January 01, 2010

The Year of the FairTax

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Dear R. George,
This winter has seen big early blizzards and ice storms in the mid- and northwest, low elevation snow packs in the western mountains, snow in Houston, and warmer, wetter weather than usual in Florida and parts of the Southeast. These severe and unusual weather patterns seem to mirror the fiscal storm that has swept across the entire nation.
The economy -- and the desperate need for real growth that will bring jobs once again to the most productive workers in the world -- should unite us no matter where we live. But as worried as we all are, the nation remains fractured over whether to spend even more money to dig out of this economic hole we're in, or whether that spending makes the hole even deeper.
We FairTaxers know there is a better way -- a way back to health and an American economic boom that will last generations.
Once upon a time the idea of spending trillions of dollars was almost unthinkable. This year, we have seen our leaders throwing around hundreds of billions of taxpayer dollars like it was monopoly money. It's not "play money."
Where is that money coming from?
It is both borrowed from foreign nations and private investors, and it is being printed hand-over-fist at the Federal Reserve. The loans from other nations and investors are being secured with promises of taxes on you, your children, their children, and their children. Our national debt now totals more than $500,000 per American household.
To make matters even worse, the Federal Reserve's "printing press" dollars are now being used to buy US Treasury notes -- from ourselves!
It is a dangerous and unsustainable path that must change. We must change the direction our government has taken, or our best days as a nation are behind us.
This year must become the year of the FairTax.
A "Happy New Year" this year must mean a re-dedication to advancing the FairTax with even more intensity than ever before. Our nation needs the FairTax and our nation needs us. Our voices must be clear, determined, and persuasive so that millions of Americans join our essential cause.
We begin this new year with a call on Congress to hold hearings on the FairTax. We are "petitioning our government for a redress of grievances" -- one of the citizen tools bequeathed to us by our founding fathers.
If you have not already, please sign the petition to Charlie Rangel, Chairman of the powerful House Ways and Means Committee, right now.
Equally as important, ask your friends, colleagues, family and neighbors to join us in winning a hearing on the most important change in government public policy in a century.
If you have not already, e-mail the link for this petition to your friends today: http://www.fairtax.org/site/R?i=oaLQOJBHVHiBWXPmAIFcRg...
Wish them a better coming year than the one we have just endured. Let them know that together we can create a new era of American growth that will last generations with the FairTax.
Tell them that the FairTax is the fastest and smartest path to more jobs, a better standard of living, and a better future for our children and their children.
Let everyone you meet know about how the FairTax will pull trillions of dollars into the country -- not out of taxpayer pockets -- from offshore. That means more jobs, better jobs, better wages, and better benefits.
Let everyone you know understand that the FairTax also brings taxes and the cost of government into the light of day so that we can end irresponsible and destructive borrowing and spending in Washington.
Our best days can still be ahead of our nation -- if we act together now.
With your help, this will be the year of the FairTax.
Happy New Year.
Ken Hoagland
Chairman, FairTax National Victory Campaign

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Our best days can still be ahead of our nation -- if we act together now.
With your help, this will be the year of the FairTax.
Happy New Year.


  1. R. George,

    Any way you could repost Ken Hoagland's letter? The right side seems to be cut off and a klot of the letter is missing. I'm always interested in what Ken has to say!


  2. I went on and widened the Blogg. Thanks for the heads up. All this tech stuff is hard to keep up with and use. Maybe it is time to find a better service.

  3. R. George Dunn,

    Thanks for the updated version. I certainly agree with Mr. Hoaglands statement of the problem. We are leaving our grandchildren with an terrible economic mess. It's hard to even comprehend a $10 trillion+ national debt let alone any solutions to balance the budget and pay down the debt.

    However, changing the way we extract revenue from our citizens doesn't begin to address the problem. We need to be very careful about what we wish for, and the Fairtax plan really isn't fair. Ken claims that trillions would flow back home from offshore accounts, but there isn't one scrap of data to support that claim. At best, there may be a few hundred million, but failing any tax amnesty provisions in HR25, none of that wealth is liable to come rushing home.

    HR25 also sets up a constitutional crisis by proposing that the federal government lay a sales tax on State and Local government consumption. Bad idea!

    In trying to offset the impact of a regressive sales tax, the Fairtax establishes a $600 billion annual cash grant entitlement which is exactly what our nation doesn't need at this time. Where is it written that no one should pay tax on essentials?

    As a retiree, I would object to the double taxation of my savings, and the unfair proposal that I would be forced to resume paying for my federal pension and health care benefits with my sales tax dollars. Another bad idea.

    I do believe that a sales tax might be preferable to an income tax, but the Fairtax tries to do too much too quickly. Replace just the income tax with a 12% sales tax and phase it in over five years or so and I would be fully supportive. The Fairtax as written in HR25 is going nowhere. imho!

  4. Thanks Dutch,

    And thank you for discussing the FairTax. The offshore funds are a known entity, estimated to be 13 trillion, but probably much more. The Free Trade policy Reagan gave us sent many Parent Companies off shore too evade the production tax we are currently under. Thus much of the wealth is overseas. By changing the tax structure, all these Parent Companies will find coming back to the USA will be more profitable. But that is not what Governor Huckabee referred to in the Primary. The 13 Trillion is Americans with wealth accumulating, bypassing the IRS Tax code. This will have no reason to hide if the FairTax is implemented.

    Ireland stated last year that it will not be good for them when America finally wakes up to this Truth. We have been dwindled down over the past 30 years for the purpose of World equality, lifting up other Nations and quelling the American Dream.

    Enough is enough. Communism at any level fails every time and not in a good way. Blood becomes subject, which brings us to what you have stated, that FairTax cannot fix the fiscal taxation mess. Very true, but by simply refounding the Constitution, we can clear up our mess in 10 to 20 years, for the next generation. We are not of choice if we wish to endure under the Liberty from the Freedom our Founding Fathers created, the Greatest nation on Earth to this day, founded in prayer endowed with the Inalienable rights given by God.

    The Founders made sure to insist that any Federal Tax had to be indirect, requiring the voluntary act of paying the tax. Excise tax is their favorite, but a consumption tax also fits the indirect tax structure.
    Knowing all this, why is the FairTax not being embraced?

    Where the challenge is coming from has to do with the Shadow power of DC fears the FairTax. The FairTax is what the Founding Fathers had in mind before someone shot Abraham Lincoln. Founders held that the best way to check the power of a National Government, limited in nearly every way, is to have an indirect tax. An indirect tax requires an voluntary act to participate.

    Fear of the American people as one voice would be empowered to control any evil from Government as a last resort. Think this is extreme? Fits in to the character of the Declaration of Independence.

    Dutch, if we don't change, we will fail fiscally and morally. Our character of honesty and trust is closing in on the crevis.

  5. R.George,

    Let's focus on the mythical $13 trillion in American wealth held offshore to avoid taxes. You say that those funds are a known entity. Known by who? What is your data source? Frankly, I believe you are simply repeating a Fairtax myth originated by Boortz. I have been trying for two years to pin down the source of this claim with no luck.

    I have found a Tax Justice Network white paper entitled the Price of Offshore done in 2005. At that time, the TJN reported that there was $11 trillion in offshore wealth, and that $1.6 trillion was owned by North Americans. There are 23 sovereign nations in NA, and the best estimate for American wealth offshore was $700 billion.

    If you have any better sources, I'd certainly like to hear about them, but simply passing on unsupportable Fairtax propaganda seems inappropriate for someone such as yourself.

    It is foolish claims such as this one that cast doubt on the whole Fairtax plan. After working for ten years on Capitol Hill, I can assure you that the professional staff on Charlie Rangel's committee will rip the Fairtax advocates a new one if HR25 ever got a hearing.

  6. Just did a google to see if I could find a figure. Did run across Golden Sachs is probally 1.6 Trillion overseas alone. But this is neither here nor there. The retrieval of investment from overseas in business and not in debt is our need.

    The FairTax plan wil bring the manufacturing of domestic products and foreign improts closer to in line, with the removal of hidden product tax and the eaual taxation of imports with domestic. This will give a approx 22% discount to domestic goods over imports. That alone is value enough to enact the FairTax. To speak on that fact alone is all that is needed. To that I ask you to respond. Otherwise, it appears you are on a mission for someone.

  7. The mission I'm on, after six years of study and discussion of the Fairtax and HR25, is to challenge all Fairtax advocates to do more than just read a couple of "comic books" written by a radio talk show host and an obscure Georgia Congressman! Only one side of the story is being presented by that $22 million in AFFT "research", and there are many unbiased economic studies available which need to be understood before getting out on that Fairtax limb.

    It appears that you do not understand just what that 22% embedded "taxes" is all about. Here is a quick review. In 1997, Prof. Dale Jorgenson did a study for AFFT which concluded that there was an average of 22% in embedded costs of the current tax system in producer prices. But, Jorgenson assumed that everyone would accept their current net after withholding pay rather than their current gross pay amount. In other words, you would get a gross pay cut so that business costs (payroll) could be used to reduce prices. This isn't going to happen for fairness and contractual reasons! If you claim that everyone will get 100% of their pay, then only business tax costs would be eliminated, and those costs might be used for price reductions. There are other uses for those cost savings such as debt reduction, business expansion, pay increases, in creased payments to shareholders, etc. etc. The competition will pretty much determine how businesses will react.

    Jorgenson didn't include compliance costs in his study. So, as a percent of sales, just what are business tax costs? Using 2007 actual revenue data, with sales of $9.5 trillion, businesses paid $291 billion in income taxes or 3% of sales; businesses paid $435 billion in payroll contributions (FICA) or 4.5% of sales; and businesses paid $265 billion in compliance costs or 2.5% of sales. Add them up and business tax related costs averaged 10% of sales across all 20 million businesses. Reduce business costs by 10% and add the 30% sales tax and retail prices have to rise by 17%. (1.00 x .9 x 1.30 = 1.17)

    I don't claim to know just what the relationship between domestic and import prices might be under the Fairtax, but for sure, domestic prices won't have a 22% advantage. Imports will have a 23% tax levied at the port and collected by Customs, but the 6% difference in prices might not be enough to offset lower foreign labor costs?

    I wouldn't count on Wal-Mart taking those cheap foreign goods off the shelf!

    I hope this helps?

  8. Thank you Dutch for the in-depth response.

    I too had thought of the 22% not being totally offset out of the product cost due to the wages increasing the amount of labor returned to the net pay, that being the gross pay. I am also aware that some of the business tax is not removed from product and is still collected.

    Without knowledge of being so, but assuming that it is, the 22% reduction in product taxes being replaced by a 23% consumption tax is a near wash and that the wage increase of labors is figured into the formula. But you have given one pause for thought and a question to answer. I will get a breakdown on your analysis and get the truth out.

    As to the fight over the wage taxes, companies will get their matching percentage of SSI, but the inflation coming from the unchecked spending by the Federal Reserve and a Congress in fantasy land will need an offset of hyper-wage increase to stabilize the economy. Being as the purchase level of Americans is already very low, this will be a near break even on spending, but will put a much higher cashflow into the hands of Americans, to afford mortgages and cost of living increases. Being used goods are tax free, it will also increase a families net worth and will provide a market of used items for a short period to sustain this Nation as it digs out of this depression.

    What you are saying, if I may, is that the 22% reduction cost in goods is not a real figure and that the 23% increase in tax will increase product cost to consumer, by taxing a domestic product not reduced 22% and by taxing imports, both 23%, thus inflating goods on the shelf.

    As to the use of 30% increase under the FairTax plan, that will depend on how low the domestic product is lowered by tax removal. If it is the 22%, you must use the reduced price as the multiplier of the 23% to arrive at the cost after fairtax application. $100 - 22%= $78. X 23% = $95.94, making the cost of domestic goods drop, while imports will have to either compete or America will manufacture their own. This latter sentence is the entire reason for FairTax, jobs.

    I will ask Dutch.
    As to Wal-Mart, sure some goods will be hard to beat, but the continued debasing of the U.S. Dollar will change much and the tax structure change will do the reat to creat jobs.

  9. R.George,

    First, whatever the average reduction in producer costs turns out to be, (my estimate is 10% as I explained), you have to multiply that by 30%, not 23% in order to arrive at a 23% tax inclusive price. A common mistake made by Fairtax advocates is to assume 22% is taken out and 23% added back in for basically a wash. That is just not correct. The only way 22% comes out is if everyone takes a gross pay cut. And you have to add 30% back in in order to have a 23% inclusive retail price. Simple math.

    Next, don't assume that the added income from the prebate and getting 100% of your gross pay will result in added purchasing power. Not true. You will need that added income to offset the 17% higher retail prices.

    Finally, while used goods don't have to be taxed, there is still a tax element in the used good price. Think about it as the embedded cost of the Fairtax. For example, a new car that costs 20,000 to produce would sell for a retail price of $26,000 including $6000 in tax. Surely you don't believe that the new car owner would simply forget about that $6,000 tax cost upon resale? Supply and demand will quickly adjust the price of used goods upward until the new/used cost relationship is the same as currently exists. You can avoid sending any tax revenue off to Washington by purchasing used goods, but don't expect any sort of extra savings by doing so.

    And, while you are mulling over these three points, ask yourself if a bank will finance the inclusive tax? There are many who believe that in order to purchase a new car, you will need an added down payment to cover the tax? What do you think?

    Cheers! Dutch

  10. YOur point of the 30% is not clear and makes not a bit of logic. Say the product before fairtax is $100.00. Let's say for argument, that the reduction is only 20%, that would leave a retail price of $80.00 to tax at 23%. 80 X .23= $18.40 plus the $80.00 produces a total product cost of $98.40. YOur thirty % defense has been put down many times. You care to show the error?

    Also a note, income taxes make up 10% of the total tax revenue by DC. So I the gross pay is not allowed for in the 22% figure by FairTAx, then you simply deduct 10% of the 22% figure.

    The FairTax has never claimed to lower or raise the standard of liveng, but for the tax shift to be a neutral effect, break even to U.S. Citizens. As to the pre-bate program, it is a perfect form of General Welfare, as it is including every citizen equally.

    YOur pint on the cost of tax on new goods being transferred to the sale of the product used is correct, but the biggest shift will be from demand of used goods, thus making for the greatest conservative effect of consumerizm and stewardship of the Earth ever proposed.

    I am starting to get the idea who you are trying to defend and that you have had this argument many times before. I should be feeling honored to be a center of your attention.

    You still have not answered the main reason for FairTax and that is jobs. How can you deny that FairTax will counter the destructiveness of the current Produciton tax? A personal reason is not such, like: if I were you I would be moving my Corporation back to the USA before your neighbor starts producing it here first when the FairTax passes.

  11. Please pay attention because this is the last time I try to explain why retail merchants have to add 30% to their costs in order to arrive at a 23% tax inclusive price.

    Let's use your example. A widget costs $100 today, the cost is reduced to $80 under the Fairtax and a 23% tax is added to arrive at your retail price of $98.40. Now, lets test your retail price against the tax amount. 18.40 divided by 98.40 equals 18.7%. Oops, it is supposed to be 23%. Now, let's add 30% to the 80.00 for a retail price of 104.00 Divide 24 by 104 and you will get a 23% tax inclusive price. Bottom line is that you have to add 30% to producer costs in order to get a 23% tax inclusive price. This isn't rocket science, but it is amazing how many Fairtaxers fail to grasp this simple math process. If you still don't get it, go to the AFFT website, select Frequently Asked Questions (FAQ) and read the fourth from the bottom. This is the only place you will see the 30% number. I can only guess that AFFT doesn't want you to understand that 30% is in play?

    As for US Corporations moving back to the US under the Fairtax, don't count on it. Having spent 20 years working for a major aerospace company, there are many other reasons for locating abroad. For instance, proximity to a market, availability of natural resources, availability of less expensive labor, Contractual offsets, and even tax laws. But tax avoidance is way down the list. I believe that State and Local taxes might be an even larger consideration than federal Corporate taxes. Boeing relocated to Chicago from Seattle primarily due to State and Local tax burdens in Washington State.

    The Fairtax claim that the US has the highest business taxes in the world isn't true. Again, using 2007 actual data, business income taxes paid were only 3% of sales. Is that really such a burden that would force companies to relocate overseas? I think labor costs are a much more important consideration than federal taxes.

    As for who I am, I'm a retired Air Force pilot, been shot at and missed in two wars, spent 20 years with that aerospace company, ten of which was representing the company on Capitol Hill, and have spent the last six years trying to get at the unbiased truth about a national sales tax. My hope is that you use your god given brains and separate the facts about the Fairtax from the marketing BS.

    Good Luck!


  12. Well Dutch, if you had a job being a magician, you would do well. Your 30% calculation is so twisting, it would make a pretzel look straight. You cannot take the total of the retail and the tax and divide it by the taxable amount to get a % of the taxation of a product, for you are including the tax itself in the calculation. Such talk is for one purpose, to protect your DC job and buddies in the Shadow power. Nice try , but you strike out to in jobs for America. With your attitude , we might as well roll up the sidewalk and move overseas. Thanks for your military service Dutch.

  13. Last try for the math challenged. When you add 30% to the cost of a product, then the inclusive percent of the cost plus tax is 23%, which is what the Fairtax demands. Sorry you don't get it, but it is a cast iron fact that merchants have to add 30% to their costs. Even the folks at AFFT agree with me on this one.



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