July 16, 2010

Fairtax Friday: The Tax Man Cometh--Again



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Weekly Feature

The Tax Man Cometh—Again

In the midst of the worst economic climate in most American's lifetimes, tax hikes are coming.

At least one of ten Americans remains unemployed and federal government debt is larger now than any time in our nation's history—with even higher levels of debt on the way. To satisfy government borrowing from China and other countries, our government has now also pledged the future earnings of coming generations of American citizens. Compounding and deepening the problem—the Federal Reserve has printed and circulated record levels of new money out of thin air.

There are three ways out of such unthinkable and destructive levels of national debt—spending reductions, economic growth or higher taxes. As a Wall St Journal online article below details—higher taxes seem to be the preferred choice of many elected officials and, without public intervention, they are on their way.

The Bush tax cuts, which dramatically benefit the middle class and small businesses as well as the investor class, will likely be allowed to expire either before the November elections or, more likely, just after—if the November elections don't change the political landscape.

The "Alternative Minimum Tax" which eliminates many widely used deductions (because of Congress' failure to index it for inflation) will likely again be put off for two years by Congress so the unexpected severe tax rate increases that will swamp people with as little as $80,000 a year annual income don't affect middle class voters and incumbents' prospects for re-election.

The mechanics for coming tax hikes and possibly brand new national taxes are being readied now. The President's Commission on Debt Reduction will issue their report on December 1st and the President has already challenged those who will oppose high taxes as the primary answer to the debt created by government officials. Paul Volker, special advisor to Mr. Obama and a former chief of the Federal Reserve system has also stated that a European-style "Value Added Tax" should be considered.

This hidden consumer VAT tax, embedded within the price of goods and services, would likely start modestly at first to gain public support. In Europe, the average VAT tax also started modestly at 2-4% but could not be restrained and now averages nearly 18%-- on top of income taxes. Mr. Volker suggested the same combination of a VAT on top of income taxes. Many have described the VAT as a politician's favorite tax because it can be raised again and again to justify spending. The VAT remains far from public view and cannot be easily seen by average consumers because it is buried inside higher retail prices.

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Fair Tax Call to Action—Help our Countrymen on the Gulf Coast

Please click here to write a letter to President Barack Obama. Ask the President to order the IRS to lay off taxing modest payment to residents of the Gulf Coats who have seen their lives and livelihood turned upside down—or destroyed for years to come.

After 9/11 we took the compassionate and human path and forgave taxes on payments made to victims of that deadly terrorist attack on our country. Inflexible IRS rules can be made to bend. This is just such a moment. Please lend your voice by clicking here.

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Goal Achieved! Thank you!

The FairTax Treasurer reports that we raised the $200,000 needed to meet our goal.  A big "thank you" to the nearly 5,000 FairTaxers who gave during this critical time.

FairTax Books in the Mail

Ken Hoagland has completed signing and sending 5,000 FairTax books to supporters across the nation.

"I've learned a few things," said Hoagland. "You can't grip the pen with great force or you will cause nerve damage—and I did." He said that after recovering from an initial hand injury he was able to pace himself and complete signing books for the many people who donated to the FairTax cause. "I am sorry for any delays, I've learned better how to do this and in the future will be able to turn around copies to supporters much faster," he said.

The FairTax Solution BookThe book has received very positive reviews and talk hosts ranging from Mike Huckabee to Phil Valentine have featured Hoagland on their shows to discuss the FairTax and the new book.

To learn more about newest FairTax book "The FairTax Solution—Financial Justice for All Americans", click here.

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In The News

How the Expiring Bush Tax Cuts Affect You
From the Wall St. Journal—online
The Tax Guy by Bill Bischoff (Author Archive)

The so-called Bush tax cuts are scheduled to expire at the end of the year. Although some of the cuts retain bipartisan support in Congress and may yet be extended, as of now, Washington has some severe changes in store for you and your family. Grab a scotch and sit down.

Higher tax rates for all

You may have been led to believe that only individuals in the top two brackets will face higher federal income taxes when the Bush cuts go bye-bye. Not true! Unless Congress takes action and President Obama goes along, rates will go up for everyone -- not just a sliver of the wealthiest Americans. The current six rate brackets of 10%, 15%, 25%, 28%, 33% and 35% will be replaced by five new brackets with the higher rates of 15%, 28%, 31%, 36% and 39.6%. Just a few months ago, it seemed like a safe bet that Congress would make a fix to keep the existing 10%, 15%, 25% and 28% rate brackets to help out lower and middle-income folks. That bet is now looking iffy.

Higher capital gains and dividends taxes for all

Right now, the maximum federal rate on long-term capital gains and dividends is only 15%. Starting next year, the maximum rate on long-term gains will increase to 20%. The maximum rate on dividends will skyrocket to 39.6% unless action is taken to limit the rate to 20%, as the president has repeatedly promised. Plan on 39.6%, and hope I'm wrong.

Right now, an unbeatable 0% rate applies to long-term gains and dividends collected by folks in lowest two rate brackets of 10% and 15%. Starting next year, those folks will pay 10% on long-term gains and 15% and 28% on dividends (compared with 0% now) unless a change is made. Otherwise, taxes on long-term gains and dividends will go up for everyone.

Return of the marriage penalty

Right now, the standard deduction for married joint-filing couples is double the amount for singles. For this, we can thank the Bush tax cuts, which included several provisions to ease the so-called marriage penalty. The penalty can force a married couple to pay more in taxes than when they were single. Starting next year, the joint-filer standard deduction will fall back to about 167% of the amount for singles unless Congress takes action and the president approves. We don't know if that will happen. If not, lots of lower and middle-income couples will face higher tax bills.

Now, the bottom two tax brackets for married joint-filing couples are exactly twice as wide as those for singles. That ratio helps keep the marriage penalty from biting lower- and middle-income couples. Starting next year, the joint-filer tax brackets will contract, causing higher tax bills, unless a change is made.

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Around the Nation

What an incredible week in the heartland of America!  We arrived in Bonner Springs, Kansas last Wednesday where the local FairTax folks had prepared a meet and greet plus a convoy ride around Kansas City. On Thursday, we met up with Miki Booth and supporters in Miami, OK for a meet and greet at the Route 66 Motorcycle Museum, with supporters and candidates for Congress. Onward to Houston where we attended "The Dam Tax Revolt" at the Dam Ice House with AFFT FairTax volunteers and Texas Sons of Liberty Riders where we dunked the Tax Man in a dunk tank. The highlight of this day, in addition to meeting new recruits, was the arrival and wonderful words of support from Leo Linbeck, the man behind FairTax, and his wife. In addition, Terry Stockham, Sean Matula, and Aaron Schutte attended and we had fruitful discussions about the upcoming "Where is the FairTax Bike' contest.

On Monday, we arrived in New Mexico where we have been overwhelmed with hospitality and activity throughout the state.  Meeting up with SOL riders in Roswell at noon, we joined a picnic locals had planned. Then we rode to Alamogordo where the local Tea Party Patriots hosted a talk and dinner. We found overwhelming support and did our best to leave them with information and materials to use at their upcoming events to generate more support for the passage of FairTax. From Alamogordo, we went to Las Cruces NM Harley Davidson and met up with the local HOG chapter president who is a supporter of FairTax. The next stop was Deming, NM for another Tea Party Patriot group where we found more support for the FairTax. Finally we ended the day in Silver City, meeting with yet another Tea Party Patriot Group.  Although people we met believe New Mexico is a liberal state, we found the greatest support for FairTax here than anywhere we've been.  It's clear the entire nation can support the FairTax. We firmly believe FairTax liaisons can expand our base of support throughout this state and the country.

We ask all FairTaxers to please support the FairTax through the FairTax Bike. It's where Americans are meeting up to bring government back to the people! 

To see photos of any of these events, visit Facebook's Grass Roots Freedom Ride Photos or Sons of Liberty Riders Photo Albums for Grass Roots Freedom Ride.

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FairTax August "Webinar" Announced

WHAT: Understanding the FairTax webinar for August 2010

SPECIAL TOPIC: The History of the Income Tax

WHEN: Thursday Aug. 26, 2010

TIME: 8 – 8:45pm Eastern Time 7 – 7:45pm Central, 6 – 6:45 Mountain, 5 – 5:45 Pacific

WHERE: Your home, your Personal Computer

WHY: To provide an interactive forum for people who cannot get to local meetings to learn about the FairTax and to present Special Topics that are frequently misunderstood or not generally discussed. Education is the weapon of the FairTax grassroots organizations and we are Educating the Nation on the web.

Join Marc Manieri, Americans for Fair Taxation Community Coordinator in the Greater Orlando, Florida Area. In our second year now, Marc's webinars draw national participation from seasoned FairTax supporters as well as those just getting started as a supporter. We help build the knowledge base of those on the front lines as well as those wanting to know what the FairTax is about. We educate candidates and sitting Congressional Representatives on the merits of the FairTax.

The PowerPoint presentations are available from Marc. When you get your email after the webinar just 'Reply', requesting a copy and it will be sent to you.

To participate it is necessary to pre-register at this web link: https://www2.gotomeeting.com/register/938873810

You will receive a confirmation email with instructions for signing in at the time of the Webinar.

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Take Action
Click here to write the President for common sense and compassionate relief for our Gulf Coast neighbors

Did You Know?
Why not just exempt food and medicine from the tax? Wouldn't that be fair and simple?

Exempting items by category is neither fair nor simple. Respected economists have shown that the wealthy spend much more on unprepared food, clothing, housing, and medical care than do the poor. Exempting these goods, as many state sales taxes do, actually gives the wealthy a disproportionate benefit. Also, today these purchases are not exempted from federal taxation. The purchase of food, clothing, and medical services is made from after-income-tax and after-payroll-tax dollars, while their purchase price hides the cost of corporate taxes and private sector compliance costs.

Finally, exempting one product or service, but not another, opens the door to the army of lobbyists and special interest groups that plague and distort our taxation system today. Those who have the money will send lobbyists to Washington to obtain special tax breaks in their own self-interest. This process causes unfair and inefficient distortions in our economy and must be stopped.
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