1Declaration: Free Markets, Free People, Free Minds

On Sunday 24 February 2008 this article written by Laurence J Kotlikoff appeared in the Boston Globe. Mr. Kotlikoff is an economic professor at Boston University, consultant to the Americans for Fair Taxation and economic consultant to former Democratic Presidential nominee and now Libertarian Mike Gravel

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Such a candidate would be hailed by the left and reviled by the right.

Thus, it’s remarkable that so many Democrats, with the exception of Presidential candidate Mike Gravel, oppose the FairTax and so many Republicans, particularly presidential candidate Mike Huckabee, support it. In fact, the FairTax, which replaces all federal taxes with a federal retail sales tax and provides a rebate, represents a way to tax wealth, reduce taxes on wages, and disproportionately redistribute money to the poor.

A sales tax effectively taxes wealth?

It does. When we buy goods and services with our wealth in a sales tax world, part of the payment goes to sales taxes. So we end up with fewer real goods and services.

Take Megabucks, who’s sitting on $65 million and wants to buy a jet like Oprah’s a 10-passenger, $50 million Global Express XRS. Under the FairTax, the plane costs him an extra $15 million because of the 30 percent sales tax. Megabucks gets the plane, but the extra $15 million, which he’d budgeted for Beluga, Dom Pérignon, and other flight snacks, goes to Uncle Sam.

Now $15 million is 23 percent of $65 million so the FairTax cost Megabucks 23 percent of his wealth. Precisely the same outcome would arise were Uncle Sam to directly tax Megabuck’s $65 million in wealth at a 23 percent rate, leaving him with $50 million to buy the jet at the original price.

What if Megabucks sits and counts his money? With a direct wealth tax Mr. Megabucks pays $15 million immediately and is left with only $50 million in purchasing power. Under the FairTax, Megabuck’s in the same boat. Retail prices rise by 30 percent and Megabucks finds that his $65 million can only buy $50 million in real goods and services; Megabucks has the same number of dollars, but 23 percent less purchasing power.

This equivalence is no coincidence; taxing consumption is mathematically identical to taxing the resources used to buy consumption -- current wealth holdings plus wages as they are earned. The beauty of the FairTax is that taxing wealth at a 23 percent rate generates enough revenue to reduce workers’ marginal tax brackets to 23 percent. This is dramatically lower than the 30 percent to 45 percent marginal tax bracket confronting most workers under our combined income and payroll taxes.

The FairTax sales tax rate isn’t graduated; everyone’s resources get taxed at the same 23 percent effective rate. What makes the FairTax progressive is its rebate. The rebate is a trivial share of the resources of the rich, but 23 percent of the resources of the poor. Since our current tax system is regressive, adopting the FairTax would achieve progressivity.

Our current tax system is regressive because none of the corpus - the principal -- of their wealth of the rich, including our more than 400 billionaires, is subjected to taxation. Instead they pay taxes only on the income earned on their wealth. But this income comes primarily as capital gains, which are taxed at only 15 percent. Furthermore, capital gains taxes are levied only when wealth holders realize their gains -- when they sell their appreciated assets.

But the super rich don’t need to sell their gains. If they need cash they can borrow using their appreciated assets as collateral. When they die, they can hand their heirs their appreciated assets with a step-up in basis, which wipes out prior capital gains. With the right estate planning, they can also avoid most estate and gift taxes. Unlike most of us, what the super wealthy and just plain wealthy pay in taxes is a matter of choice their choice. When Warren Buffet says his tax rate is much lower than his secretary’s, he’s got it right.

So why do so many Democrats think the FairTax is regressive? Because they consider taxes relative to annual income rather than resources, and the former is a terrible proxy for the later. Bill Gate’s income this year may be zero given what’s happening to stocks. If so, a man with over $47 billion in resources will be classified, based on income, as no better off than the homeless. And since Gates consumption is based on his resources, not his current income, the ratio of this “poor” person’s FairTax payments to his income would be sky high. Measuring taxes relative to income will thus suggest regressivity with respect to consumption taxation where none exists.

Our economy needs a simple, transparent, and progressive tax system. The FairTax is the answer. Democrats should give it another look and a fair chance.

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Take 30 seconds and email this article to someone and help spread the word about the Fair Tax. Following that take another 30 seconds to sign the Fair Tax petition at ChangeDC.org or visit FairTax.org for more information about the Fair Tax and its benefits to you.

I visited FairTax.org moments ago to see the update on their petition for the Fair Tax. Just two days ago the number stood at 70,000 signatures. Today the number stands over 90,000 and increasing daily. Our goal is to get over 100,000 signatures by April 15th, 2008. Remember that April 15th is Tax Day.

If you have not signed the Fair Tax petition yet please take a mere 30 seconds of your time to do so. Imagine a life where each year you did not have to purchase software, hire accountants, call the IRS just for them to give you the wrong answer anyway, spend hours filtering through savings and investments statements, and finally the possibility that you might be audited and get penalized heavily for some small error in your calculation because of a tax system the has over 67,000 pages of rules and regulations.

Now imagine that replaced with a transparent tax that is completely voluntary, that does not penalize hard work or high achievement, that does not institute regressive forms of taxation against the lower and middle classes, that does not require you to file your taxes each year, and can be written in a mere 133 pages. If you believe in the Fair Tax and greater transparency in our tax collection system do not waste another moment.

Visit ChangeDC.org today and sign the petitions for the Fair Tax. Remember that you have until April 15th to do so to get your name on the petition this year. If you need more information please visit FairTax.org.

This myth could not be further from the truth. First though it is important to understand what a regressive tax is. By definition a regressive tax is a tax that decreases as the ability to pay increases. In laymen terms this means that the more you pay the less you are taxed and the less you make the more you pay. Doesn't really sound fair does it? Well the Fair Tax takes this into account as the Fair Tax is progressive. Let's prove it.

Examining our current system of taxation reveals a regressive nature. The income tax is graduated or progressive; however, the FICA payroll tax is highly regressive and for middle and low income families can represent over half the tax burden each year. For instance the Social Security Tax, one of the FICA taxes, (around 7.65%) has an income taxation cap around $95,000 where income after that level is no longer taxed. This means that the more you earn the less you pay as a percentage of your total income into the Social Security tax, while low wage earners pay a higher percentage of taxes relative to their total income. Under the Fair Tax this highly regressive tax is abolished and included in the 23% Fair Tax rate.

Put into perspective under the Fair Tax system. A family whose spending equals the poverty level will have a 0% tax rate. A family whose spending is at twice the poverty level will incur an 11.5% tax rate and this rate continues to increase as spending increases. This means that the richest people in America who spend the most money will incur a tax rate approaching 23% while the poorest family whose spending does not exceed the poverty level will incur no or low taxes.

How does spending up to the poverty level not get taxed?

Go back and read my previous post about the Fair Tax "prebate." I discussed this in great detail already.

In summation, this places the Fair Tax clearly in the category of a progressive tax. The tax rate is increases proportionately with the ability to pay.

The Fair Tax helps low and middle income classes in other ways as well. This will be the subject of my next post on the Fair Tax.

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Tax day is just around the corner. To help put a stop to thousands of wasted man hours and money just to prepare your income tax (not to mention the headaches of just trying to figure out how to compute them or getting the IRS to help you and give you a right answer) please sign the petition at ChangeDC.org by April 15th, 2008. Be part of the solution and take a stand for Fairness in our tax system!

One of the most common questions on the Fair Tax is what exactly is the "prebate" is and how it would work. It is a simple concept that upholds the basic principles of the founding of our government that "all men are created equal."

The "prebate" is by definition a rebate for the taxes that any person would incur up to the poverty line as designated by the Department of Health and Human Services. To further define, the poverty level is the minimum level of which must be earned to be able to provide the basic necessities in life. This figure is adjusted yearly for inflation, takes into account for family size, and in some instances your state (Hawaii and Alaska). The poverty guidelines can be found a the Department of Health and Human Services Website if you have questions about your current level of income as regard to where it stands.

The "prebate" would be given out monthly to every citizen in the country regardless of income level because no person should be required to pay taxes for the "necessities of life." This sounds like a lot of work but could be done quite simply. Each year you would file a report, a single page, to the US government your family size (parents/guardians and dependents), the names of the individuals, their Social Security number, address, and a financial institution where the money could be electronically deposited each month. Paper checks would also be available for those who choose to do so.

On a side note, some of the major credit card companies have expressed interest in such a system and have indicated that they would be willing to pay the electronic transfer fee's incurred by the federal government to have the privilege of the money transfered to one of their credit cards. Another possibility would be the issuance of a debit card specifically for the purpose of depositing the tax rebate.

Well, How much would I get back?

To find a detailed list of how much your family would be rebated each month and yearly please visit the figures provided by FairTax.org FAQ page. The calculation is easy to perform though. Take the poverty line for your family, as provided by the Department of Health and Human Services, and multiply by .23 (this is the 23% Fair Tax rate on all new items or services). This number is the yearly rebate (divide by 12 for the monthly rebate). A family of 4 would expect to be rebated $337 each month or $4,048 yearly. It is simple math and simple to understand.

Some ask "Why not just untax 'items of necessity'?"

The answer is two parts. First, politicians will never be able to agree which items are "items of necessity" nor should they tell you that these certain items are and these aren't. For instance, potatoes but not potato chips. The choice should be left up to each individual and each family. Second, people who earn more tend to spend more on food and other "items of necessity" of which is not are not necessary to the preservation of the basic levels of living. These items are not "needs" but "wants" like buying a Jaguar versus a Honda. Both items provide transport but one is pure luxury. Basically, no person should have to pay taxes on the "necessities of life."

What does this mean? Quite simply, the Fair Tax is voluntary. If you decide to save your money or become more frugal with your spending you have no tax burden because of the "prebate". It is your choice. Also remember that taxes are only paid on new items or services so buying that used car or house will never result in taxation.

For more information on the Fair Tax view my March 2008 blog archives or visit FairTax.org.

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Tax day is just around the corner. To help put a stop to thousands of wasted man hours and money just to prepare your income tax (not to mention the headaches of just trying to figure out how to compute them or getting the IRS to help you and give you a right answer) please sign the petition at ChangeDC.org by April 15th, 2008. Be part of the solution and take a stand for Fairness in our tax system!

This news column was first brought to my attention during the Neal Boortz Show on April 1st. It turns out Hillary stole documents and ushered them to her office which proved the Nixon would have been allowed a representation during impeachment hearings. She then wrote a knowingly false legal brief that if it had been submitted would have gotten her disbarred and her legal and political career would have ended. She was fired from the House Judiciary Committe for unethical behavior.

Former general counsel and chief of staff of the House Judiciary Committee Jerry Zeifman, a longtime Democrat, has kept a diary of the events and has tried to get the story published since the mid-1990's. Look for this to hit the mainstream news soon.

Please check out this excellent article written by Dan Calabrese of the North Star Writers Groups exposing Hillary Clinton's lies back to her brief time on the House Judiciary Committee.

Watergate-Era Judiciary Chief of Staff: Hillary Clinton Fired For Lies, Unethical Behavior

Let's lay out a little background before I apply this seemingly difficult concept for alot of parents and politicians to our current political situation and state of American's.

Right now I work at a local retail store so I know this story all to well. Although, I am sure that all of you are also familiar with it almost every time you go into a supermarket or other store of your choice. Maybe this will take you back.

Your shopping in your local grocery store and you see a parent and her children walk buy. Suddenly you hear the child ask for that box of sugary cereal or candy sitting on the shelf. Under most circumstances the parent quickly replies with a "no." All of you know what happens next. The kid starts whining, running around, screaming, and making such a ruckus that you think the parent is beating them silly. The parent then tries to calm the child but invariably fails. After all this is probably not the first time this happened, actually I can guarantee it (the same thing happens to the at home). Invariably words do nothing so the parent puts the candy in the basket but the whining doesn't stop so the parent adds some more and the child stops whining.

If you are one of these parent's shame on you for giving in. Your kid has learned that whining will eventually get them the things that they wants. Put more simply, you have rewarded negative behavior so the behavior will continue to happen. By this time I figure your wondering where this is leading if you were educated in our government schools (yeah I don't like our government schools though we'll leave that discussion for a later day) what does this have to do with anything. Your child has learned that bad behavior and actions will get them the thing that they want because you have rewarded them instead of punishing them.

Let's take this concept in a new direction. In the United States we have millions of people utilizing welfare services whether they be in the form of Medicare, Medicaid, Social Security (this will get everyone eventually, even me who is an ardent opponent of this program), or food stamps which is estimated in a recent report to top 28 million this year. If you haven't figured out where I'm going yet I'll lay it out.

A large majority of the people on welfare in this country believe that the money from these programs is an entitlement to them (that they actually deserve this money because of some injustice that they had to have in their lives) and they expect more everyday even though they are totally nonproductive members of society. These people continue whining for more like the children they raise and politicians like bad parents give in to their every wish in an effort to buy them off and get their votes.

(There are some people who do need help, those who have debilitating mental conditions or physical conditions that render them unable to carry even out the most basic of tasks that is beyond their control. My writing is not aimed at these people.)

These people are the spoiled whining children of our society who contribute nothing and steal our money through one of our "wonderful" (sarcasm) government welfare programs that trap these people into a life of disparity, degradation, oppression, and mental imprisonment all so our government can continue to erode the personal freedoms or the hardworking and industrious people that this country was built upon and so politicians (namely Democrats and liberals) can stay in office. And we wonder where our children learn this from!

These people will continue to be non-productive members of our society as long as it is economically feasible for them to do so by rewarding them instead of punishing them. As soon as the rewards for bad behavior end and punishment starts, welfare programs will decrease in size and the unethical redistribution (a great word since income is earned not distributed) of income through welfare services will diminish.

And we wonder where our children learn this from!