UBS: We Won?t Give Up Names

India the Latest to Stone the Dollar

Geithner: Derivatives Blindsided Us

Federal Reserve Deputy Kohn: Please Don’t Let GAO Audit Us!

Senate Supporters of Obama’s $787-Billion Stimulus Insist It’s Working Despite Declining Economy, Rising Unemployment

Some Residents Want the Fair Tax Act Now

From WCTV

Posted: 6:12 PM May 12, 2009
Last Updated: 6:12 PM May 12, 2009
Reporter: La’Tasha Givens
Email Address: latasha.givens@wctv.tv

The talk about fair taxes continues to grow in the Rose City just weeks after the tea party protest held around the country

And one man is on a mission to tell people about other options. The Fair Tax Act would essentially get rid of federal income taxes. It would in turn charge consumers a higher tax on everyday retail items–allowing tax payers to keep all of their gross income from their paychecks.

John Layton, Thomasville Fair Tax Organizer says, “Sure everyone would like to have all their money. When you take your pay check and you look at it and see how much money is taken out it’s like wow, I would love to have that money in my pocket.”

Layton has started a letter writing campaign and is gaining support all over town. He will continue to host a series of meetings to inform residents about how much money he thinks the fair tax act would save them.

Thomasville, GA FairTax Follow-up Survey

If you were are the FairTax Meeting in Thomasville, thank you for taking the time to come learn about the FairTax. Please take just a few more moments to answer these questions about the meeting. Also, we would appreciate any comments you have about the meeting below. If you would like to get more involved with the FairTax Movement in Thomasville, please join our FairTaxSOWEGA Community and please subscribe to our newsletter (sign up form is to the right).

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FairTax Script for National Debate Tournament

We are really proud of our FairTaxSOWEGA member , Kyle Constable.  Kyle is a high school freshman and is active in the Lee County High School Debate Team.  He has advanced to the National Debate Tournament and has chosen FairTax as his debate topic.  Kyle shared his FairTax Script for the nation Debate Tournament and we wanted to share it with the world!

We thank Kyle for all of his great work in supporting the FairTax and we wish him the best success in his upcoming National Debate Tournament!

Here is Kyle’s Script:

“Extra, Extra, Read All about It! Stock Market crashes as Americans are taxed more and more!” Isn’t that the headline we hear every day? I don’t know about you, but I am tired of hearing that over and over. Here’s one we definitely won’t hear; “Extra, Extra, Read All about It! American economy saved by successful tax reform!” But wait; there is one possibility…the Fair Tax. This has the potential to make that head line and more! The unfortunate thing is, our politicians reject almost anything beneficial for the American people and try to find quick and easy fixes, band-aid solutions if you will. Well, this may take a little bit longer to implement, but it sure is worth it! Let me explain…
Our tax system is broken let’s look at the first fact. No one knows the whole tax code. In 1938, Franklin Delano Roosevelt wrote a letter to the IRS Commissioner asking him to figure out how much he owed in taxes because the tax code was so confusing that the President could not figure it out. Let’s look at a very troubling fact. If the tax code was written in a book about this wide and this long, then it would be 8 feet tall! It is outrageous that “we the people” could even allow this to happen; but even more outrageous is that fact that we’re still using a tax code designed for the 20th century. Yes, it’s true; all the major tax code legislation that our system is based upon is from the early to mid 20th century. We need a change in this system. Every century, no matter what you’re dealing with, there is a major change in the way things are done. The best example I have is the transportation revolution of the 20th century. In the 19th century, we rode horse and buggy up until the point where we transitioned to the Model-T Ford at the beginning of the 20th century. Just like that horse and buggy, our tax code, just isn’t efficient anymore. We can’t keep running on something that doesn’t work. It’s like you’re still driving a car, day after day, knowing that it needs a new tire. And each day that the tire doesn’t get changed, the worse it gets. And eventually, we’re going to break down. That’s definitely something that we don’t need right now. Along with the fact that the system is outdated, it’s a system that penalizes productivity. That means the harder you work, the less percentage of money you’re going to keep. But facts are facts, and the truth is, the average American will make more money not working at all, then they would working two jobs. That just shows that our system is broken. Not only is the tax system broken, so is the organization that runs it, the IRS.
The IRS is the worst government agency and truly the most irresponsibly run agency in the country. Because of their irresponsibility, we get inefficiency. And this inefficiency leads to the waste of our tax dollars by paying to keep the IRS running, inefficiently. The money that they receive every year from the government to keep them running, is used ineffectively. Let me point something out; we spend ten billion dollars a year to keep the doors of the IRS open. Not only is this money wasted, the employees’ time is wasted as well. The employees that work for the IRS are very intelligent and capable people. Was the IRS gone, they could become accountants and work to help people save their money in order to further future. Now, imagine with me what we could do if we closed the IRS and kept that extra 10 billion dollars a year. We could use it to pay off debt! After ten years, that’s a 100 billion dollar surplus coming from where the IRS was. Or, even better, we could reinvest this money elsewhere. We can pay off Social Security or Medicare. We could start looking at repairing roads, bridges, and highways. We could even use it for green energy research. If we put the “Going out of Business” sign on the front door of the IRS, it will be much more beneficial to the country. And there’s only one plan out there right now that will do that. Ladies and gentlemen, I present to you, the FairTax.
The FairTax was created in 1994 by graduates from Harvard and Stanford University and was declared by these business experts, the best way to run our tax system. Even though it was made in the 1990’s, it’s still applicable today. The FairTax eliminates all taxes and puts in place a simple 23% sales tax. With the elimination of all taxes, April 15th becomes another beautiful spring day. Now, you don’t have to go to the post office to mail your tax returns. You can go on a picnic with your family in the park! And instead of looking at the second number on your paycheck, you can now look at the first and take home every cent you have earned! It’s about time Americans get what we’ve earned. Not only does the FairTax get rid of our current tax system, it gets rid of the IRS as well! So there you have it, our faulty tax system is gone and so is its manager, the IRS. Well, some of you may ask, why 23%? Isn’t that a little high? In the FairTax program, there’s a monthly check called the Prebate. Based on your income, you get a certain amount of money in this government check that you receive monthly. The more money you make, the less money you get in your prebate check, the less money you make the more money you get in your prebate check. This money in the Prebate check comes from some of the taxes they’ve collected from us so we get a little bit back of what we’ve paid. According to the FairTax Calculator on FairTax.org, for a married couple with two children making 50,000 dollars per year, they would get twelve and a half percent more spendable income. It’s that simple. The FairTax is the fastest and most effective solution in our situation.
The debate will go on, but it’s time that we fight for change. Let me tell you a story in closing. My friend, Charlie Prochaska of FairTaxSOWEGA, was going through a hard financial time in his family last year and worked overtime to try to make some extra money to help. He usually works 40 hours in a work week. That week he worked 100 hours that week, 60 hours overtime. When he got his paycheck, he did the math. In that additional 60 hours, he made 100 dollars, that’s it. It’s sad that our tax code can do that to us. This just shows we need the FairTax. This tax system will change the America we know. In the Constitution, the 16th amendment requires us pay the income tax. The FairTax will deem that amendment null and void. Isn’t that what America needs in these economic hard times? It’s time that we stand up and fight to change this situation. We need to fight the system and save our country. Ladies and gentlemen, I implore you to stand with me in fighting this battle for our freedom and our prosperity. Thank you.

Great Job Kyle and Thank you for promoting FairTax on this national platform!! (Please feel free to leave your comments for Kyle in the comments sections below.)

Interesting Tax Articles – More Reasons We Need Fair Tax

Here are two recent articles that just continue to illustrate why we need the FairTax:

From http://online.wsj.com/article/SB123846422014872229-email.html

Lawrence Summers, President Obama’s chief economic adviser, declared recently that “Let’s be very clear: There are no, no tax increases this year. There are no, no tax increases next year.” Oh yes, yes, there are. The President’s budget calls for the largest increase in the death tax in U.S. history in 2010.

The announcement of this tax increase is buried in footnote 1 on page 127 of the President’s budget. That note reads: “The estate tax is maintained at its 2009 parameters.” This means the death tax won’t fall to zero next year as scheduled under current law, but estates will be taxed instead at up to 45%, with an exemption level of $3.5 million (or $7 million for a couple). Better not plan on dying next year after all.

This controversy dates back to George W. Bush’s first tax cut in 2001 that phased down the estate tax from 55% to 45% this year and then to zero next year. Although that 10-year tax law was to expire in 2011, meaning that the death tax rate would go all the way back to 55%, the political expectation was that once the estate tax was gone for even one year, it would never return.

And that is no doubt why the Obama Administration wants to make sure it never hits zero. It doesn’t seem to matter that the vast majority of the money in an estate was already taxed when the money was earned. Liberals counter that the estate tax is “fair” because it is only paid by the richest 2% of American families. This ignores that much of the long-term saving and small business investment in America is motivated by the ability to pass on wealth to the next generation.

The importance of intergenerational wealth transfers was first measured in a National Bureau of Economic Research study in 1980. That study looked at wealth and savings over the first three-quarters of the 20th century and found that “intergenerational transfers account for the vast majority of aggregate U.S. capital formation.” The co-author of that study was . . . Lawrence Summers.

Many economists had previously believed in “the life-cycle theory” of savings, which postulates that workers are motivated to save with a goal of spending it down to zero in retirement. Mr. Summers and coauthor Laurence Kotlikoff showed that patterns of savings don’t validate that model; they found that between 41% and 66% of capital stock was transferred either by bequests at death or through trusts and lifetime gifts. A major motivation for saving and building businesses is to pass assets on so children and grandchildren have a better life.

What all this means is that the higher the estate tax, the lower the incentive to reinvest in family businesses. Former Congressional Budget Office director Douglas Holtz-Eakin recently used the Summers study as a springboard to compare the economic cost of a 45% estate tax versus a zero rate. He finds that the long-term impact of eliminating the death tax would be to increase small business capital investment by $1.6 trillion. This additional investment would create 1.5 million new jobs.

In other words, by raising the estate tax in the name of fairness, Mr. Obama won’t merely bring back from the dead one of the most despised of all federal taxes, and not merely splinter many family-owned enterprises. He will also forfeit half the jobs he hopes to gain from his $787 billion stimulus bill. Maybe that’s why the news of this unwise tax increase was hidden in a footnote.

THE GLOBAL TAX REVOLUTION

Few policymakers today want to regulate trade and capital flows as countries did in the 1950s, but dangerous movements are afoot to control and limit tax competition. Policymakers in international organizations such as the Organization for Economic Co-operation and Development (OECD), the European Commission and the United Nations (UN) want to turn back the clock and create an OPEC for taxes to insulate governments from tax competition, say authors Chris Edwards and Daniel Mitchell, in their new book, “Global Tax Revolution.”

The good news is that the United States is uniquely situated to protect and advance global tax competition. Edwards and Mitchell recommend U.S. policymakers:

* Use American influence inside the OECD to kill the anti-tax competition project; the United States is the biggest funder of the OECD, providing nearly one-fourth the organization’s budget, meaning that we have the ability to block further attacks by the organization on lower-tax jurisdictions.
* Reject European Union invitations to participate in cartel-like tax initiatives, such as the savings tax directive.
* Block possible UN schemes for global taxes, global tax regulations and a global tax organization; fortunately, the United Nations has not made much progress toward those ends, but these ideas are often discussed and may come to fruition unless tax-payers remain vigilant.
* Oppose efforts to change U.S. tax policies in anti-competitive ways or to expand the reach of the U.S. worldwide tax system; also, efforts to by U.S. policymakers to blacklist low-tax nations and jurisdictions should be rejected.

One way to help ensure that American policies stay on the side of international tax competition is for us to proceed with domestic tax reform. With America’s current tax system, politicians often fret about companies moving profits to the Cayman Islands and the like, and they are susceptible to siding with high-tax countries on tax policy matters. However, if we proceed with major tax reforms and make the United States a magnet for investment and jobs, it will be much easier for policymakers and the public to understand the benefits of open tax competition, explain Edwards and Mitchell.

Source: Chris Edwards and Daniel Mitchell, “Global Tax Revolution: The Rise of Tax Competition and the Battle to Defend It,” Cato Institute, September 2008.
For more information:

http://www.catostore.org/index.asp?fa=ProductDetails&method=&pid=1441407

For more on Taxes:

http://www.ncpa.org/sub/dpd/index.php?Article_Category=20

Even the IRS Says the Tax Code has “Overwhelming Complexity”

In the annual report to Congress, released January 7, 2009 by the National Taxpayer Advocate for the IRS, Nina Olson said, “The largest source of compliance burdens for taxpayers, and the IRS, is the overwhelming complexity of the tax code” and “The only meaningful way to reduce these burdens is to simplify the tax code enormously.”

The report – available on line here (The Complexity of the Tax Code) – is a 12 page pdf file. Here is the text of the report without the footnotes and graphs:

Taxpayer Advocate Service — 2008 Annual Report to Congress — Volume One 3
The Complexity of the Tax Code MSP #1
Most Serious Problems #1
The Complexity of the Tax Code
Definition of Problem – The most serious problem facing taxpayers is the complexity of the Internal Revenue Code.
Analysis of Problem – The largest source of compliance burdens for taxpayers – and the IRS – is the overwhelming complexity of the tax code. The only meaningful way to reduce these burdens is to simplify the tax code enormously.
Consider the following:

• According to a TAS analysis of IRS data, U.S. taxpayers and businesses spend about 7.6 billion hours a year complying with the filing requirements of the Internal Revenue Code.2 And that figure does not even include the millions of additional hours that taxpayers must spend when they are required to respond to an IRS notice or an audit.
• If tax compliance were an industry, it would be one of the largest in the United States. To consume 7.6 billion hours, the “tax industry” requires the equivalent of 3.8 million full-time workers.
• Compliance costs are huge both in absolute terms and relative to the amount of tax revenue collected. Based on Bureau of Labor Statistics (BLS) data on the hourly cost of an employee, TAS estimates that the costs of complying with the individual and corporate income tax requirements in 2006 amounted to $193 billion – or a staggering 14 percent of aggregate income tax receipts.
• Since the beginning of 2001, there have been more than 3,250 changes to the tax code, an average of more than one a day, including more than 500 changes in 2008 alone.
• The Code has grown so long that it has become challenging even to figure out how long it is. A search of the Code conducted in the course of preparing this report turned up 3.7 million words.6 A 2001 study published by the Joint Committee on Taxation put the number of words in the Code at that time at 1,395,000.7 A 2005 report by a tax research organization put the number of words at 2.1 million, and notably, found that the number of words in the Code has more than tripled since 1975.
  Tax regulations, which are issued by the Treasury Department to provide guidance on the meaning of the Internal Revenue Code, now stand about a foot tall.   The CCH Standard Federal Tax Reporter, a leading publication for tax professionals that summarizes administrative guidance and judicial decisions issued under each section of the Code, now comprises 25 volumes and takes up nine feet of shelf space.  Two companies publish newsletters daily that report on new developments in the field of taxation; the print editions often run 50-100 pages and the electronic databases contain substantially more detailed information.
• The complexity of the Code leads to perverse results. On the one hand, taxpayers who honestly seek to comply with the law often make inadvertent errors, causing them either to overpay their tax or to become subject to IRS enforcement action for mistaken underpayments of tax. On the other hand, sophisticated taxpayers often find loopholes that enable them to reduce or eliminate their tax liabilities.
• Individual taxpayers find the return preparation process so overwhelming that more than 80 percent pay transaction fees to help them file their returns. About 60 percent12 pay preparers to do the job,13 and another 22 percent purchase tax software to help them perform the calculations themselves.
• The Code contains no comprehensive Taxpayer Bill of Rights that explicitly and transparently sets out taxpayer rights and obligations.15 Taxpayers do have rights, but they are scattered throughout the Code and the Internal Revenue Manual and are neither easily accessible nor written in plain language that most taxpayers can understand.

The Office of the Taxpayer Advocate sees dozens of examples of the impact of tax law complexity each year. Here are some key illustrations:

• Excessive Number of Education and Retirement Savings Incentives. The Code currently contains at least 11 incentives to encourage taxpayers to save for and spend on education; the eligibility requirements, definitions of common terms, income level thresholds, phase-out ranges, and inflation adjustments vary from provision to provision.17 The Code also contains at least 16 incentives to encourage taxpayers to save for retirement; these incentives are subject to different sets of rules governing eligibility, contribution limits, taxation of contributions and distributions, withdrawals, availability of loans, and portability.18 Taxpayers wishing to choose the optimal vehicle to save for college must know the difference between a Section 529 plan, a Coverdell Education Savings Account, and the Hope and Lifetime Learning Credits, among other alternatives. Taxpayers wishing to choose the optimal plan in which to save for retirement must know the difference between a traditional IRA, a Roth IRA, a Section 401(k) plan, a Section 403(b) plan, and a SARSEP, among others.
  The point of a tax incentive, almost by definition, is to encourage certain types of economic behavior. But taxpayers can only respond to incentives if they know they exist and understand them. Choice is good, but too much choice is overwhelming. It is not reasonable to expect the average taxpayer to learn the details of at least 27 education and retirement incentives to determine which ones provide the best fit.
• The Alternative Minimum Tax (AMT). The AMT concept, originally enacted in response to a report that 155 high-income taxpayers had paid no tax for the 1966 tax year, now effectively requires taxpayers to compute their taxes twice – once under the regular rules and again under the AMT regime – and then to pay the higher of the two amounts.21 The AMT was originally conceived to prevent wealthy taxpayers from escaping tax liability through the use of tax-avoidance transactions. However, most of the significant tax loopholes that enabled taxpayers to escape tax at the time the AMT was written have long since been closed, and it is now estimated that about 77 percent of the additional income subject to tax under the AMT is attributable simply to family size or residing in a high-tax state.22 Few people think of having children or living in a high-tax state as a tax avoidance maneuver, but under the unique logic of the AMT, that is how those actions are treated. Yet government has become so dependent on AMT revenue that Congress to date has been unwilling to make permanent changes in law to curtail the AMT, and it is not likely that such changes will be made outside the context of major tax reform.
• Tax Consequences of Mortgage Foreclosures and Canceled Debts. Most financially distressed individuals who lose their homes to foreclosure or cannot pay off their car loans, credit card balances, student loans, or medical bills probably do not realize that
  their delinquency may increase their tax liabilities, but it often does. If a creditor writes off a debt, the tax code generally treats the amount of the canceled debt as taxable income to the debtor. Congress has carved out a number of exclusions, including a recently enacted exclusion to help homeowners whose mortgage debts are canceled when their houses are foreclosed upon and sold.25 However, taxpayers do not receive the benefit of these exclusions automatically. A taxpayer must file Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment), to claim an exclusion. Form 982 is extremely complex, and very few taxpayers or preparers are familiar with it. The IRS estimates that it takes business taxpayers ten hours and 43 minutes to complete the form,26 and the form is not included in many tax software packages available to taxpayers.
  IRS data shows that approximately two million Forms 1099-C, Cancellation of Debt, are issued to taxpayers each year reporting canceled debts.27 The National Taxpayer Advocate estimates that tens of thousands and possibly hundreds of thousands of taxpayers who qualify to exclude canceled debts from gross income do not file Form 982 to claim allowable exclusions. Instead, some of these taxpayers unnecessarily include the amount of the canceled debt in gross income, and other taxpayers who fail to include it unnecessarily face IRS examinations and tax assessments.
• Earned Income Tax Credit (EITC) Complexity. About 22 million low income taxpayers claim the EITC each year.30 The eligibility requirements and computations are complex, yet EITC recipients are relatively less able to understand complex rules and less likely to speak English as their primary language, creating a recipe for confusion. EITC complexity leads to improper claims by taxpayers – some intentional but many inadvertent – and to improper denials by the IRS. A 2004 TAS study surveyed cases in which the IRS denied an EITC claim on audit but the taxpayer asked the IRS to reconsider its findings. Despite the initial IRS denials, the study found that taxpayers ultimately obtained some or all of the EITC amount they had claimed on their returns in 43 percent of the cases (and they received, on average, 94 percent of the amount they had originally claimed). Another window into EITC complexity: One might expect that low income taxpayers would be less likely to need return preparers because their sources of income are often limited to wages and perhaps interest income, yet 72.5 percent of taxpayers who claim the EITC use tax preparers.
• Proliferating Tax Sunsets. The tax code contains more than 100 provisions that are temporary and set to expire soon, up from about 21 in 1992. Tax benefits have increasingly been enacted for a limited number of years in order to reduce their cost for budget-scoring purposes. Although most such benefits are periodically renewed, some are not. For example, the AMT patch and the deductions for state and local taxes and for tuition and fees paid to a post-secondary institution are generally renewed for one or two years at a time, but the extensions are not guaranteed and the amount of the AMT patch is generally changed with each renewal. If taxpayers do not know whether a tax benefit will remain in the Code, the incentive is less likely to influence their decision-making, thereby undermining its purpose. The uncertainty associated with an expiring tax benefit also makes it difficult for taxpayers to estimate their tax liabilities and pay the correct amount of estimated tax, potentially subjecting them to penalties and causing disillusionment with the tax system.
• Phase-out Complexity. More than half of all individual income tax returns filed each year are affected by the phase-out of certain tax benefits. A common phase-out relates to the deduction allowed for personal exemptions. For example, a married couple with two minor children is generally allowed to claim four personal exemptions if they file a joint return, with each deduction worth $3,500 ($14,000 in the aggregate) in tax year 2008.35 If the family’s adjusted gross income (AGI) exceeds a certain threshold, however, the exemption amount is phased out at a rate of two percentage points for each additional $2,500 (or fraction thereof) of income. Thus, under permanent law, the benefits of the personal exemptions would fully phase out over a $125,000 income range. But under a temporary provision that will sunset after 2009, the phase-out is capped at one-third of the exemption amount. Thus, the phase-out may not reduce the exemption amount below $2,333 per family member ($9,332 in the aggregate). This computation is not obvious to the average taxpayer, and as noted, there are about 100 phase-outs that operate in this manner. Like tax sunsets, phase-outs are largely used to reduce the cost of tax provisions for budget-scoring purposes. However, phase-outs add substantial complexity and create marginal “rate bubbles” – income ranges within which an additional dollar of income earned by a relatively low income taxpayer is taxed at a higher rate than an additional dollar of income earned by a relatively high income taxpayer. This inequity is largely hidden by the complexity of the phase-out calculations.
• Unclaimed Telephone Excise Tax Refunds. In 2006, taxpayers were permitted to claim a one-time tax credit for telephone excise taxes that the government concluded it had improperly collected in the past.38 The amount of the credit ranged from $30 to $60, depending on the number of personal exemptions the taxpayer was entitled to claim on the return.39 No substantiation was required unless a taxpayer claimed a larger amount, so this credit was essentially free money. Yet IRS data show that 28 percent of eligible taxpayers (37 million out of 133.2 million) did not claim the credit. The only plausible explanation is that taxpayers missed the credit because of the complexity of the law and the tax forms.
• Burgeoning Penalties. The number of civil penalties in the Code has grown from about 14 in 1954 to approximately 130 today.42 Penalties should be designed to enhance voluntary tax compliance, but they also should be reasonable and can only influence future taxpayer behavior if taxpayers are aware that the penalties exist. As a consequence of “penalty creep,” some penalties are obscure or unduly harsh. For example, Section 6707A of the Code, which was enacted in 2004 to combat tax shelters, imposes a minimum penalty of $100,000 per individual per year and $200,000 per entity per year for a failure to disclose a “listed transaction.”43 The penalty reflects strict liability – the IRS must impose the penalty even if the taxpayer derived little or no tax benefit, even if the taxpayer had no reason to know the transaction was questionable, and even if the transaction was not “listed” until years after the taxpayer’s return was filed and the transaction was complete. Taxpayers cannot challenge this penalty in court. As a result, an individual who does business as an S corporation and who entered into a transaction that he did not know was listed and that provided little or no tax savings would face an automatic $300,000 penalty per year. In addition, the usual three-year statute of limitations on tax assessments does not apply in the case of listed transactions,44 so if the taxpayer entered into a listed transaction that was reflected on his return for ten years, he would face an automatic $3 million penalty overall. TAS has about 40 cases in its inventory involving non-rescindable Section 6707A penalties,45 and we understand the IRS is considering this penalty in hundreds of additional cases. If Congress does not change the law quickly, this penalty may bankrupt middle-class families that had no intention of entering into a tax shelter.
• Small Business Burdens. Small business taxpayers face a particularly bewildering array of laws, including a patchwork set of rules that governs the depreciation of equipment, numerous and overlapping filing requirements for employment taxes, and a vague set of factors that govern the classification of workers as either employees or independent contractors and that can keep businesses and the IRS battling each other for years with no obvious “correct” answer.

Recommendation
The National Taxpayer Advocate recommends that Congress substantially simplify the Internal Revenue Code.

America’s taxpayers deserve a simpler and less burdensome tax system that enables them to comply with their tax obligations expeditiously – not one that requires them to spend 7.6 billion hours filing their returns every year, thereby consuming the equivalent of 3.8 million full-time workers. Taxpayers deserve a tax system that enables them to prepare their returns cheaply – not one that requires them to pay practitioners for help, as nearly 61 percent of individual taxpayers and 74 percent of unincorporated business taxpayers do today. Taxpayers deserve more clarity about their rights and obligations under the tax code in the form of a Taxpayer Bill of Rights. Taxpayers deserve a tax system that enables them to make wise choices about education and retirement savings – without having to wade through the details of at least 27 tax-favored alternatives. Taxpayers deserve a tax system that enables them to compute their tax liabilities fairly and transparently – not one that effectively requires them to compute their tax liability under two sets of rules (the regular rules and the AMT rules) and often to pay more tax under the AMT regime simply because they engaged in the “tax-avoidance behavior” of having children or living in a high-tax state.

Taxpayers deserve better than a tax system so complex that honest taxpayers often overpay while sophisticated taxpayers often find loopholes, and so complex that 37 million taxpayers could fail to claim a tax credit because they did not know it was available. Taxpayers deserve better than a tax system that gives financially distressed taxpayers a tax break when they default on their mortgage or other consumer debts and the debts are canceled – but then makes claiming the tax break so burdensome that many and probably most eligible taxpayers do not claim it. Low income taxpayers deserve a simpler set of rules by which determine EITC eligibility.

Taxpayers deserve certainty about which provisions will remain in the tax code so they can plan accordingly – without having to regularly grapple with uncertainty because more than 100 provisions sunset regularly and may or may not be renewed or modified. Taxpayers deserve to understand exactly how their tax liabilities are computed – not provisions like phase-outs, which make the computations seem impenetrable and subject lower income taxpayers to higher marginal tax rates than upper income taxpayers. Taxpayers deserve simplicity and proportionality in the penalty rules; it is not reasonable that a taxpayer who claims minimal or even no tax savings may face a mandatory, non-waivable $300,000 penalty per year for failing to file a disclosure form that he may not even know he is required to file.

These are a few aspects of a system that requires pervasive reform. The good news is that there is widespread agreement on the need for tax simplification. The National Taxpayer Advocate has previously identified the complexity of the tax code as the most serious problem facing taxpayers, members of Congress regularly complain about the complexity of the Code, and in 2005, an advisory panel created by President Bush to study the federal tax system delivered a detailed report with substantive recommendations. The bad news is that despite widespread agreement on the need for tax simplification, there has not yet been sustained action to make it happen.

To assist the Congress in pursuing tax simplification, we offer a number of proposals in the Legislative Recommendations section of this report, including recommendations to streamline the education and retirement savings incentives, repeal the AMT, allow taxpayers to exclude modest amounts of canceled debts from income without filing Form 982, simplify the family status provisions of the Code, reduce tax sunset and phase-out provisions, and revise the penalty structure.

The National Taxpayer Advocate continues to view tax simplification as essential and urges the new administration and the new Congress to make it a priority. In doing so, she recommends that emphasis be given to six core principles:

1. The tax system should not “entrap” taxpayers.
2. The tax laws should be simple enough so that most taxpayers can prepare their own returns without professional help, simple enough so that taxpayers can compute their tax liabilities on a single form, and simple enough so that IRS telephone assistors can fully and accurately answer taxpayers’ questions.
3. The tax laws should anticipate the largest areas of noncompliance and minimize the opportunities for such noncompliance.
4. The tax laws should provide some choices, but not too many choices.
5. Where the tax laws provide for refundable credits, they should be designed in a way that is administrable; and
6. The tax system should incorporate a periodic review of the tax code – in short, a sanity check.

Be sure and read What is the FairTax? and Herman Cain’s Top Ten Advantages of the FairTax.

Our Broken Tax System Just Keeps Growing and Growing….

Here are a couple of good news stories that continue to illustrate that our tax system is broken and needs not to be reformed, but to be replaced with a simple and fair tax system.

From the Los Angeles Times -

Broken tax code snagged Obama’s Treasury pick
If Timothy Geithner — the guy Obama wants to run the Treasury Department — could make $34,000 worth of mistakes on recent federal tax returns, then clearly this is a system so bloated and complex as to be incomprehensible to all but the most pointy-headed accountants.

“The system has gotten out of hand,”

From AuctionBytes.com – an online news service for eBay and online merchants

New Law May Prove Taxing for PayPal and for eBay Sellers

A new law will require payment card processors and third-party settlement organizations to report eBay sellers’ and online merchants’ transactions to the IRS beginning in 2011.

Our elected officials keep adding layer upon layer of tax codes to a system that is already bloated and broken.  It is time for us all to stand up and tell them “enough is enough”.  We need the FairTax and we need it now.

FairTax Bill – HR 25 has been Reintroduced in the 111th Congress

The FairTax Bill – HR 25 has been Reintroduced in the 111th Congress.

A message from Representative John Linder:

I am extremely happy to tell you that HR 25, the FairTax, has been reintroduced and is alive and well in the 111th Congress.  Not only that, the FairTax has been dropped with more original co-sponsors than it has ever had.  This is an incredible accomplishment, and it has everything to do with you and the immense passion and work you have put into it.

As a citizen co-sponsor of the FairTax you have played an active role in illustrating to other Members of Congress that the FairTax is important to you and is the right step for America to once again regain her prominence.  Thank you for that.

Our citizen co-sponsor effort has become a powerful tool, as I hoped it would.  This means we need to work together to enhance and strengthen it.  Our goal in Congress is to reach 100 co-sponsors on the bill, and our goal for the citizen co-sponsors is to reach 100,000.  I truly believe that if our citizen co-sponsors can achieve that goal, then that will be the catalyst for HR 25 crossing that 100 co-sponsor threshold.  So now is the time, if you haven’t gotten a friend to join the fight, do it today by sending them to www.johnlinder.com. If you already have, thank you; now go try and find ten more.

The success of the FairTax to date has been tremendous, and it is all a result of your hard work.  It is incumbent upon all of us that we step up our efforts  to ensure that the FairTax has not yet reached its peak, but is still climbing.

Thank you again for all you do,
John

To become a Citizen Co-Sponsor go to Add my name as a Citizen Co-Sponsor of the FairTax

CNN to Broadcast I.O.U.S.A.

An Announcement from Peter G. Peterson Foundation

CNN to Broadcast I.O.U.S.A.

The public has spoken, and we’ve listened. In response to demand for information about our country’s financial challenges, CNN/U.S. will air the broadcast premiere of the acclaimed documentary I.O.U.S.A. on on Saturday, January 10 at 2:00 p.m. EST and on Sunday, January 11 at 3:00 p.m. EST. Accompanying the documentary will be an unscripted panel discussion with policy leaders about various economic solutions currently under consideration.

This exclusive televised event will air only on CNN, and will be hosted by Ali Velshi and Christine Romans, co-anchors of CNN’s Your $$$$$, the network’s weekend business roundtable program.

Throughout I.O.U.S.A.’s broadcast premiere, Velshi and Romans will engage a distinguished group of panelists, including Pete Peterson, Chairman of the Peter G. Peterson Foundation and former U.S. Commerce Secretary; Dave Walker, President and CEO of the Peter G. Peterson Foundation and former U.S. Comptroller General; Alice Rivlin, noted economist and former Director of the Office of Management and Budget; and Bill Bradley, a Managing Director of Allen & Company and former U.S. Senator and Democratic presidential candidate, in discussions about issues raised in the film and their ties to current economic events.

Learn more about the film at www.IOUSAtheMovie.com. And be sure to spread the word about the U.S. broadcast premiere!

Obama Foresees Trillion-Dollar Deficits

CNNMoney.com reported on Tuesday that when President-elect Barack Obama takes office on January 20, he’ll inherit an economy deeper in debt than ever.

Obama commented on the unprecedented deficit, saying, “At the current course and speed, a trillion-dollar deficit will be here before we even start the next budget.” In reference to his planned economic recovery plan with an $800 billion price tag, Obama added, “And potentially we’ve got trillion-dollar deficits for years to come, even with the economic recovery that we are working on at this point.”

Even with Obama’s promised budget reform, our economy will still remain in the red — at least for the next few years. However, incurring a trillion-dollar deficit in the short-term in order to stimulate the economy is, according to organizations like the Center on Budget and Policy Priorities, essential in order to prevent “a deep and prolonged recession.”

Dave Walker, president and CEO of the Peter G. Peterson Foundation, was also asked to comment on the deficit and Obama’s proposed stimulus. A “timely, targeted and temporary” stimulus is, according to Dave, the best way to shore up the economy while our deficit continues to deepen.

To read the original article, visit CNNMoney.com.

A Bipartisan Plea for Fiscal Responsibility

On Monday, January 5, the two most prominent members of the Senate Budget Committee – Sen. Kent Conrad (D-ND) and Sen. Judd Gregg (R-NH) spoke out about the need for fiscal responsibility, especially in the face of our current economic crisis.

In an impassioned editorial for the Washington Post, Conrad and Gregg called for Democrats and Republicans to unite in support for an economic recovery package, even with the short-term addition it will make to our larger deficit. The senators also called for a “bipartisan fiscal task force” to help create concrete solutions for America’s long-term fiscal woes.

To read the full text of the editorial, visit the Washington Post.

The Government We Deserve by Gene Steuerle

“Investment” and Obama’s First Budget

President-elect Obama’s chief in-house economic advisor Larry Summers suggests in a recent Washington Post piece that the new Administration will put a lot of effort into addressing long-term growth challenges, not just short-term policies that generate consumer spending. How? Through “investments.” To make sure we get the point, Summers uses that word or some variation 12 times.

But the first Obama budget will not be oriented toward investment. Just as with recent administrations, the words will stress “investment” but the numbers will emphasize “consumption” – not only in the short-term but, more dangerously, in the long-term. In fairness, this is the budget the new administration inherits. They gain control of the wheel of a battleship sailing full-steam ahead toward the icebergs. But by using terms like “down payment” to describe new proposals, Summers hints that no major course correction will be sought.

Read more…

Gene Steuerle writes The Government We Deserve column regularly, and serves as the Vice President of the Peter G. Peterson Foundation. You can read Gene’s bio here.

The FairTax and the Importance of GRASSROOTS

In my quest to get the Fair Tax word out by working for a grassroots effort, I came up with the idea to bring up the word and meaning of “grassroots”. From my experience when some people want change they wait for someone else to do all the work. You can not be affective if you don’t get involved. Our country was founded on the principle and idea that the people govern the country and the government, not the other way around. If the government controls the people (as it is happening now) you have a form of socialism, where people don’t have the freedom to do what they want to do. We the People of these United States, are blessed to speak up and tell our government what we want.

Sometime we have to sacrifice our free time to have freedom prevail. We must stand and fight. I have found it much better to pick up the phone, our pens or use online tools and sites (such as this one) to make a grassroots case for our government to see that “WE The People” want to have better lives (better than the rest of the world) and more freedom.  We are blessed to have the Constitution and Bill of Rights we do. Help me exercise this right with getting the government to see that we want the Fair Tax Bill Passed, and the unconstitutional 16th Amendment abolished – for the people, by the people, of the people, for the economy, our country and our national security.  Join this grassroots effort, along with me and many like me.  Pursue the freedom we have to make our lives and the lives of our children as free as it was meant to be in the first place.

Grassroots is defined as……
A grassroots movement (often referenced in the context of a political movement) is one driven by the constituents of a community. The term implies that the creation of the movement and the group supporting it is natural and spontaneous, highlighting the differences between this and a movement that is orchestrated by traditional power structures. Often, grassroots movements are at the local level, as many volunteers in the community give their time to support the local party, which can lead to helping the national party. For instance, a grassroots movement can lead to significant voter registration for a political party, which in turn helps the state and national parties

Join with our grassroots effort to get the Fair Tax Bill passed. Remember ” DARE TO COMPARE, EVERYONE CAN DO SOMETHING”.

Thank you
Charlie Prochaska
Volunteer Community Coordinator
FairTaxSOWEGA

Comparing FAIR TAX against FLAT TAX

It has been brought to my attention that there is some confusion about Flat Tax and Fair Tax being the same thing. This is not the case.

Flat Tax can easily be reverted back to Income Taxation as we know today.

Fair Tax is progressive and transparent, with a “prebate”.  This means it will be fair for the poor as well as the wealthy.   The Fair Tax is”fair” to both ends of the spectrum of our society as well as the corporates and businesses. Fair Tax is a consumption taxation. Fair Tax is not a Income Taxation

Let look at some comparisons…
This statement should let you know that ” Flat Taxation” is not the best Taxation System “The Estonian economist and former chairman of his country’s parliamentary budget committee Olev Raju, stated in September 2005 that “income disparities are rising and calls for a progressive system of taxation are getting louder – this could put an end to the flat tax after the next election”. However, this did not happen, since after the 2007 elections a right-wing coalition was formed which has stated its will to keep the flat tax in existence.”

FLAT TAXATION
Overall structure
Some taxes other than the income tax (for example, taxes on sales and payrolls) tend to be regressive. Hence, making the income tax flat could result in a regressive overall tax structure. Under such a structure, those with lower incomes tend to pay a higher proportion of their income in total taxes than the affluent do. The fraction of household income that is a returned to capital (dividends, interest, royalties, profits of unincorporated businesses) is positively correlated with total household income. Hence a flat tax limited to wages would seem to leave the wealthy better off. Modifying the tax base can change the effects. A flat tax could be targeted at income (rather than wages), which could place the tax burden equally on all earners, including those who earn income primarily from returns on investments. Tax systems could utilize a flat sales tax to target all consumption, which can be modified with rebates or exemptions to remove regressive effects (such as the proposed FairTax in the U.S.)

Administration and Enforcement
A flat tax taxes all income once at its source. Hall and Rabushka (1995) includes a proposed amendment to the US Revenue Code implementing the variant of the flat tax they advocate. This amendment, only a few pages long, would replace hundreds of pages of statutory language (although it is important to note that much statutory language in taxation statutes is not directed at specifying graduated tax rates. As it now stands, the USA Revenue Code is over 9 million words long and contains many loopholes, deductions, and exemptions which, advocates of flat taxes claim, render the collection of taxes and the enforcement of tax law complicated and inefficient. It is further argued that current tax law retards economic growth by distorting economic incentives, and by allowing, even encouraging, tax avoidance. With a flat tax, there are fewer incentives to create tax shelters and to engage in other forms of tax avoidance.
Under a pure flat tax without deductions, companies could simply, every period, make a single payment to the government covering the flat tax liabilities of their employees and the taxes owed on their business income. For example, suppose that in a given year, ACME earns a profit of 3 million, pays 2 million in salaries, and spends an added 1 million on other expenses the IRS deems to be taxable income, such as stock options, bonuses, and certain executive privileges. Given a flat rate of 15%, ACME would then owe the IRS (3M + 2M + 1M) x0.15 = 900,000,( similar to the 1913 income taxation principles of the US). This payment would, in one fell swoop, settle the tax liabilities of ACME’ s employees as well as taxes it owed by being a firm. Most employees throughout the economy would never need to interact with the IRS, as all tax owed on wages, interest, dividends, royalties, etc. would be withheld at the source. The main exceptions would be employees with incomes from personal ventures. The economist claims that such a system would reduce the number of entities required to file returns from about 130 million individuals, households, and businesses, as at present, to a mere 8 million businesses and self-employed.
This simplicity would remain even if realized capital gains were subject to the flat tax. In that case, the law would require brokers and mutual funds to calculate the realized capital gain on all sales and redemption. If there were a gain, 15% of the gain would be withheld and sent to the IRS. If there were a loss, the amount would be reported to the IRS, which would offset gains with losses and settle up with taxpayers at the end of the period.
Under a flat tax, the government’s cost of processing tax returns would become much smaller, and the relevant tax bodies could be abolished or massively downsized. The people freed from working in administering taxes will then be employed in jobs that are more productive. If combined with a provision to allow for negative taxation, the flat tax itself can be implemented in an even simpler way. In addition, such a tax reduces the cost of welfare administration significantly.
It is invariably argued that a flat tax will greatly simplify tax compliance and administration. In fact, simplicity does not so much stem from the structure of tax rates (a progressive rate structure is nothing more than a look-up table filling at most one page) as from the definition of what is subject to tax. Tax simplification – getting rid of all the deductions, exemptions, and special rules added over the years – is an issue wholly separable from that of the rate structure. A nation can vastly simplify its tax code while keeping its rate structure progressive. Similarly, a nation could establish a flat tax rate while retaining inordinately complex rules defining the nature of income (such as the imputed interest rules in the US).
It is possible that a flat tax would not remain simple over time, given the realities of interest group politics. While all flat tax proposals propose to eliminate nearly all deductions and credits, some envision keeping the mortgage interest deduction and possibly some others (note that Hall and Rabushka 1995 do not).

Economic efficiency
A common approximation in economics is that the economic distortion or excess burden from a tax is proportional to the square of the tax rate. A 20 percent tax rate thus causes four times the excess burden or dead-weight loss of a 10 percent tax, since it is twice the rate. Broadly speaking, this means that a low uniform rate on a broad tax base will be more economically efficient than a mix of high and low rates on a smaller tax base.

Revenues
Some claim the flat tax will increase tax revenues, by simplifying the tax code and removing the many loopholes corporations and the rich currently exploit to pay less tax. The Russian Federation is a claimed case in point; the real revenues from its Personal Income Tax rose by 25.2% in the first year after the Federation introduced a flat tax, followed by a 24.6% increase in the second year, and a 15.2% increase in the third year. The Laffer curve is used to illustrate the idea that increases in the rate of taxation do not necessarily increase tax revenue.   For instance, a 100 percent income tax will generate no revenue, as citizens will have no incentive to work.  Increasing taxes beyond the peak of the curve point will decrease tax revenue predicts such an outcome, but attributes the primary reason for the greater revenue to higher levels of economic growth. The Russian example is often used as proof of this, although an IMF study in 2006 found that there was no sign “of Laffer-type behavioral responses generating revenue increases from the tax cut elements of these reforms” in Russia or in other countries.

Border adjustable
A flat tax system and income taxes overall are not inherently border-adjustable; meaning the tax component embedded into products via taxes imposed on companies (including corporate taxes and payroll taxes) are not removed when exported to a foreign country. Taxation systems such as a sales tax or value added tax can remove the tax component when goods are exported and apply the tax component on imports. Under a flat tax, domestic products are at a disadvantage to foreign products. Such a system greatly impacts the global competitiveness of a country. Though, it’s possible that a flat tax system could be combined with tariffs and credits to act as border adjustments (the proposed Border Tax Equity Act in the U.S. attempts this). Implementing a income tax with a border adjustment tax credit is a violation of the World Trade Organization agreement.

Economic efficiency
A common approximation in economics is that the economic distortion or excess burden from a tax is proportional to the square of the tax rate. A 20 percent tax rate thus causes four times the excess burden or dead-weight loss of a 10 percent tax, since it is twice the rate. Broadly speaking, this means that a low uniform rate on a broad tax base will be more economically efficient than a mix of high and low rates on a smaller tax base.

Race to the bottom
An argument raised by opponents of the flat tax is that corporations or wealthy persons might move to countries with lower taxes, especially in a single country context. The argument states that this would lead to a race to the bottom in which countries compete to offer ever-lower taxes for the rich, so that the rich become even richer, while the poor and middle classes, unable to financially handle relocation to another country, are left to shoulder the entire cost of all government services. A consequence would be an ever-worsening under-funding and neglect of the public sector.
Opponents of the flat tax argue that the end result of this race to the bottom is social disintegration, a situation from which even the richest cannot benefit. It is argued that in order to prevent this it is the responsibility of local and national governments everywhere to ensure that the rich pay a fair share of the tax burden. Concepts such as flat rate taxes are therefore said to be irresponsible at a global level, even if they may seem to grant a temporary advantage at a national level. In other words, making economic conditions too desirable in one country may have the effect of forcing other countries to compete by making their conditions equally desirable. It could however be argued that even in the absence of a flat tax, this situation in which the very wealthy relocate to lower tax jurisdictions already exists.

Distribution
Tax distribution is a hotly debated aspect of flat taxes. The relative fairness hinges crucially on what tax deductions are abolished when a flat tax is introduced, and who profits the most from those deductions.
Proponents of the flat tax claim it is fairer than stepped marginal tax rates, since everybody pays the same proportion. Opponents point out first that it might not make sense for everyone to pay the same proportion when some get advantages of prosperity. Also, they note that for the state to raise the same amount of money under a flat rate tax (to the first order, that is, assuming people earn the same incomes as before) requires that the rich pay less and the poor pay more than they would under a more progressive tax system. Proponents respond to this argument by saying that second-order effects would compensate; a flat tax would remove economic disincentives and encourage economic growth, thus leading to higher incomes and more tax revenues. So taxpayers across income ranges could be paying at the same or lower rate than their old system. Economic models usually predict that flat tax will increase both output and inequality.
Proponents claim that since everybody pays the same rate, it treats everyone equally and thus is fair to everyone. Opponents of the flat tax, on the other hand, claim that since the marginal value of income declines with the amount of income (the last 100 of income of a family living near poverty being considerably more valuable than the last 100 of income of a millionaire), taxing that last 100 of income the same amount despite vast differences in the marginal value of money is unfair. Many flat-tax proponents actually concede this premise since most proposals are not truly totally flat but have a threshold below which income is not taxed at all. Therefore, with the exception of flat-tax proponents who argue for no deductions and taxation of all income at one flat rate, both proponents and opponents agree in principle if not in degree with the basic premise of this concept. However, the sizable exemptions provided under most flat tax proposals go far in restoring effective progressivity. As income for an individual increases, the exempt income becomes an ever smaller percentage of total income.
The issue of removing deductions, exemptions and special treatments is also relevant to the tax burden, if those special treatments currently benefit the better off. Example, the tax debate in the UK has recently (2007) focused on the fact that hedge fund managers, some with multi-million pound incomes, “pay less tax than a cleaning lady” (actually a lower tax rate rather than less tax), because the hedge fund manager’s “income” qualifies as capital gains, taxable at 10%, rather than the cleaner’s employment income taxable at 33% (22% income tax plus 11% social security charge). A flat tax that taxed both at the same rate is argued to be fairer than the current, supposedly progressive, system.
We must also consider fairness in relation to the broader concept of justice. Proponents argue that a flat tax would:
1. by its greater simplicity, reduce taxes for each person, rich and poor; and
2. by stimulating economic growth, produce more government revenue, directed to programs that benefit the poor.
Thus, even if a flat-rate taxation is less fair than graduated taxation as a concept, it could produce more social justice. But Flat Tax does create a false or if you will an artificial standard of “fairness”. A flat tax (short for flat rate tax) is a tax system with a constant tax rate. Usually the term flat tax would refer to household income (and sometimes corporate profits) being taxed at one marginal rate, in contrast with progressive taxes that may vary according to such parameters as income or usage levels.
Flat taxes that include a tax exemption for household income below a level determined by statute are not a true proportional tax, as taxable income may not equal total income. Nomenclature,(a set or system of names or terms in a particular science, art, or other subject.), regarding flat taxes has become increasingly lax, in that taxes that are described as flat sometimes have little to differentiate them from other tax regimes. Flat tax proposals different in how they define and measure what is subject to tax.

Here is what is happening in the United State on proposal of Flat Tax
In the United States, where it has gone hand in hand with a general swing towards conservatism, that have recently reintroduced flat taxes have done so largely in the hope of boosting economic growth. Flat tax proposals have made something of a “comeback” in recent years. Former House Majority Leader Dick Armey and FreedomWorks have sought grassroots support for the flat tax (Taxpayer Choice Act). While the Federal income tax is progressive, five states — Illinois, Indiana, Massachusetts, Michigan and Pennsylvania — tax household incomes at a single rate, ranging from 3% (Illinois) to 5.3% (Massachusetts). Pennsylvania even has a pure flat tax with no zero-bracket amount.
Proposals for a flat tax at the federal level have emerged repeatedly in recent decades during various political debates. Jerry Brown, former Democratic Governor of California, made the adoption of a flat tax part of his platform when running for President of the United States in 1992. At the time, rival Democratic candidate Tom Harkin ridiculed the proposal as having originated with the “Flat Earth Society”. Four years later, Republican candidate Steve Forbes proposed a similar idea as part of his core platform. Although neither captured his party’s nomination, their proposals prompted widespread debate about the current U.S. income tax system.

Flat tax plans that are presently being advanced in the United States also seek to redefine “sources of income”, current progressive taxes count interest, dividends and capital gains as income, for example, while Steve Forbes’s variant of the flat tax would apply to wages only.
(Charlie P. thought to himself “What?, Is this another form of Income Taxation?”)
Flat Taxation, Federal Income Taxation, Value Added Taxation (VAT) all are in common with one issue they are REGRESSIVE Taxation systems. Fair Tax is proven to be the only PROGRESSIVE Taxation system, that will at all times create stimulus economy growth.

Read on please and see how the rest of the world handles their taxation……
Flat Taxation Around The World
Eastern Europe, Countries that have flat taxes
Advocates of the flat tax argue that the former-Communist states of Eastern Europe have benefited from the adoption of a flat tax. Most of these nations have experienced strong economic growth of 6% and higher in recent years, some of them, particularly the Baltic countries, experience exceptional GDP growth of around 10% yearly.
* Lithuania, which levies a flat tax rate of 24% (previously 27%) on its citizens, has experienced amongst the fastest growth in Europe. Advocates of flat tax speak of this country’s declining unemployment and rising standard of living. They also state that tax revenues have increased following the adoption of the flat tax, due to a subsequent decline in tax evasion and the Laffer curve effect (the Laffer curve is used to illustrate the idea that increases in the rate of taxation do not necessarily increase tax revenue. (For instance, a 100 percent income tax will generate no revenue, as citizens will have no incentive to work). Increasing taxes beyond the peak of the curve point will decrease tax revenue. Others point out, however, that Lithuanian unemployment is falling at least partly as a result of mass emigration to Western Europe. The argument is that Lithuania’s comparatively very low wages, on which a non-progressive flat tax is levied, combined with the possibility now to work legally in Western Europe since accession to the European Union, is forcing people to leave the country in masses. The Ministry of Labor, estimated in 2004 that as many as 360,000 workers may have left the country by the end of that year, a prediction that is now thought to have been broadly accurate. The impact is already evident, in September 2004, the Lithuanian Trucking Association reported a shortage of 3,000-4,000 truck drivers. Large retail stores have also reported some difficulty in filling positions. However, the emigration trend has recently stopped as enormous real wage gains in Lithuania (presumably due to the shortage of workers) have caused a return of many inmigrants from Western Europe. In addition to that, it is clear that countries not levying a flat tax such as Poland also temporarily faced large waves of emigration after joining Europe Union membership in 2004.
* While in most countries the introduction of a flat tax has coincided with strong increases in growth and tax revenue, there is no proven causal link between the two. For example, it is also possible that both are due to a third factor, such as new government that may institute other reforms along with the flat tax. A study by the IMF showed that sharp increases in Russian GDP growth and tax revenue around the time of the introduction of a 13% flat tax were not the result of the tax reform, but of a sharp increase in oil prices, strong real wage growth, and intensification in the prosecution of tax evasion.
* In Estonia, which has had a 26% (24% in 2005, 23% in 2006, 22% in 2007, 21% in 2008, planned 20% in 2009, 19% in 2010, 18% in 2011) flat tax rate since 1994, studies have shown that the significant increase in tax revenue experienced was caused partly by a disproportionately rising VAT revenue. Moreover, Estonia and Slovakia have high social contributions, pegged to wage levels. Both matters raise questions regarding the justice of the flat tax system, and thus its long-term viability. The Estonian economist and former chairman of his country’s parliamentary budget committee Olev Raju, stated in September 2005 that “income disparities are rising and calls for a progressive system of taxation are getting louder – this could put an end to the flat tax after the next election”. However, this did not happen, since after the 2007 elections a right-wing coalition was formed which has stated its will to keep the flat tax in existence.
Recent and current proposals
In other countries, flat tax systems have also been proposed, largely as a result of flat tax systems being introduced in several countries of the former Eastern Bloc, where it is generally thought to have been successful, although this assessment has been disputed. The Baltic countries of Estonia, Latvia and Lithuania have had flat taxes of 24%, 25% and 33% respectively with a tax exempt amount, since the mid-1990s. On 1 January 2001, a 13% flat tax on personal income took effect in Russia. Ukraine followed Russia with a 13% flat tax in 2003, which later increased to 15% in 2007. Slovakia introduced a 19% flat tax on most taxes (that is, on corporate and personal income, for VAT etc., almost without exceptions) in 2004; Romania introduced a 16% flat tax on personal income and corporate profit on January 1, 2005. Macedonia introduced a 12% flat tax on personal income and corporate profit on January 1, 2007 and promised to cut it to 10% in 2008. Albania will be implementing a 10% flat tax from 2008. Greece (25%) and Croatia are planning to introduce flat taxes. Paul Kirchhof, who was suggested as the next Finance minister of Germany in 2005, introducing a flat tax rate of 25% in Germany in 2001, which sparked widespread controversy. Some claim the German tax system is the most complex one in the world. Flat taxes have also been considered in the United Kingdom by the Conservative Party. However, it has been rejected by Gordon Brown, then Chancellor of the Exchequer for Britain’s ruling Labor Party, who said that it was “An idea that they say is sweeping the world, well sweeping Estonia, well a wing of the non-conservatives in Estonia, The millionaire to pay exactly the same tax rate as the young nurse, the home help, the worker on the minimum wage”. On 27 September 2005, the Dutch Council of Economic Advisers recommended a high flat rate of 40% for income tax in the Netherlands. Some deductions would be allowed, and persons over 65 years of age would be taxed at a lower rate.

My question to you after you have just read this!
Sure with the Flat Tax the IRS would be downsized, but still there would be an IRS Agency in Washington and a coalition doing what they have done with the Income Tax – that is finding “loop-holes”. How is Flat Tax going to bring our American Companies back to the USA shore where they belong? How can this Flat Tax help small businesses, the very core of our economy, grow? All I see is the same 20%, to even as high as 40%, of taxation under the Flat Tax that we the consumers still will be paying and with no tax incentives for the consumers?
Where is the progressive, transparent, or a “prebate” as proposed under the Fair Tax? Ask yourself are we going to use someone else’s ‘failed” system? Are we going to “Do The Right Thing” as someone we all know Governor Mike Huckabee says to do? I agree with the good Governor. Bring good common sense back to America. We can start by putting in a system known as the Fair Tax that has been proven by world economists to better our country and our economy over the rest of the world!

Charlie Prochaska
Volunteer Community Coordinator
FairTaxSOWEGA

Reference – Flat Tax

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