This week’s Chairman’s Report is written by Jade Walle. Vice president of Ur-Energy Inc., a CPA and a member of the Americans For Fair Taxation board of directors.
Psychological Predisposition- Income and Property Taxes
In last week’s Chairman’s Report, we highlighted a famous Adam Smith quote from Wealth of Nations, which reads, “The property which every man has in his own labor, as it is the original foundation of all other property, so it is the most sacred and inviolable.”
This quote highlights how our income is sacred to us because it is the primary, if not only, source of all property we will ever acquire and have the brief privilege and responsibility to care for in our allotted time on earth.
What is the psychological predisposition and effect of our nation’s income tax as it relates to Mr. Smith’s inescapable human truth?
We see that the answer to this question is painfully obvious. Our nation’s illegal evasion tax gap is $1 trillion per year as pointed out by the IRS commissioner in 2021 sworn testimony. That’s bad, and it’s only going to get worse.
As illegal tax evasion is a severe form of fraud, it is useful to examine the study on how and when fraud usually occurs. Research on the motivation behind fraud began in the 1950’s and culminated with what is known as the fraud triangle, which highlights three things needed or present when fraud occurs:
- Incentives / Pressures
- Rationalization / Justification
- Opportunity
The simple reality that rings true is that if humans are involved, the first two elements of the fraud triangle are always going to be present. Meaning, we cannot train, teach, or coach people out of having pressure or incentive to steal and enrich themselves. It also means that with humanity, we will always find a way to make our bad choices and thievery justifiable in our own minds. Sadly, this is our human condition for now.
How would the FAIRtax change this rampant and illegal tax evasion? By cutting off the “opportunity” leg of the fraud stool, so it comes crashing down!
The FAIRtax is a simple national sales tax collected at the point of sale of new retail goods and services. Today, over 90% of all retail sales are made by only a few hundred U.S. retailers such as Wal-Mart, Amazon, Home Depot, etc. Can you imagine trying to tell the clerk or the on-line check-out window chatbot that you’re not going to be paying the sales tax? This would be an exercise in futility.
The reality is that with the current income tax, hundreds of millions of U.S. individuals and businesses are essentially on the honor system. They are being asked to honestly report all of their income and claim only those credits and deductions they are legally entitled to. Most do, but many don’t.
Unfortunately, it’s ridiculously easy for even honest taxpayers to make mistakes. There are hundreds of different IRS tax forms. The instructions alone are thousands of pages long. Add up all the statutes, regulations, instructions and case law and you’ll find that our current tax code approaches 90,000 pages long. No one, not even trained tax professionals, can understand it all. Yet, we are all expected to understand our tax situation and comply with the law. The rate of IRS audits continues to decline, and our illegal tax evasion continues to grow at unprecedented rates.
The simple fact is that the FAIRtax takes the hazard out of play. If the vast preponderance of U.S. retail sales has near zero probability of illegal evasion, why wouldn’t we use this much simpler, fairer, more transparent, and more easily administered taxation system?
While the depravity of humanity cannot be curtailed by man, the FAIRtax does remove the psychological predisposition to cheat on our taxes, because the source of our property is no longer being confiscated. The FAIRtax would usher in a voluntary tax system where we choose when and where to pay the FAIRtax on purchases beyond the necessities of life.
The FAIRtax prebate mechanism reimburses all citizens for tax paid on life’s necessities. We would also be able to choose whether we purchase used items, like houses or automobiles, which are not subject to the FAIRtax, or new items where FAIRtax is collected.
The inclination for fraud is not only eliminated because the opportunity is significantly curtailed, but also because our income and the source of our property is no longer being seized. The rationalization and justification leg of the fraud triangle also takes a significant hit with the FAIRtax! The mindset that the income tax is theft and our justification for not paying it in full is now eliminated.
A September 2020 article penned by yours truly goes much deeper into this phenomenon and how the FAIRtax elegantly addresses the problem of illegal tax evasion without needing to hire 100,000 new IRS auditors to harass our U.S. citizens into paying what they essentially feel is property seizure.
The research paper is available at fairtax.org, in the Evasion section of the Research tab, and the link is here. (Microsoft Word - Fair Tax Article- Tax Evasion Summary, by Jade Walle, September 2020 #3 CLEAN.docx). The research indicated that under the FAIRtax, illegal evasion would plunge by over 90% (from nearly $1 trillion to $50 billion per year).
The FAIRtax saves the day not only by eliminating the psychological predisposition to illegally evade paying taxes but also addresses the only truly controllable leg of the fraud triangle, opportunity.
CONCLUSION
As Jade makes clear, the FAIRtax Act (H.R. 25) is more than just a proposal for a retail sales tax; it is a fundamental restructuring of the federal fiscal structure and largely eliminates the fraud that is now growing in the income/payroll tax system.
Unlike other excise taxes which normally are applied to specific products and in different percentage amounts, the FAIRtax applies a 23% rate to all new retail products and retail services.
THE FAIRTAX IS THE ANSWER.
The FAIRtax is a national retail sales tax on new retail goods and retail services which provides a family credit so that all purchases up to the poverty level for each family are not taxed. There is no withholding from your paycheck, and YOU NEVER HAVE TO FILE A TAX RETURN TELLING THE GOVERNMENT HOW MUCH YOU EARNED AND HOW MUCH YOU SPENT, AND YOU’LL NEVER BE HARASSED BY THE IRS EVER AGAIN.
Many of you have labored tirelessly for freedom from the federal income tax and the IRS. You deserve a great deal of credit for your efforts to educate the American people on the need to fund the American government in a way that is good for America and returns freedom to the American people.
It is imperative, though, that we don’t replace the current income tax and the IRS with an alternative system that can still be manipulated by the Ruling Elite. We must let Congress and the President know that the best way to replace the income tax and the IRS is with the FAIRtax.
Make no mistake about it. The FAIRtax is a grave threat to the Ruling Elites. It will strip them of their power and their ability to control us though the tax system. Their opposition to the FAIRtax will be fierce and unrelenting. And don’t think for an instant that they won’t use half-truths, deception and downright lies in their desperate attempt to hang on to their power.
However, with the support of this President, we can finally eliminate the income tax and the IRS!!!
Of course, the best course of action is to not only repeal the income tax and abolish the IRS but to repeal the 16th Amendment as well so no future administration can ever shackle the American people with an income tax again.
We must come together and ensure that real tax reform, the FAIRtax, is not subverted by the Elites in D.C.
This will take the diligent efforts of all of us. We need your financial assistance, and we need your grass roots assistance.
If you have contacts that will allow us to get more information to President Trump about the FAIRtax please let us know.
Please email us at info@fairtax.org and we will give you some options on how you can best help us.
At a minimum, please call your Congressional representative and ask if he or she supports the FAIRtax. If so, thank him/her for their support and suggest they become a cosponsor of HR-25 if they’re not one already. If not, ask why not. If your representative claims to be unfamiliar with the FAIRtax, offer to have someone come to their office and explain it to them.
Please go to this link to invest in AFFT and help us pass the FAIRtax. It’s an investment in your and your family’s future.
THE SOLUTION—PASS THE FAIRTAX!
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?
HELP BRING ABOUT REAL TAX REFORM AND STOP FUTURE IRS ABUSES
By contributing (investing) $10.40 per month, you help provide a financial base to AFFT. If you can make larger contributions (investments), these will be used not for salaries, as we are all volunteers, but for the needed updates to our economic studies which will be vital for all future years.
Please go to this link to invest in AFFT and help us pass the FAIRtax. It’s an investment in your and your family’s future.
Please email us at info@fairtax.org and we will give you some options on how you can best help us.
At a minimum, please call your Congressional representative and ask if he or she supports the FAIRtax. If so, thank him/her for their support and suggest they become a cosponsor of HR-25 if they’re not one already. If not, ask why not. If your representative claims to be unfamiliar with the FAIRtax, offer to have someone come to their office and explain it to them.
Please go to this link to invest in AFFT and help us pass the FAIRtax. It’s an investment in your and your family’s future.
THE SOLUTION—PASS THE FAIRTAX!
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?
HELP BRING ABOUT REAL TAX REFORM AND STOP FUTURE IRS ABUSES
By contributing (investing) $10.40 per month, you help provide a financial base to AFFT. If you can make larger contributions (investments), these will be used not for salaries, as we are all volunteers, but for the needed updates to our economic studies which will be vital for all future years.
Please go to this link to invest in AFFT and help us pass the FAIRtax. It’s an investment in your and your family’s future.