You keep entire pay check with 23% consumption taxPublished 10:00am Friday, January 8, 2010
By JOHN EBY
Dowagiac Daily News
Characterized by fairness, simplicity, transparency and revenue neutrality, the Fair Tax has been lolling around on Capitol Hall for a decade without finding traction.
John Gisler has been educating himself about the 23-percent Fair Tax for six of those years.
He said there are “58 or 59″ House co-sponsors and “three or four” in the Senate.
The hurdle is that legislators and lobbyists “and all those who make their livings and love gaming the tax system we have now don’t like this.
“This could be the greatest return of power to the people since the American Revolution. If you’re a lobbyist, that’s how you keep your representatives and senators in line to vote the way you want – making sure they’ve got the funding to run their next campaign. It’s incestuous.
“A previous President said, ‘So many people get elected to Congress and they go there thinking Washington is a cesspool. But once they’ve been there six months, they find out it’s a hot tub.’ ”
Gisler, of Scotts, spoke to Dowagiac Rotary Club Thursday noon at Elks Lodge 889 about the Fair Tax, built on seven fundamentals:
• Only people pay taxes.
• Business taxes are embedded in prices passed along to consumers.
• Prices will stay essentially the same. “It varies according to the kind of good, but built-in taxation runs right around 22 percent – 18 percent to 26 percent.”
• Taxpayers pay only when they spend on new goods and services.
• Used goods are not taxed.
• There are no taxes on productivity or investment.
• Monthly “prebate” checks are issued to every household for essentials such as food, medicine and shelter because “you will be paying taxes on everything. That’s part of the fairness of it. You don’t split hairs between hot dogs and caviar.”
Benefits include keeping your whole paycheck because spending is taxed – not earnings. No state or federal withholding.
Advocates argue this makes U.S. business more competitive, stimulating the economy and creating jobs.
Yet it hasn’t sailed through Congress or the Michigan Legislature in Lansing, although it is before the Missouri Senate after clearing the Show-Me State’s House.
The Fair Tax “absolutely treats every single citizen the same,” Gisler said. “Nothing could be fairer than that. It’s simple. The entire legislation that’s been put before Congress since 1999 has now bulked up to 133 pages versus the IRS Code, which totals over 70,000 pages. No wonder nobody knows what they’re doing.
“It’s transparent. Taxes you pay show up on every retail sales receipt because its a tax on consumption. You pay only when you buy something. It’s completely non-partisan. You can be of any political belief you want and this makes good sense. And it’s designed to be revenue-neutral, which means it doesn’t cut any spending. It doesn’t get into how the federal government spends the money now.”
Paying 23-percent Fair Tax eliminates income tax, AMT, FICA, Medicare, self-employment, estate tax, gift tax, capital gains tax, taxes on investments and compliance costs, “which is not a tax,” Gisler said, “but for small businesses, keeping all the records to comply with tax regulations is sometimes the biggest cost.”
For example, he used a single person making $40,000 in the 15-percent tax bracket, paying 6.2 percent for Social Security and 1.45 percent for Medicare – 22.65 percent or “almost what those embedded taxes are that are going to be eliminated. You’re paying that now as a hidden tax even though you never see it. With the built-in business taxes, you’re at more than 40 percent, plus state tax laid on that. We’re all at about 50 percent tax on our income.”
Next, Gisler analyzed a family of four. A 40-hour worker making $20 an hour would keep all $800 rather than their current take-home pay of $619.
Actually, with a $121 Fair Tax prebate minus the 23-percent tax bite, there would be 14.5 percent more spendable income – $709 rather than $619.
“Nobody got a raise and your income just went up 14.5 percent,” Gisler said.
“It almost sounds too good to be true, but in six years I cannot really find a way to poke a hole in this. It’s that good, but it’s that different.”
Gisler said 43 of the 50 states collect sales tax.
“Any system set up, regardless of how fair and simple and straightforward it is,” Gisler said, “somebody will find a way to sneak around it. But in order to keep it working for the ninetysome percent of us who play the game the way it’s supposed to be played and who try to live right and do honest things, we don’t want to screw that ninetysome percent up trying to collar the last 5 percent who are out there twisting everything their way the best they can.
“That’s how we got 70,000 pages – trying to lock everybody in or everybody out. Laws have been passed in Lansing, for example, that apply to one company, Meijer. I don’t know what they are, but I bet they favor Meijer. If I was running Harding’s, I’d be a little bit stressed that Meijer has the political pull to do that. Let them compete without government tail-twisting. And I don’t mean to pick on Meijer – my wife’s probably shopping there right now.”
Gisler – “our own Paul Revere” – spoke as the guest of Dr. Matthew Cripe, who used July 1, 1863, as an unusual point of reference.
That date Brig. Gen. John Buford led the Union cavalry to the western edge of Gettysburg, Pa.
“We’ve got to hold the high ground,” he famously told his troops.
“He was a pivotal man at a pivotal moment,” Cripe, a dentist, said. “He saw what needed to be done, he was a leader and he got the job done, but he didn’t deny what he was seeing. Fast forward (to 2005) and David Walker, the former comptroller general of the United States, joins with Robert Bixby, director of the Concord Coalition. They took a look at what’s going on in the United States of America numbers wise and financially.”
They formed the Wake Up America Tour, but “I don’t think any of us are going to have the opportunity to see these guys speak,” Cripe said.
“The good news is there was a movie made about what these guys are talking about, ‘I.O.U.S.A.’ It’s an absolutely fascinating movie. If you’re even halfway paying attention to it, your eyes are going to pop open and your jaw’s going to drop because the facts are frightening. We need some good leadership. We have four deficits going – budget, savings, trade and leadership. It makes me think of John Buford saying, ‘This is what we’ve got to do’ when he saw what was going on. Like David Walker told Diane Rehm on NPR (National Public Radio), ‘This is not about Republicans, it’s not about Democrats. It’s not about conservatism, it’s not about liberalism. It’s about the facts.’ (Gisler) travels around spreading the news that there is danger coming and we better prepare for it.”