Hostile Argument: The FAIRtax will hurt seniors
Picking up a series of Grassroots Corners from a couple of years ago about parrying criticisms of the FAIRtax, we address the attack that the FAIRtax will hurt senior citizens and retirees. Many in this group are on a fixed income. The argument is that price increases from the FAIRtax will unfairly target this group. But you can highlight features of the FAIRtax that the attacker does not want others to know about.
Although seniors are not a monolithic group, they tend to be the ones who are most negatively impacted by cost increases. That’s because many seniors are on a fixed income. Some depend exclusively on Social Security payments to provide for themselves. Some have government pensions, while others have tax-advantaged retirement plans. Still, others have accumulated enough resources to live from their investment income.
Consider a retired married couple that depends on Social Security benefits to live. Conventional wisdom says that this couple would be disproportionally hurt if the FAIRtax were to trigger an increase in the cost of living. However, the FAIRtax has a transition feature that adjusts Social Security benefits to compensate. (If you want to read the provision, go to https://www.congress.gov and type HR25. Click on the H.R.25 and go to the tab Text(1). Scroll down to Title III (Other Matters), Section 303, Sales Tax Inclusive Social Security Benefits Indexation.)
This provision ensures that this couple will, at the very least, be no worse off under the FAIRtax than under the current income tax system. Given the many other benefits of the FAIRtax, it’s safe to say that this couple, along with just about every other American taxpayer, will be better off when the FAIRtax replaces the income tax.
It's important to remember that the FAIRtax’s Family Consumption Allowance is not a fixed amount. It's adjusted annually based on cost-of-living tables that the Department of Health and Human Services ("HHS") calculates. If the cost of living rises for any reason, the prebate will increase the following year. This feature ensures that the FAIRtax is adaptable to changes in the cost of living and protects seniors and retirees from undue burden.
Speaking of the prebate leads to the next point. Critics will argue that the standard deduction from the income tax provides a benefit to married couples that would disappear with the FAIRtax. However, the prebate, the FAIRtax’s counterpart to the standard deduction, adjusts the HHS tables for married couples. The current HHS cost-of-living table provides a greater allowance to the first member of a household than subsequent members, regardless of how the second member is related to the first member. The FAIRtax prebate gives a spouse the same allowance as the first, thus resulting in a “marriage bonus.”
Critics must understand that seniors today pay the same embedded tax costs as all other consumers. Embedded costs include business income and payroll taxes, along with significant tax compliance costs. Profitable businesses must pass these taxes and costs on to consumers. But with the FAIRtax, there are no tax and compliance costs to pass on - income, payroll, and compliance costs disappear. Seniors, along with everyone else, benefit from lower pre-tax prices.
Even if costs rise because of the FAIRtax, these increases are one-time. Seniors have had to cope with today's inflation, which has nothing to do with the FAIRtax. Seniors can make that adjustment with the FAIRtax since the FAIRtax’s positive effects on the economy will likely lower future inflation.
Today, many seniors own homes that are worth hundreds of thousands of dollars more than their original purchase price. Seniors who downsize and sell their homes pay tax today on the appreciation of over $500,000. Many homes have appreciated more than that. With the FAIRtax, seniors can downsize and sell their homes completely free of any Federal taxation.
According to one calculation, seniors would have to spend more than $60,000 per year before they begin to feel any impact from the FAIRtax. This benefit comes from the indexation of Social Security benefits and the prebate’s effects. Above that level, seniors would probably finance their spending from income on which they pay taxes, particularly for seniors who live on more than Social Security and Roth IRA distributions.
In conclusion, the FAIRtax does nothing to hurt seniors. On the contrary. Seniors will reap the full measure of benefits that the FAIRtax bestows on every American taxpayer.
I would love your suggestions for putting these arguments into a soundbite.
Although seniors are not a monolithic group, they tend to be the ones who are most negatively impacted by cost increases. That’s because many seniors are on a fixed income. Some depend exclusively on Social Security payments to provide for themselves. Some have government pensions, while others have tax-advantaged retirement plans. Still, others have accumulated enough resources to live from their investment income.
Consider a retired married couple that depends on Social Security benefits to live. Conventional wisdom says that this couple would be disproportionally hurt if the FAIRtax were to trigger an increase in the cost of living. However, the FAIRtax has a transition feature that adjusts Social Security benefits to compensate. (If you want to read the provision, go to https://www.congress.gov and type HR25. Click on the H.R.25 and go to the tab Text(1). Scroll down to Title III (Other Matters), Section 303, Sales Tax Inclusive Social Security Benefits Indexation.)
This provision ensures that this couple will, at the very least, be no worse off under the FAIRtax than under the current income tax system. Given the many other benefits of the FAIRtax, it’s safe to say that this couple, along with just about every other American taxpayer, will be better off when the FAIRtax replaces the income tax.
It's important to remember that the FAIRtax’s Family Consumption Allowance is not a fixed amount. It's adjusted annually based on cost-of-living tables that the Department of Health and Human Services ("HHS") calculates. If the cost of living rises for any reason, the prebate will increase the following year. This feature ensures that the FAIRtax is adaptable to changes in the cost of living and protects seniors and retirees from undue burden.
Speaking of the prebate leads to the next point. Critics will argue that the standard deduction from the income tax provides a benefit to married couples that would disappear with the FAIRtax. However, the prebate, the FAIRtax’s counterpart to the standard deduction, adjusts the HHS tables for married couples. The current HHS cost-of-living table provides a greater allowance to the first member of a household than subsequent members, regardless of how the second member is related to the first member. The FAIRtax prebate gives a spouse the same allowance as the first, thus resulting in a “marriage bonus.”
Critics must understand that seniors today pay the same embedded tax costs as all other consumers. Embedded costs include business income and payroll taxes, along with significant tax compliance costs. Profitable businesses must pass these taxes and costs on to consumers. But with the FAIRtax, there are no tax and compliance costs to pass on - income, payroll, and compliance costs disappear. Seniors, along with everyone else, benefit from lower pre-tax prices.
Even if costs rise because of the FAIRtax, these increases are one-time. Seniors have had to cope with today's inflation, which has nothing to do with the FAIRtax. Seniors can make that adjustment with the FAIRtax since the FAIRtax’s positive effects on the economy will likely lower future inflation.
Today, many seniors own homes that are worth hundreds of thousands of dollars more than their original purchase price. Seniors who downsize and sell their homes pay tax today on the appreciation of over $500,000. Many homes have appreciated more than that. With the FAIRtax, seniors can downsize and sell their homes completely free of any Federal taxation.
According to one calculation, seniors would have to spend more than $60,000 per year before they begin to feel any impact from the FAIRtax. This benefit comes from the indexation of Social Security benefits and the prebate’s effects. Above that level, seniors would probably finance their spending from income on which they pay taxes, particularly for seniors who live on more than Social Security and Roth IRA distributions.
In conclusion, the FAIRtax does nothing to hurt seniors. On the contrary. Seniors will reap the full measure of benefits that the FAIRtax bestows on every American taxpayer.
I would love your suggestions for putting these arguments into a soundbite.
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CALL FOR PICTURES AND WRITEUPS
We need more of you to send in pictures and news. If you have something to share, please send your material to me, jim.bennett@fairtax.org, (908) 578-4975, or fax (908) 598-2888. When others see your activity, they are inspired, and the process snowballs. When the process snowballs, Congress Members, Senators, and even the President start to listen.
CALL FOR PICTURES AND WRITEUPS
We need more of you to send in pictures and news. If you have something to share, please send your material to me, jim.bennett@fairtax.org, (908) 578-4975, or fax (908) 598-2888. When others see your activity, they are inspired, and the process snowballs. When the process snowballs, Congress Members, Senators, and even the President start to listen.
Jim Bennett
AFFT Grassroots Coordinator & Secretary🇺🇸 Call For Pictures & WriteUps - When others see your activity, they are inspired, the process snowballs and Representatives, Senators and, yes, even the President start to listen to you and me. Please send your material to me at Jim.Bennett@FAIRtax.org.
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