Fair Warning on the Fair Tax

Part II

By Vicky Davis

The reason for the Budget Committee hearing was because the U.S. government tax revenues as of the end of fiscal year 2003 were at their lowest point since 1950.  The revenues were only 16.2% of Gross Domestic Product (GDP).  There had been 8 straight quarters of declining revenues since 2001.¹ The budget deficit was $422 billion dollars - a $47 billion increase over the previous year.   Other economic problems noted include:

• Estimated $1 trillion untaxed economy in porn, drugs and illegal labor
• Between $5 and 6 trillion dollars of capital and productive capacity moved offshore to foreign countries 
• To avoid taxation, corporations refuse to repatriate their profits and the vast majority of them have incorporated offshore so they aren’t even American corporations anymore - they just pretend they are
• Products exported include corporate taxes paid, imports are untaxed (and - unspoken, are produced by primarily and effectively slave labor in third world countries)
• 20% of the people, pay 80% of the taxes

Clearly, all the incentives are for corporations to move offshore and continue to import their goods and services here.  It is also beneficial for the wealthy to give up their citizenship because they can still live and do business here without paying taxes. 

The WTO and ‘free trade’ agreements were mentioned only by indirect reference in terms of what tax reforms would be legal under the rules of the GATT-GATS agreements.  No mention was made of the tax incentives (subsidies and tax breaks) that are given to corporations for moving offshore and no mention was made of the financial assistance that is available for corporations to move offshore (i.e. Export-Import bank, Overseas Private Investment Corporation, World Bank, etc.)  And there was no discussion of how these trade agreements are obviously detrimental to the U.S. economy.  There was one brief mention by Congressman Spratt that they didn’t want to ‘touch off a trade war’.

Summary of the Problem

The problem can be summed up by saying that the U.S. has severe structural economic problems due to globalization which is the free movement of capital, goods and labor without regard to national borders or laws.   The Congress has taken off the table - the option to leave the WTO and cancel all ‘free trade’ agreements even though clearly, they are gutting the U.S. economy of productive capacity and they are bankrupting our country. 

The tax reform proposals - regardless of which plan - are revenue neutral.  This means they are trying to redistribute the tax load so that they can begin to raise taxes to make up for the structural deficit. 

Tom Delay’s Fair Tax solution

Rep. Linder (R-GA) is the lead sponsor in the House, but he is a dentist and frankly, he’s not the sharpest knife in the drawer.  Linder is no doubt a Club for Growth puppet who does what he is told by the Republican mafia led by Tom Delay and Grover Norquist.  And since we are cutting through the deceptions here - we’ll just call it Tom Delay’s Fair Tax Plan.

In the first part of this article, it was shown that the effective sales tax rate of the Fair Tax plan will be between 60% and 80% of every dollar spent - except for dollars spent on education.   They plan to remove all taxes based on income for both corporations and individuals. 

Under the Fair Tax plan, at an income level of about $135,000 annually, their tax bite begins to decline over what they are presently paying in income taxes.  At an income of about $350,000 they hit an effective zero tax liability relative to their tax bill under the current system.   Essentially, the Republican plan shifts the tax liabilities of corporations and the taxes paid by the top 20% of income earners to the backs of bottom 80% of income earners - giving the corporations and the wealthy a free ride.  Adding insult to injury, the Fair Tax plan eliminates social security, Medicare, unemployment insurance and disability insurance programs by eliminating the funding streams for them - the payroll taxes. 

A simple way to see how the Fair Tax plan will impact your standard of living is to look at your gross pay.  If you make less than about $60,000, using the most conservative of the estimates, simply subtract 60% of your gross pay and consider that as the amount you will have to pay in sales taxes under the Fair Tax plan.  The remaining 40% is what you will have to live on for all your needs.  The ‘prebate’ (sales tax rebate check before the sales taxes are incurred) check from the government based on a poverty level income to ALL households will add about $200 a month to your spendable income (23% of $10,000 in 12 monthly installments).  This check will help you, Bill Gates and Warren Buffet offset their sales taxes paid monthly - so glad we can help. 

After you pick yourself up off the floor and put your teeth back in your mouth - consider contacting the members of the House of Representatives listed below.  They are the co-sponsors of this legislation according to Thomas, the government's search engine for legislation.  If your member of Congress is not on this list, then check the list below that.  It is the list of sponsors from the American for a Fair Tax website (AFT).  Since the Thomas list seems to be up to date, one has to assume that the sponsors on the AFT website made a commitment to support the legislation but they are too chicksh*t to put their names on the official record because they know how bad this legislation really is.  Below that are links to the Americans for a Fair Tax 'scorecard'.  This is their record of who will support the legislation when it comes up for a vote even though they are not co-sponsoring it.     

Co-Sponsors of H.R. 25

 Fair Tax Act of 2005

 Sponsored by Rep. John Linder (R-GA)

Sponsors from the Americans for a Fair Tax website

As of July 19, 2006

Americans for a Fair Tax 'Scorecard' for the House of Representatives

Americans for a Fair Tax 'Scorecard' for the Senate

The most disappointing of the names on the list of co-sponsors and supporters are:

Ron Paul - Texas

Tom Tancredo - Colorado

Butch Otter - Idaho

1.  October 6, 2004 House Budget Committee Hearing Testimony - Audio only
http://www.house.gov/htbin/leave_site?ln_url=http://boss.streamos.com/wmedia/hbudget/budget/hbc041006a.asx&ln_desc=FedNet