Welcome to the June Manufacturing: Making It Local, issue of NorthBay biz magazine. This month, we also have a Special Report on the Arts and Entertainment industry in the North Bay. Earlier this week, NBB was selected to receive the very prestigious Legacy award from BloodSource at a gathering of 150 local business people held at the Santa Rosa Golf and Country Club. I’d like to thank Mike Fuller, CEO, and Leslie Botos, VP of marketing for BloodSource for honoring the magazine. I’d also like to thank them for their invaluable contribution in saving lives in our community every day of the year.
I left off last month’s column promising to return to the topic of the FairTax. Our federal income tax system is a cruel joke perpetrated on every tax-paying citizen and in a stealthy, overlooked way contributes significantly to the dysfunction of the American economy. Confoundingly complex, the federal income tax code’s 77,000 pages and more than 4 million words are contradictory, unfair and littered with exemptions, exclusions and special treatment for special interests. It’s so arbitrary and open to different interpretations that senior agents within the IRS often render opposite rulings on the same question. Wade through any one of the hundreds of multi-page tax forms and you’ll quickly see why even the most intelligent, best educated business people throw up their hands in frustration trying to comply with and understand them.
The FairTax eliminates all of that while changing economic dynamics and turning taxation into a positive contributor to the economy. Plus, it’s a tax system so simple it’s easy for everyone to understand.
The FairTax is a 23 percent national sales tax applied equally to every American citizen, which will generate the same tax revenue as our current tax system. However, along the way, it eliminates our current federal taxes as well as all payroll taxes completely. What this results in is straightforward. If you earn $1,000 per week, when you open your pay envelope, your check will be for $1,000—no deductions! You take home your entire paycheck.
Here are a couple of important points. The 23 percent rate just happens to equal the lowest income tax rate of 15 percent plus the 7.65 percent employee payroll tax rate that will be eliminated when the FairTax is made into law. The important difference between the two is that, for the first time, people will be taxed on what they spend—not what they earn. The FairTax’s 23 percent rate is simply a consumption tax applied at the point of final purchase on all new goods and services. Buy used goods—no tax!
Worried about Social Security and/or Medicare funding under this plan? Don’t be, because benefits don’t change. These programs are currently funded by taxes on workers’ wages, a number that’s been shrinking for roughly six years. Going forward under the new tax plan, the funding is provided by taxes on overall consumption, which will be paid by everyone.
OK, I can hear you thinking, “Well, this FairTax sounds pretty good, maybe, but what about lower-income families and the hit they’ll take by having to pay this tax?” The FairTax has a built-in feature called a prebate. This prebate gives every legal resident an advance refund at the beginning of every month so that purchases made up to the poverty level are tax-free.
Something is very wrong in this country when we have an economic system that can set record stock market returns and corporate profits, but can’t produce jobs and wages. The economy is flush with liquidity with interest rates at all-time lows, but there’s no velocity of money because of all the uncertainty in the marketplace—can you say national debt and the looming implementation of Obamacare (to name just two)? And, once again, the economy has slowed to a crawl because of all the unknowns. The growth rate for the last quarter of 2012 was an anemic 0.6 percent.
Yet we continue to hear at every level of government that it “desperately” needs more tax revenues to fund critical programs and reduce deficits. It’s simply beyond their comprehension to initiate programs that stimulate the economy through incentives (lower taxes and so forth) that will bring in the “desperately” needed revenues by expanding the tax base by creating new jobs to get the economy humming again. Instead of real solutions, they have the same answer every time—coincidentally the same answer that got us where we are—just spend more money. The FairTax helps put people back in control. Currently, the bill languishes in Congress waiting to be acted upon. It’s past time to make this plan the law of the land.
I’d like to give attribution to this concluding portion of this month’s column, but I can’t since it was obtained from my favorite source—anonymously on the Internet. Here goes:
If you can get arrested for hunting or fishing without a license, but not for being in the country illegally…you might live in a country founded by geniuses but run by idiots.
If you have to show an I.D. card to board an airplane, cash a check, buy liquor or check out a library book, but not to vote in an election…you might live in a country founded by geniuses but run by idiots.
If being stripped of the ability to defend yourself makes you “more safe” according to the government…you might live in a country founded by geniuses but run by idiots.
If hard work and success are met with higher taxes and more government intrusion, while not working is rewarded with EBT cards, WIC checks, Medicaid, subsidized housing and free cell phones…you might live in a country founded by geniuses but run by idiots.
If the government’s plan for getting people back to work is to incentivize not working with 99 weeks of unemployment checks and no requirement to prove they applied for a job, but can’t find work…you might live in a country founded by geniuses but run by idiots.
That’s it for now. Enjoy this month’s magazine.
