The Chairman’s Report May 12, 2023

  • by:
  • Source: FAIRtax
  • 05/11/2023

Rent Seeking



Rent seeking is an economic concept that very much explains why many in D.C. resist all attempts to replace the income/payroll tax system with an improved, simpler, fairer system—like the FAIRtax.

This article, which appeared online on the Investopedia site, explains rent seeking:
  • Rent seeking evolved from economists studying Adam Smith who had first explained the concept in the 18th century.
  • Smith said that people and entities earn money from wages, profit and rent.
  • Economists define rent as the income earned from ownership of resources (capital).
  • Today rent seeking is when economic wealth or opportunity is obtained from government payments or special treatment and not through work or investment.
  • In other words, rent seeking is obtaining benefits without exchanging something of value.
  • Prior to 1913 when there was no federal income tax, rent seeking often took the form of protective tariffs which caused higher prices for consumers, but protected the industry that was unable to compete.
  • Since 1913, rent seeking groups, industries, companies and individuals have directed their efforts toward the federal income/payroll tax system.
  • An example of modern day rent seeking is when an industry, group, company or individual lobbies Congress for better federal income tax treatment than they would otherwise be entitled to.  It’s great for the one getting the break, but everyone else has to make up the difference. 
According to Open Secrets, in the first quarter of 2023, spending on federal lobbying exceeded $1 billion for the second year in a row.  Much of that money was spent seeking special federal income tax “loop holes” for their clients.

The lobbyists and the Members of Congress who participate in this scheme can be said to be amoral—they don’t care if the tax benefits they obtain for their clients create a heavier tax burden on Americans who can’t afford to hire them.

Federal income tax rent seeking generates huge “donations” to Members of Congress and payments to their minions in D.C.  

This may explain why a group of Republican and Democrat U.S. Senators sent a letter to the IRS Commissioner complaining about how artificial intelligence (AI) can be used to defraud U.S. taxpayers.  

Of course, if they were really concerned about fraud and evasion, they would have demanded that the fraud friendly income tax be replaced with a system that is a lot harder to defraud—the FAIRtax.  Instead, they just asked for a band-aid, not a cure for the problem.

Senators want IRS to stop AI-generated tax scams is the title of an article that appeared in Accounting Today.  Here are some of the points made in that article:
  • Sen. Chuck Grassley, R-Iowa, Maggie Hassan, D-New Hampshire, Ron Wyden, D-Oregon, and James Lankford, R-Oklahoma, sent a letter Monday to IRS Commissioner Werfel expressing growing alarm about the possible use of AI tools to create persuasive, tailored scams to steal money from taxpayers and elicit their personal financial information.
  • They urged the IRS to educate taxpayers and tax professionals about the existence of AI-generated tax scams and how to avoid becoming a victim. 
  • They also asked whether the IRS anticipates that such scams will become more commonplace and how they might evolve over time. 
  • The letter noted, “In previous tax filing seasons, many scam messages could be identified by spelling mistakes, grammatical errors, and inaccurate references to the Tax Code.  By contrast, tax scams generated by new AI tools are professionally composed and specifically tailored to trick vulnerable taxpayers."
  • Given the emerging threat that AI poses to taxpayers, the lawmakers urged the IRS to use all the tools at its disposal to counter AI-generated tax scams.
  • "According to recent reporting, one cybersecurity expert demonstrated how ChatGPT can be used to generate scam messages claiming to be from the IRS targeting families, older Americans, and small businesses," the letter continued. 
  • "For example, ChatGPT generated a fake email from the IRS claiming that, in order to receive a $1,450 tax refund, an individual needed to respond with personal financial information."

Rent seeking will exist as long as D.C. is allowed to receive financial inducements--bribes, from people seeking to profit by obtaining government benefits without producing anything of value.  

Since it is Congress that writes the rules on what is bribery and what is not, they have enacted rules that conveniently exempt all involved from the consequences of an act that would be a crime if anyone else did it.

Replacing the present income/payroll tax system with the FAIRtax is not going to end rent seeking entirely.  However, enacting the FAIRtax would force rent seekers to look for their benefits in places other than the tax code.

This attack on their income, is why D.C. is terrified that the FAIRtax will be enacted and Americans will realize how they have been manipulated and used by the D.C. denizens.

When someone attacks the FAIRtax, ask them about some of the above issues with the income/payroll tax system.  

Ask them to explain why a system with all of these problems should not be changed.

Isn’t it time to end this ludicrous tax collection system and the IRS?

When the FAIRtax is enacted, there will be no need to fear being audited by the IRS because there will be no more IRS.  

Under the FAIRtax, there will be no more tax returns.  We will pay our taxes when we make retail purchases of new goods and services.
There is going to be a vote on the FAIRtax in the House of Representatives.  McCarthy and the other elites didn’t want it, but it was forced on them.

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 changed, then they can propose the change.  Don’t let them reject the entire bill because it has a “flaw” that can be easily 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 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!
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.”
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!

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