1. Right, we don’t need a title.

2. This legislation rescinds thousands of pages of tax laws & the entire tax code. It is a tremendous net reduction in the tax laws on the books. It “kills” the IRS, reducing it to auditing the collection of the NRST by the States. The NRST will be paid by everyone, whereas today one out of four evades the Income Tax. Most people think getting “tax cheats,” criminals & illegal aliens to pay their share is “fair.” It provides incentive both to earn more rather than devote time to finding ways to avoid taxes, & to save rather than to spend.

3. That’s right, Cao.

4. The Fair Tax is much LESS burdensome on lower wage earners. Today, we think someone at the minimum wage ($11,000 per year) is given a “free ride,” because no Income Tax is withheld from his paycheck, even though 6.2% is withheld for Social Security & 1.45% for Medicare. But when that $11,000 is spent – mostly for necessities – the federal taxes (corporate Income Tax, Social Security “contributions,” excise taxes, etc., plus associated “compliance costs”) built into those products averages 26%, or about $2,900. In reality, that “low wage earner” pays about 40% of his income ($4,430 = $2,900 + $1,240 S.S. + $290 Medicare) to Uncle Sam. Under the Fair Tax, nothing will be withheld from his pay & he will receive a monthly “prebate” check – based on his income, not on receipts & not a “poor SOB card” – for the amount of tax on the spending of his entire income. Not only will he no longer pay that $4,430 but, if he buys used goods, e.g., clothes, furniture, etc., he will have part of his “prebate” left over. Only when his income rises to almost $19,000 will he start to pay ANY federal tax at all, & then only if he buys nothing used.

If you are concerned that the Fair Tax might not be “progressive,” i.e., that it would be hard on low & middle income people, check out the “pdf” file at: http://www.fairtax.org/pdfs/How%20the%20FairTax%20affects%20differing%20income%20levels.pdf It provides comparisons – Income Tax vs. Fair Tax – for six “typical” families, ranging from a single parent with two kids & a $10,712 annual income to a married couple with two kids & no mortgage, living on $100,000 annual income. You will see that they all come out ahead under the Fair Tax.

The point, about people working hard being able to keep their earnings, is that the incentives will change. Instead of having an incentive to spend, there will be an incentive to earn & to save. There will be no tax returns to file, so we can save the 6 billion man-hours per year we now devote to our 1040s, & we won’t have to spend $225 billion on tax consultants. Many high earners don’t invest extra time or effort to earn more, because the Income Tax penalizes them so severely. They gain more by working on ways to evade the tax. The system is so complicated & there are so many “loopholes,” that time spent that way is more productive for them today. Under the Fair Tax, it won’t be.

A sales tax is FAR EASIER to police than the Income Tax. The IRS will be reduced to auditing the States’ audits of sales tax collections by retailers. It is easy for auditors to find out how much product a retailer bought, & retailers, to protect themselves, keep transaction by transaction records of their sales & how much sales tax they collect. The sales tax system is about the most efficient & has the least fraud of any, & FAR LESS than the Income Tax, which is among the worst. Remember, 25% of those who incur Income Taxes never pay them, just for ”starters.” Today, the country – individuals & companies – spend more than $700 billion per year on CPAs & tax attorneys to consult on tax returns & deal with the IRS. And the taxpayers pay billions for the IRS to audit millions of returns & deal with our “tax consultants.”

By being visible, obvious & transparent, it will constantly remind us what Uncle Sam is costing us, which will cause citizens to keep the pressure on Congress. For the first time in 70 or 80 years, the government in Washington WILL BE accountable. The attitude will no longer be, “A billion here & a billion there, & pretty soon it adds up to some real money.”

Since paychecks will grow by “half” & people will have more incentive to save & invest (funds used will be untaxed & will grow untaxed), there will be MORE savings & investment, which will keep interest rates modest. Municipal bonds will still be able to compete, the way they do today. Not many years ago, municipal bonds had to pay 15% interest in order to sell. One of the major “pluses” for municipal bonds is the “full faith & integrity” of the municipal corporation, with its ability to levy taxes to meet its obligations. That will not diminish. Congress will be addressing how best to “translate” the current exemptions & deductions. Modest interest rates will reduce costs for government bodies. Employers of all kinds, including government at all levels, will benefit from the elimination of the corporate “contributions” to Social Security & Medicare. Any municipal corporation, such as a school system, which spends most of its budget on salaries, will benefit from that 7.65% reduction it its salary & wage costs.

The 25% figure for Uncle Sam’s burden on corporations is a combination of the 22% Income Tax, Social Security & Medicare “contributions,” etc., etc., which is all part of any corporation’s “overhead,” or cost of operating. Corporations don’t pay those taxes; they can only pass them on to their customers. All those expenses, including salaries, taxes, utilities, insurance, etc., are there whether the business has a high or a low margin. The margin is influenced most by the rate of turnover, the business’s intensity of capital utilization & depreciation schedules. All businesses will benefit from the elimination of the Income Tax, Social Security & Medicare “contributions,” & all the associated “compliance costs.”

As inflation has made enormous fortunes small, the estate tax has become a concern for people of modest means. The point is that your money should remain your money. (Have you noticed that, the phrase, “the IRS” spells “theirs”?) If you die, you should be able to leave your estate to your family, because it is yours. Taxes are supposed to be associated with expenses the government incurs, e.g., a tax on elevators, to cover the cost of inspecting them.

By increasing take home pay by “half,” the Fair Tax will increase sales, production & employment. Elimination of those corporate taxes is a tremendous benefit for our exports, since most other countries waive their taxes on their exports. The Fair Tax will turn that around, eliminating the “outsourcing” of production lines & jobs & reversing the balance of payments. The economy is projected to double in less than 15 years, which should generate enough additional revenue to properly fund Social Security and permit us to begin paying on the National Debt.

5. Cao-Right on! Good job!

6. The “prebate” reimburses people for the taxes paid on “necessities.” Under the Fair Tax, poor people will be MUCH better off. The best way to institute the Fair Tax is to repeal the 16th Amendment, which “legalized” the Income Tax. That will be the only thing that will make it almost impossible for Congress to reinstitute the Income Tax, in addition to the NRST. Unfortunately, because they have different routes in the legislative process, H.R. 25, i.e., the Fair Tax, & passing a bill calling for a 28th Amendment (repealing the 16th Amendment) have to be separate bills.

7. Absolutely right, Cao.

8. Yes, this is a federal bill, starting – because it is a “tax bill” – in the House of Representatives. It will not affect State sales taxes, although the States will collect it, along with their sales taxes. Insofar as the retailer is concerned, all that will change in the percentage he collects. Agreed, the benefits for our export businesses will be tremendous!

Et cetera.

Oh, and one other thing–Replacing the income tax with the FairTax will stop the income tax to make foreign-produced goods more competitive than our own. This is a big plus as far as I’m concerned. Probably one of the biggest! It will, in fact, make American products 20% to 30% more competitive, both at home and abroad. What a break for U.S. producers and consumers! Getting rid of the income tax will dramatically lower production costs in this country. And competition will ensure that these cost savings will flow not only to the pockets of American manufacturers who will be able to create more and better-paying jobs, but also to the pockets of American consumers who will be able to buy more, save more, and invest more. All around, that’s a pretty good deal; and a lot better than the wasteful system we have right now which doesn’t help us at all in this area.

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Personally, I like the fair tax. There will always be anecdotal evidence to lambaste the idea, but the way I see it, scenarios can always be created to paint a black picture. For example, food could be exempted (thus lightening the load on poorer folk and while its easy to talk about Bill Gates, there are many others who have to sell personal property because they can’t afford the taxes to keep an appreciating asset- something that can be passed down as well. There are other allowances that can be made as well.

The fair tax doesn’t have to be instituted all at once, but it does seen to be equitable.