It is good that alternative tax systems are being discussed. An even better alternative than what Robert Frank suggests in his 11/8 article is called the FairTax which is already a bill that has been introduced in congress.

The key to raising prosperity in our nation is to attract business and jobs back to our lands – not through altering free markets via personal and corporate welfare. Business and jobs are attracted by creating an environment that allows businesses to offer U.S.-made products and services to end consumers at globally competitive prices. So what would have the greatest impact on costs that get priced into domestically produced goods and services?

-          Payroll Taxes (Social Security and Medicare) raise costs to companies who employ workers.

-          Corporate Taxes must be priced into products/services when seeking after-tax profits.

-          Tax compliance (Corp, Payroll, Employee Personal withholdings, etc.) is also a cost that every U.S. business must bear (and price into end products).

Ultimately, end consumers bear the burden of corporate and payroll taxes as well as tax compliance. 

One of the biggest sleight-of-hand tricks is to suggest that raising corporate taxes is somehow compassionate to workers and the middle class. Raise taxes on oil companies for instance and we all know what happens to the price of gas at the pump. Corporations don’t pay taxes. They just pass them on to the consumer.

Some of our nation’s top economists have determined that without Payroll and Corporate taxes, the average price of U.S.-made goods and services could come down by 22%.

Consider this for a moment… 

If U.S.-made goods and services could be offered to end consumers (domestically and abroad) for 22% less, would our products compete better globally? It doesn’t take an economist to figure this one out. 

Once we level the playing field some, domestically we can add the tax back at the point-of-sale which applies to both U.S.-made and imported products alike.

From a “keeping jobs in America” you can’t beat the FairTax!   More jobs = more prosperity = more disposable income = more consumption = more revenues to our federal government. Rather than have a vicious downward cycle, we reverse current trends and go up for a change!

Considering also that the FairTax invites $12+ trillion to repatriate back to our lands by completely eliminating Capital Gains and Estate Taxes, the timeline for investment in the U.S.A. would be months… not years!

There are many other key benefits to the FairTax that are worth mentioning. Here are a few.

1.       Income earners will receive 100% of their gross earnings (assuming States follow suit by eliminating personal income tax obligations).

2.       All consumption taxes paid on consumption at or below the poverty-level are untaxed via the monthly prebate provision.

3.       Spreads the tax burden among all who consume within our lands – not just those of us who file tax returns.

4.       Liberates households and (many businesses) from having to file income tax returns

In Summary, by replacing the Income Tax, Corporate Tax, Payroll Tax, Capital Gains Tax, and Estate Tax with the FairTax (national retail sales tax) we will attract business, investment, jobs, and prosperity back to our lands and create prosperity for all.

For more information please visit www.fairtax.org.

It would be nice if our representatives in Washington understood that making the business environment friendlier for small/mid-sized business would bring more jobs and greater prosperity to all in our lands.  What we continue to get, however, is more altering of free markets which means more taxes and burden (healthcare) pushed onto (evil) “employers”.  The sad result is higher costs for those who employ American workers.  Companies must hire off-shore manufacturing, software development, customer service centers, etc. in order to compete and survive.  Heck, if it were feasible to build houses in Asia and have them dropped on residential lots here in the U.S. our construction industry would move overseas as well in order to avoid high U.S. labor tax and compliance burden.  So, in standing up for the American worker our government is actually screwing us royally.

The smoke and mirrors are amazing…  Tax breaks for 95% of American workers…  What a joke.  So, increase taxes on companies…  Tax those windfall oil profits…  Result…  the American worker pays for it at the pump (point-of-sale) and doesn’t even know it.  Same with taxing Walmart and any other big business.  Corporations don’t pay taxes.  Consumers do. 

I am still very passionate about the FairTax.  It is probably our greatest hope. 

·         Strip out all taxes on corporate profits and all taxes on employment (payroll taxes) and U.S. made products/services all of a sudden become competitive at the point of sale (at home and abroad). 

·         Eliminate $500b annually of tax compliance BS which lowers costs of doing business further.

·         Eliminate all taxes on investment (Capital Gains taxes) and we invite $12trillion of wealth parked offshore back to invest in the U.S.

·         And so much more…

My little girl is one year old today…  Life goes on…

Cheers,

I was going to write a blog post titled “The Grasshopper, The Ant, and the Gov’t Bailout” but decided to search the internet first… It seems that someone beat me to it two days ago (although spun a bit differently)…

http://www.cnsnews.com/public/content/article.aspx?RsrcID=36377

I would add to Michelle’s story that our servants in Washington (you know... those crooks on both sides of the isle who put special interests and personal gain ahead of the interest of We the People) have chased most manufacturing away from our lands so grasshoppers and ants alike have a tougher time finding jobs in any industry other than financial services. Hmmm, what industry exactly is our economic meltdown stemming from? What exactly does the financial services industry do? Tax compliance, estate planning, insurance, investments, etc. So, insurance people buy estate planning from estate planners… estate planners engage tax attorneys and CPAs.. CPAs buy insurance…  and somehow wealth is created so we can afford imported physical goods that end up on shelves of our departments and superstores? Can you say massive trade imbalance (house of cards)?

People must come to the realization that when government panders... it is time to get wise and run away.  Government free lunches fall on the shoulders on a smaller and smaller base of tax-payers...  Yes, I am talking about the evil rich and evil corporations. 

Think about it...  When we tax the evil corporation another 5-10% (from 35% to 40 or 45%) one or more of the following happens:

1.  We cause higher costs (taxes) to be priced into the products and services that we consume. Raise the taxes on oil companies and tell me that it won’t show up at the pump.  So, who pays for higher corporate taxes?  WE DO!  Nice smoke and mirrors though...  Get the masses to believe that Washington is looking after us when Washington is really stabbing us in the back!

2.  We chase corporations (and jobs and prosperity) away from our lands to tax-friendly countries like Irland where corporate tax is 12%.  How else are they to compete with cheap imports?

3.  We cause corporations who remain to die on the vine because they simply cannot compete.

What we need more than anything is to build prosperity throughout our lands. We need to remove barriers for business within our lands. We need to plug the leaks (wasted $$ on tax compliance and unnecessary business regulation) and stop punishing producers within our lands. We also need to stop making it so darn cozy for non-producers who suck the life out of our economic engine!

Our tax system is a great place to start!

The FairTax (www.fairtax.org) make the U.S. a tax haven and invite $12-trillion back to our lands to invest which would create jobs and prosperity.  These jobs, where workers would actually produce something vs. simply help in regulatory compliance), could then create wealth which would be reinvested in our nation and bring about the greatest period of prosperity our nation has ever seen.

Question:

If you were a wealthy oil producing nation and you wanted to maximize the wealth coming to you through oil exports by preventing Americans to develop their own resources would you:

a)  Buy off Main Stream Media to confuse the American Public on the issue?
b)  Fund U.S. environmentalists to buy off Washington?
c)  Buy off politicians directly through massive funding of their re-election campaigns?
d)  All of the above?

Please fax our dear Speaker at 12024964321 and let her know that she is supposed to be respresenting [b][i]We the People![/i][/b]

Cheers,

YK

What happened to American Innovation and Competitiveness? 

In short, it has been stifled by American government.

It used to be that hard work enabled families to put food on the table and, with a little ingenuity created financial security for business owners and their employees. It used to be that if an employee were unhappy with his compensation or working environment that he/she would seek out other employment or venture out on his/her own. It used to be that one someone lost his job due to his company being downsized or due to his job being automated that there was opportunity elsewhere (that may or may not required a little training).  The Great Depression was an exception but I would argue that government altering of free markets (and corruption in Washington and on Wall Street) contributed to the 1929 collapse.

What happened over the last 100 years?

Government got too involved...

Fact: When two parties (buyer/seller, employer/employee, etc.) deal directly with each-other without intervention, we have the greatest efficiencies. 

Fact: Free-market middleman add value and add to efficiency by expanding markets. 

But where does government fit in? The best answer is it should fit in as unobtrusively as possible. But that’s not what we have right now. Right now we have a middleman that provides little to no value (and in many cases negative value). Right now we have the following:

1.       Employers burdened with income tax collection for government

2.       Employers burdened with matching payroll tax obligations as well as payroll tax collection for government

3.       Some companies burdened with sales tax collection for government

4.       The burden of health care has been largely shifted to employers

5.       An insurance middleman is forced down employers throats (workers compensation, disability, unemployment)

6.       Companies get punished when downsizing by having their unemployment ratings raised (this causes companies to think twice when considering new hires to take on new business)

7.       Companies are burdened with fear of legal action when firing employees

Okay, many may say that in a civilized society that we should have all of these regulations in place. Okay but at what cost? Wouldn’t you rather have a prosperous nation with plenty of productive jobs (i.e. not government jobs) for our workforce? I say there is a better way.

I trust the free market infinitely more than government regulation. Unfortunately, there is much to undo that our government has messed up since opportunity, jobs, and prosperity have been chased away from our lands. The key changing the business climate such that opportunity, jobs, and prosperity are attracted back to our lands.

So what changes could we make in the immediate and near term?

1.       The FairTax would eliminate the burden of companies collecting income and payroll taxes on salaries and wages. Companies would, instead, collect sales taxes on new goods and services sold to end-consumers. This massive reform makes the U.S. a tax haven and invites trillions of dollars back for investment in our lands which creates more opportunity, more jobs, and more prosperity. By untaxing production, our goods/services immediately become more competitive with imports as well as on the global market!

2.       Allow trade associations or other groups (unions?) to offer group healthcare if that reduces rates beyond what individuals can find independently. With the FairTax, there is no longer a tax advantage to running healthcare through the employer which takes the burden of administration off the employer (a good thing). 

3.       Don’t favor big business over small business! Do away with the special favors (generally in the current tax code) that big business lobbyists obtain for their big business clients in exchange for campaign contributions. Allow all business to compete on a level playing field (the FairTax does much to level the playing field). When companies are run badly, allow them to fail. When their product or services becomes obsolete, allow them to fail. A free market will see innovation and efficiency replace obsolescence and inefficiency. Simply allow the natural creation/destruction cycle to occur with businesses.

4.       As opportunity, jobs, and prosperity come back to our lands, phase out unemployment benefits. Why burden companies and society by making it so darn cozy for people to be without a job? Doesn’t that create a drag on the economy? Isn’t that fire under the seat of an unemployed person a good thing? I say this has to be phased in because the government must allow opportunity/jobs to come back naturally after implementing the FairTax.

5.       Level the playing field with regard to the legal system. Make losing parties to frivolous lawsuits pay legal fees to the winning party. This will stop opportunistic trial lawyers from suing business with little to no risk of damages when they lose. 

Remember, the key is opportunity, jobs, and prosperity. If we stop punishing productivity, investment, agility in our lands we will regain our proper place as the most prosperous nation on earth.

Cheers,

Glenn,

In response to the Glenn Beck subscription e-mail that I received today…

The problem with the economy is our government – big surprise, right?!

Here’s the thing.  Somehow our government thinks that it is okay to chase manufacturing and many services away from our lands through excessive taxation and regulation.  One simple fix would make the U.S. a tax haven which would attract trillions of dollars of investment back to our lands – and along with that, jobs and prosperity as well.

Glenn, I am talking about the FairTax and I want you to get on board.

Consider this:  You go to the doctor and get a $10,000 procedure.  What portion of that goes to the Fed?  Say valid overhead costs of the services provided are pretty low (say about $2,000), the doctor is still probably sending $3,000 - $4,000 to the Fed when considering corporate tax, payroll tax (himself and office staff), tax compliance (after he pays his CPA, etc.).

Under the FairTax, the doctor would collect $10,000 for the same procedure of which, $2,300 would be tax.  He would then that send $2,300 up to the state which would then send it up to the Fed.

No IRS

Minimal compliance costs

No individual, corporate, capital gains, or estate tax and compliance costs.

No hassles

It is important to note that this is revenue neutral to our government.  In other words, the gov’t gets the same revenue with the FairTax as it does with our current nonsense taxes.  AND… the prospects for federal revenue growth are dramatically better!

What happens when you apply that to manufacturing, distribution, retail?  Well, those workers/staff members/executives that the company matches payroll taxes on… would be able to keep their entire paychecks AND the company would not have to match payroll taxes (~7.65% thank you very much).  Take the payroll and corporate taxes off the backs of employers and, guess what?  They can get products to market that don’t have to price those nonsense items in.  Hey, doesn’t that mean that US-made products could compete on a more level playing field with imports that aren’t taxed (or that have taxes stripped when exported)?   Global competitiveness in a globally competitive world… how nice…

Tax prebate – what the hell is that?  It basically says that the survival of my family comes before funding the government.  My family of four is untaxed up to the poverty level (about $30,000) which means that the Gov’t prebates my expected taxes on $30k in the form of a monthly payment of roughly $525.  Family before gov’t… what a concept.

But wait, it gets better…  those illegal aliens who, well…, aren’t here legally…  they don’t get the prebate.  They actually pay taxes but don’t get one significant benefit.

Finally, this system collects taxes from the wealthy who consume at greater levels…  tourists who visit our lands…  that drug dealer who buys his bling and/or big screen TVs…

And finally…  WE GET OUR COUNTRY BACK FROM THE SPECIAL INTERESTS IN THE PROCESS!!!  Power back to the people… that’s what I am talking about.

I hope you take a serious look at this Glenn.  Go to www.fairtax.org for more info.  Have Neil Boortz and John Linder on your show. 

Cheers,

YK

Our economic problems have been festering for many years – at least 20. There are several key factors to our current situation which I name below:

1.       Political corruption (both parties), special interests and special favors which lead to altered markets (not free markets).

2.       Abusive/Intrusive taxation and class warefare.

An excellent read on this meltdown story can be found here - http://townhall.com/columnists/NealBoortz/2008/09/19/the_rest_of_the_meltdown_story. It is a short read but, in a nutshell it describes how our government altered our mortgage industry by encouraging (forcing) lenders to relax standards so that more poor people would own homes. This, along with Greenspan’s cutting interest rates so drastically lead us to this big financial bubble (to save us from the tech bubble) that our government even today will not allow to deflate (as is evidenced by the take-over of AIG, Fannie Mae, Freddie Mac, and other extreme bail-out activities).

I understand that former heads of Fannie Mae and Freddie Mac who happened to have been appointed by the Clinton Administration (as reward for getting Bill elected) walked away with tens of millions of dollars in income and bonuses for basically driving our financial system into the ground. I wish our country would confiscate their assets and put them in jail. These heads of Fannie and Freddie happen to be current economic advisors to the democratic candidate. So if you are swayed by the campaign slogan “more of the same…”, you might want to take this into consideration.

In short, our elected officials are so dependent on/beholden to special interests (which promote mega-corporations at the expense of small business and free enterprise) that our government refuses to tell the public the truth. I blame both parties. Our future is headed toward financial ruin because there is just no way we can support the (financial industry) house of cards.

Getting to the taxation aspect of my communication… Our taxes and regulations force manufacturing and many service jobs (offshore software development, etc.) away from our lands. If a mega-corporation wants to be subject to the 2^nd highest corporate tax in the world it can keep its home in the U.S.A. but we have seen huge corporations move away like Haliburton, Inger Sol Rand, and many others. If they don’t move away, they move their jobs away to avoid the following:

1.       Payroll Taxes

2.       Fed/State Unemployment Insurance

3.       Required Workers Compensation Insurance

4.       Etc.

These additional costs of doing business affect the agility of U.S. companies which puts global competitors at a huge advantage which causes us to lose jobs. Think about it… what would happen if many of these obstacles for U.S. productivity were removed? Would we need departments to pay out unemployment insurance if our nation was flourishing? If a company downsized (or folded) because it was no longer competitive, wouldn’t it be better to have another job in a prosperous growing company available rather than have unemployment benefits? We should promote working prosperity rather than unemployment benefits… Did you know a company that lays off an employee gets tagged with a higher unemployment rating? What affect does this have? It causes companies to think twice about staffing up and taking risks that create wealth in our nation.

Our huge financial institutions get special treatment which moves more and more of our workforce into mega-financial corps (that don’t really produce anything) while any job that really produces anything (manufacturing, high tech, research and development, etc.) moves away. At some point, the folks who buy financial services who no longer have jobs because they were outsourced can’t buy the financial services (or pay their mortgages) so mega corporations fail. Now, who is picking up the tab for this?   You and I are (and more importantly… Keira, Christopher, and Kylie are).

What happens if we strip away a lot of the nonsense taxation (income, corporate, capital gains, and estate taxes) and replace it with a simple a national sales tax that gets collected by companies who sell new goods and services to end-consumers, forwarded to the state along with state sales taxes, and then sent up to the federal government? We simplify a lot of things and make our country much more efficient. We also unleash the great potential that we have as a nation.

Consider going in for, what today would be a $10,000 medical procedure. When the doctor earns that $10,000, he is taxed at 40-50% (i.e. $4,000 to $5,000 goes to the Federal government in income and/or corporate taxes). Consider if the FairTax were inacted… That same doctor would pay 23% to the Federal Gov’t ($2,300). He wouldn’t have to keep all kinds of income and expense records, tax write-offs, etc… He wouldn’t have to hire a high-priced CPA or tax attorney help him file taxes. He wouldn’t have to go through the pains of payroll taxes for his employees. He would simply know that $2,300 would go to the state which would be forwarded to the Fed. Heck, he could even lower his prices and still be better off than our current system. Okay, you ask… so who makes up the difference if our doctor friend is paying less tax? Answer: those who visit our lands (tourists), those who evade/avoid taxes within our lands (illegal aliens, gamblers, drug dealers, prostitutes, pimps, etc.), and the ultra-rich when they spend their money.

The long and short of it is that we need a grassroots effort to take back our country from the stranglehold that special interest have on it.

Dear Senator McCain,

In this essay I will give my thoughts on how:

1. 1.      The U.S. tax system puts U.S. companies at a disadvantage vs. international competition
2. 2.      Many other countries have tax policy that actually creates an advantage for their business.
3. 3.      What we can do about it.

Tax rates around the world is a page on Wikipedia.org.

It appears that the United States is the only country with payroll taxes (Social Security + Medicare) though I do see that the UK has a National Insurance Tax which appears to be similar. U.S. Payroll taxes cause U.S. workforce costs to be ~7.65% higher than most international competition. Multiply that 7.65% on salaries/wages across all business functions (both internal and supplied) in order to get a product produced, marketed, distributed, and out to end consumers and it is not difficult to see how higher costs creep into the end pricing to consumers.

In addition, U.S. Corporate Tax is among the highest in the world – up to 39%. We all know that corporate taxes are simply passed along to consumers, right? So while Washington may seem like they are playing good guys by taxing the evil corporations, you and I are paying for it either (a) at the register or (b) through loss of jobs to international competition.

As an example, a U.S. company that manufactures widgets has $100 million in gross wages/salaries which results in employer-side payroll taxes of approximately $7.5 million. If it has cost-of-goods sold and other costs (raw materials, plant & equipment, etc.) of $72.5 million for total costs of $180 million and then sold its widgets to a U.S. distributor for $200 million and makes $20 million it must hand over one third to the government which leaves about $13 million in profit.

Now let’s move the manufacturing to Ireland and assume that relative wages/salaries are similar.
Does Ireland have payroll taxes? No. That’s a $7.5 million savings. 
Ireland’s corporate tax is 12.5%. 

If the Irish company charged the same $200 million for its widgets and had similar raw materials and operating costs ($72.5 million) it would stand to profit about $28.5 million before corporate taxes of about $3.6 million which would leave nearly $25 million in after-tax profit.

Let’s say that the Irish company wants to be more competitive than the U.S. company. It could charge $10 million less than the U.S. manufacturer and still make greater profit. So the Irish company wins the business, the American consumer gets a less expensive Irish product, but the U.S. manufacturing struggles and eventually either closes or relocates. Either way the jobs are no longer American Jobs.

So how would this manufacturing example unfold with the FairTax?

The U.S. workforce costs would come to $100 million even (not $107.5 million)
Other before-tax costs remain constant at $72.5 million
There is no Corporate Tax so in order to make $13 million in profit our company would charge $179.5 million.

To recap, in order to get $13 million in after-tax profit:

1. 1.      Before the FairTax our U.S. company must charge $200 million
2. 2.      The Irish company could charge slightly less than $190 million
3. 3.      After the FairTax our U.S. company could charge $179.5 million

Ever hear of the tremendous trade deficit that our county runs? Well, if we take this newfound competitiveness under the FairTax system and apply it to U.S. exports exports as well, we will see a rapid reversal of the trade imbalance and have even greater prosperity in our lands. 

In terms of objectives for a better tax solution we covered why FairTax simplicity and FairTax revenue neutrality are important. It’s time to tackle the issue of removing barriers to economic growth.

First off, what are the barriers to economic growth?

The most basic answer is anything that impedes the overall prosperity of our people – almost exclusively associated with reducing our ability to compete in free markets. This wasn’t such a big deal 96 years ago (i.e. when we allowed the 16^th Amendment to be ratified) when our markets were more isolated and when gross manipulation of the tax code hadn’t occurred.

But where do we stand today?

1. 1.       We are in a competitive global market.
2. 2.       We have 66,000 pages of tax code that shift the burden away from those who can afford to lobby our politicians and onto the little guy.

Most U.S. companies compete with one arm tied behind their back. The exceptions are those with significant tax breaks – usually very large organizations. 

Entrepreneurs with great ideas must not only be experts in their fields they must be experts in complex tax compliance. Sure, they can hire tax attorneys and CPAs but financial resources must be committed which take away from developing ideas and getting products and services to market. 

Also, once started, companies must divert 7.65% of gross pay (employer-side of payroll tax on salaries and wages of its workforce) to our federal government. In a society that is increasingly service-oriented and when you consider marketing, distribution, sales, administration (as well as all marketing, sales, admin of suppliers) these payroll taxes make up a significant cost of doing business which must be priced into the end products and services that you and I buy as consumers. Of course we need to factor in the ongoing cost of tax compliance as well (payroll services and/or internal software systems plus tax attorneys and CPAs). If business is a pipeline and profits come out of the end of the pipe, inefficiency constitutes the leaks in the pipe where profits seep out. Unnecessary tax compliance is a major leak to all U.S. companies.

Finally, any profit that our entrepreneur is able to manage gets taxed via the corporate tax as well.

Speaking about profits, it is worth mentioning that our government wants companies to record profits sooner rather than later. Any significant investment that our entrepreneur makes in plant and equipment must be depreciated using complex tax schedules many years into the future rather than in the year of acquisition in order to maximize (in the government’s eyes) net profit before taxes. This enables the government to take “their share” sooner rather than wait until the capital expenditure pays for itself. Our entrepreneur must carefully consider the tax consequences and additional financing prior to committing to any large acquisitions which often-times prevents companies from moving forward.

The payroll taxes, corporate taxes, and capital investment considerations can be entirely removed from the production side of goods and services by replacing our 66,000 page 96-year-old tax system that is on life support with the FairTax (see FairTax in a NutShell). In addition, costly efforts to comply with tax complexity can be replaced with one simple calculation – 23% of net sales of new goods and services period.

Our entrepreneur can now take his/her great idea and really run with it unshackled! He/she can invest in facilities and equipment, research and development, production and operations, distribution, marketing and sales… all with little to no required consideration to and ongoing cost of tax compliance. 

To bring this point home, if our entrepreneur wants to tackle, for example, our energy challenges which might require $100 million investment in plant & equipment, scientific r&d, operations, marketing, sales, etc. ahead of sale #1 under our current tax system, he/she will likely need only $75 million after the FairTax has been around for a few years.   The government will get theirs… but on the consumption side not the production side.

Another of the important objectives in an alternate tax system is that of funding our government at the current level. Many of us will question this. In fact, I fully agree that our government wastes far too much of our money. However, if we are ever going to get tax reform in our country, we need to keep income and spending legislation separate. Why? Tax reform is enough of an uphill battle without bundling spending constraints along with it. We can voice our support for the FairTax Act and, in completely separate support, voice our support for spending reform.

Even with spending at current levels, many taxpayers will experience tax relief with the FairTax for two reasons. (1) tax tax evaders (the underground economy, etc.) will immediately start sharing the burden of taxation with their common every-day purchases and (2) we will all get a simplicity dividend (hey, I like that). We will no longer be required to pay hundreds (or thousands) of dollars in annual tax compliance. 

In a completely separate effort, We the People need get our politicians to curb their massive spending appetite. When we do, I would support keeping the 23% FairTax rate until we completely pay down the national debt.