead, they started to believe otherwise, debt dynamics would make the time window for corrective action even shorter.
This information is readily available to the people in DC, and there’s no doubt that they can read and understand it. They know that our massive deficit spending and burgeoning debt are unsustainable, and that restoring fiscal sanity to the Federal budget will force many programs to be cut and this will cause the people relying on the cut or reduced programs to be adversely affected and to complain and protest.
To avoid this massive backlash against the powers in DC when people start feeling the pain, the DC crowd is counting on the process being so complicated and the numbers so large, that our eyes will glaze over, and we will give up and let the “smart” people in D.C. handle it.
This is one of the main reasons that D.C. opposes the FAIRtax. When the FAIRtax is enacted, the whole budget process becomes much simpler, and we can easily see the impact on the FAIRtax rate by each category in the budget.
THE FAIRTAX GIVES US A SAY IN THE FEDERAL BUDGET
An article published by the Center on Budget and Policy Priorities states the following:
- In fiscal year 2023, the federal government is estimated to spend $6.3 trillion, amounting to 24.2 percent of the nation’s gross domestic product (GDP).
- Of that $6.3 trillion, over $4.8 trillion is estimated to be financed by federal revenues.
- $1.5 trillion will be financed by net borrowing.
(In reality, the income/payroll tax only collected $4.4 trillion, not $4.8 trillion as predicted when the study was written, in fiscal year 2023. Since D.C. still spent $6.3 trillion, they had to borrow not $1.5 trillion but $1.9 trillion.)
Since the FAIRtax rate is calculated each year to collect the same amount of money for the government as the federal income taxes, the rate of 23% inclusive would have collected $4.4 trillion in fiscal year 2023.
This would mean that of every dollar you spent on new retail goods and services, $.23 would go to pay the FAIRtax and $.77 for the product. Products purchased in Europe, or other countries with a valued added tax (VAT), include the amount of the VAT in the price you pay.
The math is easy. Each one percent of the FAIRtax rate collects $191.3 billion in federal taxes. Therefore, a 23% rate would collect $4.4 trillion. If we needed to collect an additional $1.9 trillion to balance the budget, the FAIRtax rate would have to be raised by 10% to 33%.
This isn’t complicated. It’s simple math that anyone can do with a smart phone or simple calculator.
The chart below from the Center on Budget and Policy Priorities shows what percentage of the total budget each major category in the budget consumes.
As an example, the interest on the debt is 10% of the total $6.3 trillion or $630 billion. If you divide $630 billion by $191.3 billion, you get 3.29. So, in order to raise the money needed to pay the interest on the debt, the FAIRtax rate would have to be increased by 3.29%.
If we didn’t have to pay interest on the federal debt, the FAIRtax rate could be reduced by that 3.29% to 19.7%. In that case, the FAIRtax would collect $3.67 trillion. Of course, if you did that, you’d still need to borrow $1.9 trillion like we did in 2023 to cover the entire remaining $5.57 trillion budget.
Since we can’t eliminate our obligation to pay interest while we still have the federal debt, we can look at other reductions to the budget.
Many have called for the elimination of the Department of Education which is 4% of the $6.3 trillion budget or $2.52 billion. Doing simple math, $2.52 billion divided by $191.3 billion is 1.3. This means that if the Department of Education were eliminated, the FAIRtax rate could be reduced from 23% to 21.7%. Then if you continue to borrow $1.9 trillion you can pay for all of the budgeted items.
THE IMPORTANT POINT IS THAT WITH THE FAIRTAX, THE EFFECT OF FEDERAL SPENDING ON EACH OF US IS NOT HIDDEN. IT IS VERY VISIBLE.
Of course, if we were going to do the responsible thing, we would continue to make cuts in the $6.3 billion budget over several years until we eliminated the deficit completely and were no longer spending more than we brought in with the FAIRtax.
Once we balance the federal budget, we can increase the FAIRtax rate and force D.C. to use the increased revenue to start paying down the massive national debt.
The choice is easy—do we want a system for funding the federal government:
- That is so simple everyone can understand it.
- That shows the costs of the federal government on every retail receipt so all of us understand what we are paying.
- That helps U.S. companies compete with foreign competitors.
- That keeps jobs in the U.S. rather than exporting them to other countries.
- That permanently establishes the solvency of Social Security and Medicare.
- THAT IS THE LARGEST TRANSFER OF POWER FROM D.C. TO THE PEOPLE SINCE THE CONSTITUTION WAS ADOPTED.
D.C. is ignoring the one real solution that allows us to remain citizens and not subjects, the FAIRtax. The FAIRtax is simple, non-invasive, but most of all, IT WORKS!
THE SOLUTION—PASS THE FAIRTAX!
If you don’t like the idea of the IRS and D.C. requiring you to reveal more and more of your private financial data and changing us from citizens to subjects, you should be helping to pass the FAIRtax.
- Under the FAIRtax, there are no more tax returns. You no longer have to disclose your personal financial information to the government.
- Banks and other financial institutions no longer have to tell the government about the dividends and interest you received, or about how much you made trading stocks, bonds or other capital assets.
- There is no need for the government to know anything about your IRA because you won’t need an IRA. The FAIRtax lets everyone save for their retirement tax free.
- And of course, if the government doesn’t have your confidential financial data, they can’t leak it.
In addition to solving the confidentiality problem, the FAIRtax lets business owners concentrate on making their business more profitable and beneficial for their shareholders and employees.
President Biden and Congress, pass the FAIRtax and:
- Do the right thing for the people of America and fix the broken income/payroll tax system!
- Go down in history as the ones who freed all present and future Americans from the tyranny of the income/payroll tax system.
- Ensure that there can be no more leaks of our confidential information.
- Transfer power back to the American people over how much tax they pay!
The FAIRtax transfers power from Congress and the bureaucrats to the people. We, not D.C., decide how much federal tax we pay.
There is no IRS—the states collect the FAIRtax.
Only retail businesses will have to collect the FAIRtax and remit it to the government.
Since less than 10% of the retailers account for 90% of retail purchases, there will be much less opportunity for evasion.
Why would D.C. pass the FAIRtax and give up this almost unlimited source of donations? The only way that they will is if the rest of us demand it!
Isn’t it time to end this ludicrous tax collection system and the IRS?
There is going to be a vote on the FAIRtax in the House of Representatives.
We now have the opportunity to force all Members of the House to show where they stand. They can:
- Vote for the present income/payroll tax system or for the FAIRtax.
- Support the corrupt income tax and the IRS or eliminate it. It can’t be any simpler than that.
- Hide the true cost of their government or pass the FAIRtax and show everyone the true cost of government on each retail receipt.
- Support the largest transfer of power from government to the people, the FAIRtax, or not.
If Members think that the FAIRtax needs to be amended to address a problem, then they can propose the change. Don’t let reject the entire bill because it has a perceived “flaw” that can be addressed.
Please stand with us and demand that your representative support a much fairer, much simpler and much more efficient way to fund the government—the FAIRtax!
The FAIRtax doesn’t pick winners and losers. Because it taxes spending, not earnings, the FAIRtax lets everyone save for their retirement tax free.
The FAIRtax will allow us to TAKE BACK CONTROL.
The income/payroll tax system is broken and no longer working—we can’t repair it but we can replace it with the FAIRTAX!
Join us and TAKE BACK CONTROL OF OUR COUNTRY AND OUR LIVES—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!
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