The Chairman’s Report February 9th, 2024

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  • Source: FAIRtax
  • 02/09/2024

Secrets and Lies - The D.C. Elite tell us about Income/Payroll Taxes

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There are many reasons that the D.C. elite fight so desperately to keep the corrupt and broken federal income tax and payroll tax system in place.  Some of these are:
  • It is a great source of campaign contributions—threaten a special interest tax break and the money flows in to the politicians.
  • Providing tax breaks to some and tax penalties to others is a great way to reward friends and punish enemies.  It’s also a great tool for exerting control over people’s behavior and decisions—reward those who do what you want them to do and punish those who don’t.
  • It empowers the smart people in D.C. to control how much of our earnings we get to keep.
  • It provides work for countless bureaucrats and private workers in the income/payroll tax area, and keeps those workers dependent on the D.C. elite.
Most importantly, the income payroll tax system conceals just how much the federal government is really costing us.  

Your first reaction may be, “But I do see how much I’m paying.  My federal tax withholding and payroll taxes are right there on my paycheck stub.”

That is true, but those are just the taxes you see.  You pay hidden federal taxes every time you buy something.  

Whether you are retired or employed, these hidden taxes embedded in the prices of everything you buy boost you tax liability well above just what you see on your pay stub or tax return.


The basic laws of economics dictate that all private businesses must make a profit in order to stay in business.  That means that a business must sell its products or services for more money than it costs the business to provide those products or services and make a profit for its owners.

For example, take a family wheat farm.  In order to have wheat to sell, the farmer must:
  • Buy or lease land
  • Buy seed
  • Buy a tractor, a combine and other farm equipment
  • Pay all the costs of operating and maintaining his equipment
  • Hire employees and pay their salaries, benefits and the employer’s share of the federal payroll taxes (7.65%)
  • Pay his federal income taxes
To survive economically, the farmer must sell his wheat for enough money to pay all of those costs and still have enough profit left over to feed his family and prepare for next year’s crop.

For illustration purposes, assume that the farmer has calculated that he needs to net $50,000 per year, after all federal taxes, to feed his family.  Because of federal income/payroll taxes he needs to earn not $50,000 but approximately $65,000 in profit.

On a gross profit of $65,000, the farmer must pay:
  • 15.3% for payroll taxes or $9,945
  • Federal income taxes of $3,500
  • Net take-home pay of $51,555
If his costs are $500,000, the farmer needs to sell his wheat for not $550,000 but for $565,000.  When the grain elevator or flour mill purchases the farmer’s wheat, they don’t see it on the invoice, but they’re paying all the tax costs that the IRS imposes on the farmer.  If the farmer didn’t have to pay those taxes, he could sell his wheat for less money and still make the profit he needs to stay in business.

The laws of basic economics apply to everyone.  The grain elevators and flour mills that purchase wheat all have their own tax costs which are passed on to those who buy the flour.  When a bakery turns the flour into bread, the bakery’s tax costs are passed on to those who buy the bread.

In like manner, when a supplier sells bread to a grocery store, the supplier’s tax costs are added to the cost of the bread.  By the time a loaf of bread reaches the retail consumer, the price of that loaf of bread contains the hidden tax costs of every entity that had a hand in producing that loaf of bread and getting it to the store shelves.

It is very difficult to quantify the amount of hidden federal taxes in any particular item because each product or service will have different income/payroll tax costs added to the selling price.  However, it is estimated that by the time a product reaches the retail consumer, hidden tax costs have increased the product’s price by between 15% and 25%.

Therefore, not only is our total pay reduced by income tax withholding, but the items we purchase with our reduced paycheck contain more federal taxes in their prices.  These additional taxes are hidden and almost impossible to calculate.


While many in D.C. complain that the FAIRtax is a “new” sales tax, it is time to call them out on this.   We already pay a sales tax under the present income/payroll tax system.

For example, even though some in DC don’t understand it, workers can only live on the money they have remaining after deducting their federal income/payroll taxes.

Withholding reduces the net “take-home” pay by 15% to 50%.  For example, if we make $1,000 per week and receive $800 in take-home pay, a 20% reduction, we make purchases from the $800 we have left and not the $1,000 we earned.

If we purchase something for $800 then we had to earn $1,000 to net the $800.  

So, isn’t the true cost of an $800 item actually $1,000 because we had to earn $1000 in order to bring home $800?  

How is that not a 20% tax on our consumption?  As you make more money, the amount of the “federal sales tax” increases.


Clearly some politicians in DC don’t understand economics.  They continue to proclaim that they’re going to make rich corporations “pay their fair share”, so you as an individual won’t have to pay as much.

Here is the easy explanation that even a Member of Congress can understand.

Corporations have certain legal characteristics different from an individual doing the same business, but all must follow the same rules of economics.

Now, more and more retail purchases are being made by fewer and fewer retailers.  Over 90% of the retail sales are done by less than 10% of the retailers—like Amazon, Walmart and Target.

Corporations, both large and small, have shareholders.  Because shareholders want the corporations to be profitable and provide them a return on their investment, all corporations must sell their products/services for enough to cover their costs and make a profit or they will go out of business.

They must include any federal income/payroll taxes they pay in calculating the ultimate price paid by the consumer.

If someone in D.C. raises taxes on a corporation, then the corporation must pay the increased taxes from one or more of these three sources.
  1. They increase the price to the consumer.
  2. They reduce labor costs by hiring fewer employees and/or spending less on wages, salaries and benefits.
  3. They pay from their profits thus reducing the stock value of their shareholders either personally or reduce the value of our retirement plans.
In all three cases, people, not the corporation itself that pays the taxes.


There are many economic reasons for moving from the income/payroll tax system to a consumption tax like the FAIRtax.  You can go to and see the economic studies or just start looking at past Chairman’s Reports at the advantages outlined there.

However, perhaps the main reason is that the FAIRtax shows the true cost of government on every receipt.  It is time that our “rulers” in D.C. are honest with what their mismanagement is actually costing us.
We are adults—we deserve to know just how bad the cancer is so we can face it and fix it before it is too late.

If your Member of Congress refuses to support the FAIRtax because of some perceived flaw or shortcoming, remind them that legislation CAN be amended.  Don’t let them get away with condemning the entire bill because it has a “flaw” that can be easily addressed.  And don’t think for a minute that there aren’t any flaws in the income tax.

As Martin Luther King, Jr. said, ”In the End, we will remember not the words of our enemies, but the silence of our friends.”

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 collects the revenue that the federal government needs to operate but does it in a way that has the least impact on our individual freedom and the least impact on our economic prosperity.  

There are no tax returns to file and no records to keep.  We pay our federal taxes when we make retail purchases of new goods and services, and there is no need for the IRS.  If you sell a used couch or used jet ski online, there is no FAIRtax due on that transaction.

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!

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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