Sensible Ideas in a Senseless World: My ideas for stimulating the economy

Last week a discussion on the wall of the President’s Facebook townhall left an impression on me. I was speaking to another economist about the policies of the current Administration and we each had different opinions about the success of them. When we came to a wall, the question was asked: What are your ideas then? I had ideas, and I shared them, but it made me think about how much time is spent criticizing others without presenting alternatives. Most of the criticism isn’t even based upon logic, but a personal dislike for the owner of that thought. Well, this gave me the idea of starting a video series explaining the criticisms of the current Administration based simply on economics and presenting alternatives to them.


Now, I’ll warn you, the subject of economics probably wouldn’t be as exciting to you as it is to me, but because it is important enough to affect everyone’s lives than it should be important enough to try to have a better understanding of it. 

That being said, I would like to start with our tax code, specifically with the notion of “corporate taxes”. When asked who pays corporate taxes, many of us have been led to believe that the business pays those funds to the government, which is a serious misconception. Taxes are funded solely on an individual basis, and as such a corporation does not pay corporate taxes at all. Businesses are tax collectors on behalf of the government. Think about it. A business treats the tax as any other expense which gets passed down one of three ways: the consumer, employee, and shareholders (as explained in a piece I did in 2008). The pain of paying the higher taxes trickles down to one of the three beneficiaries of the business’ success as long as the business can remain competitive in the market. In a roundabout way, I’m basically saying that the idea of taxing businesses and corporations is another way for politicians to essentially tax the public (without the public being aware of it). Have you ever heard of a politician promising to lower the income taxes for the lower and middle classes, while also promising to get back at those greedy businesses and corporations by raising the corporate tax rates to fund social programs to benefit the growing poor and middle class? Ever notice how wages have stagnated as the cost of goods rise prior to the current recession as early as the 90s? Notice that as the world’s become globally connected, business has left this country to beneficial nations?

Retaining what I just pointed out, consider this idea to stimulate the economy: abolish the Corporate Tax rate completely. Doing so will allow business to have more revenue to play with, which would result in any of the following: stable stocks, expansion (jobs/wages/benefits), lower prices for the consumer. Business overseas will notice the friendly change and move to take advantage of the zero rate, making this country more appealing compared to other nations. If you want true stimuli, this purely economic based act would have an immediate (within a year) impact on the marketplace that would benefit the people. Yet, this act alone would not suffice….

The President recently called for the removal of federal subsidies to oil companies in retaliation to the steady increase in the price per barrel in a letter addressed to the Minority an Majority leaders of Congress with the intention of punishing the private oil companies for the increase in fuel prices. To his base and the uneducated, the idea of punishing big oil is considered a great idea. For the pain of paying at the pump, someone has to be blamed and punished. Just think about this for a second, and also consider what I said earlier about businesses and expenses. The initial shock of having those subsidies removed will dramatically increase the price we’d pay at the pump simply because what we pay at the pump has been subsidized by the government this whole time. In effect, the very people cheering this movement on will be hit the hardest once this action is taken. The trickle down effect will spread to every single industry that uses any product that comes from the oil industry, inflating the prices of food, clothing, housing, etc. Not to mention that when it comes to federal involvement in the marketplace, this is another example of the feds picking which industry wins/loses based on the political climate. In the quest for “fairness” in the marketplace, this is hardly fair business practice.

Couple the zero Corporate rate with a plan to end to all forms of Corporate Welfare. In 2006, the federal government allocated $92B subsidies to many companies including Boeing, Xerox, IBM, Motorola, Dow Chemical and General Electric. The state and local governments collectively paid out $40-50B. I just pointed out that the President is calling for the removal of subsidies to the oil industry simply because the political climate calls for it. I would agree with him, if he would take it further and completely remove all forms of corporate welfare as an economical gesture of good will. The government should be neutral in the choosing of which business receives an incentive over another. This practice of choosing who wins/loses has opened the doors for political corruption, lobbying, damaging policymaking, etc which hurts the average citizen and tainting the political process. By removing the practice, the average consumer has more say in the decisions a business makes and the future of the company. The company would no longer have to concern themselves with trying to obtain subsidies before their competitors by wasting time and money in lobbying efforts to that end, but would have to rely on catering to their customers in order to compete.

There are some concerns about the transition to such a system because there will be some of the same issues. Market influence into politics will never die unless the politicians themselves choose to make decisions that benefit the people they represent and not their campaign coffers. Regulation (a good thing, BTW) opens the door for lobbying/bribery as long as the restrictions are unnecessary, redundant and created for the purpose of assisting special interests. A reduction in some of the government programs that depend on the corporate tax system is a given, much of which can be sustained by removing waste fraud and abuse within them (no, really!) and the influx of jobs would reduce the number of Americans that are dependant on programs like WIC, Welfare, Section 8, etc.

These ideas aren’t perfect, but are simple and address the main concerns of the people in the country. The free market system works…..if the government reduces it’s influence to levels that benefit society as a whole.

For more ideas based on economic principles I've already covered (would coincide with the above):

Business
Social Security
Healthcare
Taxes
 
Acknowledgement: Michael Ramirez for the editorial cartoon

Obama Gets Busted on Mythbusters!

Here's where ReasonTV got their sources

New study shows ObamaCare subsidies potentially five times higher in first year than predicted

(Via Ed Morrissey)

In passing ObamaCare, Democrats argued that it would provide a net relief to the budget deficit in its balance of new taxes and fees, drastic cuts to Medicare Advantage, and the subsidies it would provide to Americans making $88,000 a year or less.  A new study commissioned by Families USA, a group that supports ObamaCare, shows that the Democrats and the CBO badly miscalculated the level of subsidies provided.  In the first year (2014), 28 million Americans would have eligibility for more than $110 billion, outstripping the Congressional/CBO estimate by almost 600%:

Families USA commissioned The Lewin Group to use its economic models to estimate how many individuals would benefit from the new premium tax credits in 2014 and the value of the dollars going to help pay for insurance (see the Methodology on page 12 for more details). We found that an estimated 28.6 million Americans will be eligible for the tax credits in 2014, and that the total value of the tax credits that year will be $110.1 billion.


The new tax credits will provide much-needed assistance to insured individuals and families who struggle harder each year to pay rising premiums, as well as to uninsured individuals and families who need help purchasing coverage that otherwise would be completely out of reach financially. Most of the families who will be eligible for the tax credits will be employed, many for small businesses, and will have incomes between two and four times poverty (between $44,100 and $88,200 for a family of four based on 2010 poverty guidelines). However, because the size of the tax credits will be determined on a sliding scale based on income, those with the lowest incomes will receive the largest tax credit, which will ensure that the assistance is targeted to those who need it the most.

That conflicts with the final CBO estimate that Barack Obama and Congressional Democrats used to argue for ObamaCare.  In his presentation to Congress, CBO director Douglas Elmendorf predicted a cost of only $20 billion on health-exchange subsidies and associated costs.  The Lewin Group, which conducted the study for Families USA, shows that four times as many people will become eligible for subsidies in 2014 than the CBO predicted in March and that the cost will be 550% higher as a result (page 4 of the linked study):
 
•„„ Nationally, approximately 28.6 million Americans will be eligible for these new premium tax credits in 2014 (see Table 1).„

•„ People in working families—those with annual incomes at or above 200 percent of the federal poverty level ($44,100 for a family of four in 2010)—will constitute nearly twothirds(65.6 percent) of the people who will be eligible for a premium tax credit (seeTable 1a).

Morgen at Verum Serum discovered the wide discrepancy and notes that the study wasn’t intended to argue against ObamaCare:
 
The Lewin Group study was commissioned by Families USA, a healthcare reform advocacy group based out of Washington D.C. which is closely allied with the White House and leading Democrats in Congress. Then Senator Obama was a keynote speaker at their annual Health Action conference in 2005 and 2007, and House Speaker Nancy Pelosi opened the 2008 event. Other leading Democrats who have participated at Families USA events in recent years include Hillary Clinton, John Kerry, and Ted Kennedy.

The study appears to be the centerpiece of a major media campaign initiated last month by Families USA to promote the benefits of the health reform legislation. A September 14 press release touts the projected $110 billion in federal subsidies as “one of the largest middle-income tax cuts in history”, but makes no mention of the discrepancy with the CBO’s earlier estimate.
Families USA also published state-by-state estimates by the Lewin Group of the number of people eligible to receive these subsidies and the associated costs. Numerous local media outlets around the country have reported on these figures over the past few weeks.
The CBO’s projection that the healthcare reform bill would reduce the deficit by an estimated $143 billion over 10 years was a critical factor in the enactment of the bill. Democrats lost their super-majority in the Senate in January 2010 when Scott Brown was elected in Massachusetts, and ultimately passed the bill in March only through the use of procedural tactics, and without a single Republican vote in the House or Senate.
The claim that the bill will reduce the deficit continues to be a leading selling point for proponents of reform. Just last month Families USA repeated this claim in a press release criticizing opponents of the legislation. But if the latest Lewin Group estimate is correct the initial 10-year cost of the bill will be significantly higher than what was forecast by the CBO, and would begin adding to the federal deficit as early as 2015.

Morgen also contacted Families USA to get an explanation of the difference, and was told that he made an “apples to oranges” comparison. Why? This survey, they explained, showed how many people would be eligible, while the CBO predicted how many people would actually take advantage of their eligibility for tax credits. This is an odd distinction to make, since the entire idea of the subsidies is to encourage uninsured Americans to buy health insurance through both mandates and generous subsidies. How likely will it be that people will pass on the notion of getting big tax credits to subsidize must-issue health insurance? And if the success rate in applying mandates, higher taxes, and more government authority to the 270 million Americans who are already insured is only 20-25% in getting the other 30 million insured, how is that at all successful?


The deficit projection given by Democrats was apparently based on 75% failure rates to get people into the system; their advocates are busy touting the massive amounts of subsidies in the program that will tip ObamaCare into a deficit exploder in Year 2. Either way this goes, it’s a massive failure.

Dan Mitchell Breaks it Down: It's Simple to Balance The Budget Without Higher Taxes

Even at the current spending levels, tax hikes aren't needed.....





We can simply start cutting vast amounts of federal agencies in jurisdictions outside those granted the federal government by the Constitution.  But as Mitchell puts it, no one in Washington cares about the Constitution anyway.  If we just put a hard cap on spending, the budget would naturally balance itself in five years — with the Bush tax cuts still in place.  The only reason to raise taxes is to allow Congress to spend more … which is the real reason for our massive deficits.

Think We're Headed For a 2nd Collapse? You aren't alone...

In his new treatise published by Encounter for its Broadsides collection, Broadside No. 17: President Obama’s Tax Piracy, Ferrara notes that Barack Obama has chosen the opposite strategy in economic policy from Ronald Reagan. Reagan cut taxes, especially on capital gains and dividends, and broke down regulatory hurdles.  Obama wants not only to raise taxes on those who have the most capital, he wants to make it harder for them to use it as well, quoting a similar analysis by Arthur Laffer:

[W]hen the U.S. economy comes to 2011, the train’s going to come off the tracks. . . . The tax boundary that will occur on January 1 , 2011 tells me that GDP growth in 2010 will be some 6 percent to 8 percent higher than GDP growth in 2011 . A year on year decline from trend of some 6 percent to 8 percent in 2011 growth would represent a larger collapse than occurred in 2008 and early 2009 .

Ferrara includes this helpful and rather cheerless chart to emphasize what Laffer predicts:

On top of that, the government won’t see the revenues it expects, either:

President Obama’s budget projects that his tax increases on “the rich” (singles making more than $200,000 and couples making more than $250,000) would raise $678 billion in increased revenue during the next 10 years. The ObamaCare legislation projected another $210 billion from the increased payroll taxes on those workers for a total of nearly $1 trillion. But these tax increases won’t raise anywhere near the revenue projected. Obama will be lucky if this tax piracy doesn’t result in less revenue. …

The projections of higher revenues from the other tax rate increases all fail to take into account the negative incentive effects discussed above and the counterproductive interactions from all those effects. Since we know from experience that those incentive effects are powerful and real, the result at a minimum will be less revenue than expected, if not less revenue overall.

All of this is based on the assumption that the changes in tax policy sets up no other incentives or changes any behavior.  Of course it does, though, as do even threatened changes.  This is called a static analysis on tax policy.  Ferrara believes that the economy may actually look better than it is this year because capital holders are moving gains and income into 2010 to avoid higher taxes next year.  After we hit the tax boundary, all the incentives go the other direction, and that means negative growth across the board. Essentially, that is why capital is moving about the economy, albeit at a slow pace.  Businesses are shoring profits by selling assets, limiting hiring or sitting on savings.  All of this to be ahead of the potential costs
 
Congress left Washington without addressing the massive tax hikes that will come at the end of the year as the tax-rate reductions of 2001 and 2003 expire.  Absent action on Capitol Hill, those increases will take $4 trillion out of the economy over the next ten years — and even if the lower tax bracket reductions get extended, $700 billion of capital will get redirected from the private sector to Washington.  How do you think that will that impact economic growth in the US?

Dick Blumenthal Stumped On How To Create A Job

Man, I wish I could participate in the CT election this year.....



“Creative policies” don’t create jobs. Creative policies usually interfere with job creation. We’ve seen that clearly enough in this administration.
McMahon (in a shorter amount of time) describes how jobs get created, but also consider the role of government in the process. Government has no direct role in the process. Government has a role in creating an environment in which entrepreneurs can create jobs by doing the following:

• securing a stable, predictable market without bias or tilt
• with a reliable rule of law rather than arbitrary interventions for preconceived outcomes
• utilizing a tax policy that encourages people to keep the fruit of their labor and investments to the greatest degree possible.

This will offend many public servants in the political world, but you shouldn't create laws pertaining to the economy if you don't know squat about business.

Taxes and Small Business Job Creation: How to get it done

From Chris Edwards at the Cato Institute:

A little background first, Taxes and Small Business Job Creation to get you started.

• 
  
  The chart shows that the average top OECD rate fell from 46.7% in 2000 to 41.5% in 2009. If we let the Bush tax cuts expire, we won’t be simply going back to our situation in 2000—the world has changed since then as other countries have adopted more competitive tax rates.

• President Bush cut the top federal tax rate by 5 percentage points, but the average top rate in the 30 OECD nations has also fallen by 5 percentage points since 2000.
• Unless policymakers extend current tax relief, the combined U.S. federal-state top rate will increase from 41.9% to about 46.5%, based on OECD data. That will give us about the tenth highest rate among the 30 OECD nations.
• President Obama’s proposed top federal rate of 39.6 percent is 41-percent higher than the 28-percent top income rate achieved in the late 1980s after the bipartisan Tax Reform Act of 1986.

Chris has many bulletpoints on the case for extending the Bush tax cuts.  Be sure to read them all. In other news, forty-seven Democrats have publicly demanded that Pelosi acquiesce to an across-the-board extension of existing tax rates on capital gains and dividends:

The debate over what to do about the expiring Bush-era tax cuts has focused mainly on income tax rates and the fight between Democrats and Republicans over maintaining the tax breaks for the wealthiest Americans. But in a letter to the House speaker, Nancy Pelosi, 47 rank-and-file Democrats urged Congressional leaders to maintain lower tax rates on dividends and capital gains that are also due to expire on Dec. 31.
“Our fiscal policy should be one that maximizes economic growth and private sector job creation,” the lawmakers, led by Representative John Adler, Democrat of New Jersey, wrote.
“By keeping dividends and capital gains tax rates linked and low for everyone, we can help the private sector create jobs and allow seniors and middle class households to save and invest more,” the Democrats added in the letter.

Note the phrase for everyone.  A hike in capital gains tax rates will discourage both initial investments and turnover in capital, both of which are necessary to expand the economy.  It has to apply to those with the most capital on hand in order to have the maximum effect.  It doesn’t do a lot of good to penalize those with the most potential to expand the economy through new ventures and significant expansion of existing projects and companies. This also extends to income taxes as well, since many business owners file their business income as individual income  (pushing them over the $250,000 limit).  Taking more money from this class of entrepreneur means less capital for hiring and keeping employees, capital investment, and so on.  The exact same arguments apply to income tax rates, perhaps even more so since the very wealthy can usually structure their cash flow as income, dividends, or capital gains depending on which method provides the least amount of loss.

DEMOCRATS AND GOP BATTLE OVER BUSH TAX CUTS

Neil Boortz on Fox News explaining the effects of tax cuts in an economy in his subtle way:



In case you're wondering: 70% of economist favor extending Bush Tax Cuts.  Link to Wall Street Journal article here as the source. Go figure.

Michael P. Fleischer: Why I'm Not Hiring (Rehash on How Businesses Work)

Straight from the Wall Street Journal Opinion page

Why I'm Not Hiring
When you add it all up, it costs $74,000 to put $44,000 in Sally's pocket and to give her $12,000 in benefits.
By MICHAEL P. FLEISCHER
With unemployment just under 10% and companies sitting on their cash, you would think that sooner or later job growth would take off. I think it's going to be later—much later. Here's why.
Meet Sally (not her real name; details changed to preserve privacy). Sally is a terrific employee, and she happens to be the median person in terms of base pay among the 83 people at my little company in New Jersey, where we provide audio systems for use in educational, commercial and industrial settings. She's been with us for over 15 years. She's a high school graduate with some specialized training. She makes $59,000 a year—on paper. In reality, she makes only $44,000 a year because $15,000 is taken from her thanks to various deductions and taxes, all of which form the steep, sad slope between gross and net pay.
Before that money hits her bank, it is reduced by the $2,376 she pays as her share of the medical and dental insurance that my company provides. And then the government takes its due. She pays $126 for state unemployment insurance, $149 for disability insurance and $856 for Medicare. That's the small stuff. New Jersey takes $1,893 in income taxes. The federal government gets $3,661 for Social Security and another $6,250 for income tax withholding. The roughly $13,000 taken from her by various government entities means that some 22% of her gross pay goes to Washington or Trenton. She's lucky she doesn't live in New York City, where the toll would be even higher.
Employing Sally costs plenty too. My company has to write checks for $74,000 so Sally can receive her nominal $59,000 in base pay. Health insurance is a big, added cost: While Sally pays nearly $2,400 for coverage, my company pays the rest—$9,561 for employee/spouse medical and dental. We also provide company-paid life and other insurance premiums amounting to $153. Altogether, company-paid benefits add $9,714 to the cost of employing Sally.
Then the federal and state governments want a little something extra. They take $56 for federal unemployment coverage, $149 for disability insurance, $300 for workers' comp and $505 for state unemployment insurance. Finally, the feds make me pay $856 for Sally's Medicare and $3,661 for her Social Security.
When you add it all up, it costs $74,000 to put $44,000 in Sally's pocket and to give her $12,000 in benefits. Bottom line: Governments impose a 33% surtax on Sally's job each year.
Because my company has been conscripted by the government and forced to serve as a tax collector, we have lost control of a big chunk of our cost structure. Tax increases, whether cloaked as changes in unemployment or disability insurance, Medicare increases or in any other form can dramatically alter our financial situation. With government spending and deficits growing as fast as they have been, you know that more tax increases are coming—for my company, and even for Sally too.
Companies have also been pressed into serving as providers of health insurance. In a saner world, health insurance would be something that individuals buy for themselves and their families, just as they do with auto insurance. Now, adding to the insanity, there is ObamaCare.
Every year, we negotiate a renewal to our health coverage. This year, our provider demanded a 28% increase in premiums—for a lesser plan. This is in part a tax increase that the federal government has co-opted insurance providers to collect. We had never faced an increase anywhere near this large; in each of the last two years, the increase was under 10%.
To offset tax increases and steepening rises in health-insurance premiums, my company needs sustainably higher profits and sales—something unlikely in this "summer of recovery." We can't pass the additional costs onto our customers, because the market is too tight and we'd lose sales. Only governments can raise prices repeatedly and pretend there will be no consequences.
And even if the economic outlook were more encouraging, increasing revenues is always uncertain and expensive. As much as I might want to hire new salespeople, engineers and marketing staff in an effort to grow, I would be increasing my company's vulnerability to government decisions to raise taxes, to policies that make health insurance more expensive, and to the difficulties of this economic environment.
A life in business is filled with uncertainties, but I can be quite sure that every time I hire someone my obligations to the government go up. From where I sit, the government's message is unmistakable: Creating a new job carries a punishing price.


Mr. Fleischer is president of Bogen Communications Inc. in Ramsey, N.J.

For every dime taken directly out of business, it's another dime taken from you.  This will be one of the hardest lessons that most of us will have to learn because we've been conditioned to dislike the system.  It used to be that you get rewarded for doing the right things, but the current administration (and the last) have put out the message that bad behavior trumps all others. 

This is the wake up call.

Schwarzenegger's learned an Important lesson AFTER 7 YEARS

This is just a shame. He had seven years to make this happen for his state, and instead, he's passed laws that punished business through tax and regulation in order to pay for California's bureaucracy and social programs. His message is mixed too, he claims that taxation is the sole problem, but gives examples of overregulation.



The key point here made by Schwarzenegger (and good for him for recognizing it) is that if it takes California eight months to approve a business for opening while only 30 days in Colorado and 22 days in Texas, businesses will invest first in those states and put California far down their list — especially when considering the high taxes California also imposes along with its regulatory burdens.
Take this seriously, our Federal Administration is headed down the same path as California.

How the Government is Funded

The government does not “create” wealth or print money. It takes loans out from its bank. Contrary to popular belief, it’s the Federal Reserve that retains the ability to print money for the United States and is completely separate from the orders of our government. Kind of like how you can’t tell your bank what to do when you are the one asking for a loan. For every dollar printed by the Reserve, our government must pay that back plus interest. When a request is made for more money (printing money) the value of our dollar decreases for every new dollar printed.  (Remember that for later)

Since the government doesn’t make money, how does it pay for the loan? The United States Government obtains its money from 2 sources:

1. Intergovernmental Loans : The following countries own 40% total of our debt through loans (not including interest):
• China (30.7%)
• Japan (20.5%)
• UK (6.2%)
• Foreign Oil (5.8%)
• Brazil (4.6%)
• Russia (3.2%)
2. Public Debt: 60% of our debt is paid for by individual Americans through taxation. Methods of taxation on individuals include:
• Federal Income: the U.S. uses citizenship in addition to residency in determining whether a person's income is subject to U.S. taxation.
• Payroll: taxes taken from every paycheck of every person in the U.S.
• Social Security
• Medicare
• Unemployment
• Corporate Income
• Transfer: Otherwise known as the “death” tax
• Gift: levied on wealth transfers during the transferor's life
• Estate: levied on transfers made after the transferor's death.
• Generation Skipping Transfer: levied on transfers made during life or after death to individuals removed by more than one generation from the transferor, for example, from a grandmother to a grandson
• Excise: Social “sin” tax on items/services like gasoline, tobacco, firearms, airfare and alcohol, tanning, etc

Realistically, the only income that the government does have to pay for the loans through the Federal Reserve and Intergovernmental Loans is through taxation. So the bottom line is that the money comes from us as individual citizens. Hopefully I didn’t lose you.

So let’s break down the different taxes that affect the middle and lower classes, since that’s most of the general public. Side note: currently, 49% of the general public does not pay income tax because they don’t make more than the poverty level. That being said, the average person and business will pay a payroll tax (if they are receiving any paychecks) and excise taxes. What most of the general public doesn’t know (and most politicians and public figures don’t want you to know) is that we are also paying corporate taxes as well. I’ve explained this in my economic model for a business; you can review that at any time.  Businesses are another way for the government to tax the public without directly saying they are taxing the public.

Everytime a politician explains that they will raise the taxes from Corporations, they are in effect, raising taxes on the public as a whole.  Especially if the Company provides a service or product that most of us use, like oil for example.  From the economic business model, we know that a tax is treated like an expense, which means that a business has to compensate for that loss in some way.  Employment, stocks, job benefits and the cost of goods are the choices businesses have to adjust as a result of the added expense. 

Part of the reason why the price of goods go up is because taxes are raised. If any of a companies expenses can't be cut, usually the price of their service does to make up that loss. In addition, when money is printed, the devaluing of the dollar also raises the price of goods since it takes more money to equal the "true" value of a dollar. The consumer, or individual, ends up paying.  Since we make up the majority of the country, its the middle and lower classes paying.

So, in short, our government makes money by taking money from the people they serve.  Businesess are essentially tax collectors by transferring the money they collect from the public to pay the government.  Add the excise taxes and we're footing the bill.  Adding government programs without streamlining or fixing the ones we have, means a new tax.  More funding for broken systems means a new tax.  As the deficit increases, and talk of raising taxes on businesses come up, you now know what that means.

Mind you, I covered the Federal level; remember the State taxes you as well.

Tax Cuts Stimulate Economies...when governments shrink spending

Officials are now concerned about saving the Bush tax cuts after years of saying tax cuts caused this mess.  Despite the evidence contrary to the myth.  Currently, Germany's recovery is attributed to that economic method as well as the sttes of VA and NJ.  But on to the story...

Some Democrats are now arguing forcefully that a delay is a win-win plan that would help the federal budget without hurting the economy.

Wealthy families would not have an incentive to cut back on spending and budget writers could assume an inflow of tax funds in future years, making five- and 10-year budget projections look less scary.
Rep. John Yarmuth (D-Ky.), a member of the Ways and Means Committee, which has jurisdiction over taxes, said some of his Democratic colleagues have discussed the idea out of fear of impeding the nation’s economic recovery.
“I’ve heard some sentiment about raising the rate but not making it effective until 2012,” he said.
During the 2008 presidential campaign, President Obama said he would not extend the Bush-era tax cuts for families earning more than $250,000.
Obama promised that families earning less than $250,000 would not see their taxes increase.
But vulnerable Democrats in Congress are worried about talk of raising taxes, even on the wealthiest families, when the national economic recovery has slowed.
“I think the recovery is sufficiently fragile that we ought to leave tax rates where they are,” said Rep. Gerry Connolly, a freshman Democrat from Virginia.
Connolly said Democrats should not allow the 2001 Bush tax cuts to expire for anybody.

My God.  Ignoring the lie that "families earning less than $250,000 would not see their taxes increase" (current taxes will not increase but the mandate is a NEW tax, and that's one...), let's take a step back.  So there's a limit to taxing the "rich"?  Allowing to tax cuts to expire WOULDN'T increase tax revenue?
I'm being sarcastic......sigh, I'm posting something about how government's work at building revenue, and where the money comes from.  Here's a refresher on how businesses make money in the meantime.

Another Healthcare Surprise...has nothing to do with your health

You're a business. If you make a payment to someone in the course of conducting your trade or business you are supposed to report that payment to the IRS on a 1099 form, with a copy to the person or business to whom you made the payment. The old law was that you didn't have to report payments to a corporation or payments for such things as merchandise, utilities, shipping or other similar transactions.

Now things are different thanks to a little addition from the Senate Finance Committe into the new Healthcare Bill. Starting in 2012 you'll have to file a 1099 with the IRS for any business, person or entity to whom you make payments in excess of $600 during any taxable year. This, of course, would include anyone you hire to do some minor labor during the year ... but would also include any corporation, no matter how big, to whom you make payments in excess of $600.

The average small business prepares less than 1099 forms a year under the current law. Estimates are that these same businesses will have to prepare more than 100 under the new Healthcare. What's more .. the demand for accuracy, and the punishment for incorrect filings will probably send many of these smaller businesses out there to hire accounting professionals. Just what we need; more tax compliance costs.

There is a move afoot to repeal this hideous 1099 mandate. Rep. Dan Lungren, a Republican from California, has introduced legislation that would repeal the new 1099 requirements.


For those of you who want more details on this. This is a good summary of the changes we are facing.

Health Insurance Mandate a Tax after all, who knew?!

Not forgetting that people are not guaranteed to keep their health insurance per the President's foolish promise, the New York Times reports that the Obama administration will defend the ObamaCare mandates as part of its power to tax, despite Barack Obama’s contentious debate with George Stephanopoulos when Obama denied it was a tax at all:

When Congress required most Americans to obtain health insurance or pay a penalty, Democrats denied that they were creating a new tax. But in court, the Obama administration and its allies now defend the requirement as an exercise of the government’s “power to lay and collect taxes.”
And that power, they say, is even more sweeping than the federal power to regulate interstate commerce.
Administration officials say the tax argument is a linchpin of their legal case in defense of the health care overhaul and its individual mandate, now being challenged in court by more than 20 states and several private organizations.

Remember when asked about the mandate, President Obama's response:



That is exactly what the mandates do — regulate individual behavior in an area where the federal government has no jurisdiction and punish those who don’t exhibit favored choices, in this case buying comprehensive health insurance regardless of whether it makes sense for anyone. This court will almost certainly take a dim view of the same attempt that the 1922 court struck down as a gross overreach by the government.

Paul Ryan: A Time for Choosing

Young Gun Rep. Paul Ryan (R-WI) is extremely bright and informed. He is also and an excellent communicator.Recently he appeared on CNBC to discuss his Roadmap For America’s Future.


Via GatewayPundit :
Are we going to reclaim the American idea?
An entrepreneurial economy where you make the most of your life, you can maximize your potential; reinvigorate the principles of liberty, freedom, free enterprise – and defend its morality – or – are we going to abandon the American idea, and become a stagnant European-style cradle-to-grave welfare state, where we drain people of their incentive and will to make the most of their lives, and become more dependent on the government? The President and the people that run Congress are dedicated progressives. They believe that we ought to have the government so much more involved in our lives, with the government – not ourselves – as the determining factor of our destiny. The country must answer the question: do we want an entrepreneurial society that gets the prosperity turned back on in the 21st century, where individual merit and entrepreneurial activity defines the American economy – or – are we going to have more and more people dependent on the government for their livelihoods? That is the fork in the road – and the urgency of the time for choosing is being precipitated by the current direction of our government and the looming debt crisis, driven by the explosion in entitlement spending. We must decide what kind of a country we are going to be in the 21st century.

Keeping Up with the Unemployment Rate

Here we go..

The light blue line represents what unemployment would be had nothing been done to stimulate the economy.  Notice, we stay around 9%.
The dark blue line represents what unemployment would be after the stimulus passed. You know the promise that unemployment would be under 8%, yada, yada....
We went past that percentage.  The maroon dots represent the ACTUAL unemployment data, peaking above 10%.  A lot of factors led to this happening. Geithner's prediction (March 2010) to Congress is that unemployment will not drop to 8% until the 4th quarter of 2012.
Just prepare.  Starting next year, a range of tax cuts expire, new taxes begin and government spending increases.  The IRS reported that they do not have the manpower or resources to enforce the mandate for the new Healthcare bill, new tax to pay for that (via Hotair).  The President has now changed his stance on the mandate and is admitting that it's a tax.  A very hostile environment for economic growth and the unemployment situation.  Numbers are my thing, and I'm tired of being right

Wake Up Call of the Day

Via (Ed Morrissey; Hotair)

Ezra Klein calls this “the scariest jobs graph you’ve seen yet,” and for good reason. The center-left Brookings Institute calculated what kind of job growth it would take to reach pre-recession employment levels, and how long it would take. Brookings takes into account population growth and therefore calculates that in this month, the total employment gap has expanded to 11.2 million jobs. According to their analysis, adding jobs at a rate equal to the best average monthly rate for any one year in the past decade will mean we won’t catch up to pre-recession employment until 2022 (via Newsalert):

Looking ahead, there are several challenges to sustained job growth. The boost to economic activity from the American Recovery and Reinvestment Act is winding down and job losses related to temporary Census workers will continue in July. Further, the four-week moving average of initial claims for unemployment insurance have hit their highest level since March and have remained above 450,000 all year.
The “job gap” underlying these numbers is daunting. In recent months, on this blog, we described the job gap — the number of jobs it would take to return to employment levels from before the Great Recession, while also accounting for the 125,000 people who enter the labor force in a typical month. After today’s employment numbers, the job gap stands at almost 11.3 million jobs.
How long will it take to erase this gap? If future job growth continues at a rate of roughly 208,000 jobs per month, the average monthly job creation for the best year for job creation in the 2000s, it would take 136 months (more than 11 years). In a more optimistic scenario, with 321,000 jobs created per month, the average monthly job creation for the best year in the 1990s, it would take over 57 months (almost 5 years).

If we start in 2009Q4, when Obama argued that Porkulus and his other economic policies started taking effect, the rate of job creation under his policies has been … +39,000. Bear in mind that this includes the massive Census Bureau hires made by the Obama administration in 2010.
 
How about just the private sector? The Brookings calculation isn’t limited to the private sector, so it’s a bit like comparing apples and oranges, but few people doubt that private sector jobs have to return in force to close the jobs gap. The average monthly growth in the private sector during the entire Obama term has been -192,000, and the average growth since the beginning of 2009Q4 has been +14,000. In other words, two-thirds of the growth numbers from Porkulus come from government hiring, not private-sector growth.
 
How long will it take to close the employment gap with a growth rate of +14K in the private sector? It’s flat-out impossible, because we’re digging the hole deeper each month at that rate. Under the failed Keynesian policies of the Democrats in Congress and the Obama administration, 2022 looks like a pipe dream instead of a nightmare.

Guess who pays in the new Financial Regulation Bill

Barack Obama celebrated the passage of the new financial regulation bill yesterday. So did Chris Dodd and Barney Frank. And why not? It’s not as though they’ll have to pay for the new bureaucracies and regulation imposed on the American financial system. For that matter, it won’t be the bankers, either. Who pays? Three guesses, and the first two don’t count:

Big banks facing big drops in revenue are looking to Main Street to make up the difference.
Checking accounts, bank statements, even popping into your local bank branch could carry a hefty cost as the nation’s mega-banks scramble to offset expected damage from the sweeping financial overhaul. The uncertain future has overshadowed otherwise strong second-quarter earnings at JPMorgan Chase & Co., Citigroup Inc. and Bank of America Corp.
All three companies beat expectations this week with profitable results. Yet their stocks tumbled, helping send the wider market sharply lower Friday.

This is so basic that people inside the Beltway never learn it. Costs imposed on businesses get passed to consumers. It doesn’t matter where those costs originate, whether they come from materials, labor, rent, taxes, or regulation. All of those figure into the price paid by consumers for the product or service provided.
 
How will consumers get hit with these new regulations? Expect more fees on more transactions, including paying premium prices for doing business face to face with bank tellers and other employees. Banks will start demanding higher minimum balances and start charging higher fees on accounts that don’t make the cut. Bank of America will lose between $7 and $10 billion just on charges for debit and credit cards alone, money that will get made up by its customers somewhere.
 
That's the big secret that most of the public fails to realize when Democrats continually issue the battle cry calling for raising taxes and fees on big business. Consumers may not pay the entire price, however, at least not directly. If you like your local branch, better get used to the idea that it may disappear. With billions of dollars in new costs landing with a thud on their balance sheets, we can expect to see branches close up entirely — and the jobs that exist disappear along with them.
 
In short, the bill will erode consumer buying power, harm retirement accounts that rely on the performance of financial institutions, and create more unemployment. What exactly did we get in return for all of this?
 
If you want a refresher course on business, I've done the legwork.  Pay attention!

More from "Recovery Summer".....13 year low in Mortage applications

Thursday, the Associated Press reports that mortgage applications hit a 13-year low last week despite low mortgage rates. Even refinancing applications dropped significantly:

Demand for loans to purchase U.S. homes sank to a 13-year low last week, and refinancing demand also slid despite near record-low mortgage rates, the Mortgage Bankers Association said on Wednesday.

Requests for loans to buy homes dropped 3.1 percent in the week ended July 9, after adjusting for the Independence Day holiday, to the lowest level since December 1996, the industry group said.
Refinancing applications fell 2.9 percent, and the mortgage market index that reflects total loan demand also fell 2.9 percent.
Average 30-year mortgage rates edged up 0.01 percentage point to 4.69 percent, but were near the record low of 4.61 percent set in March 2009, based on MBA records dating back to 1990.

Now that the artificial stimuli have ended, most of those who intended to buy have already done so in order to take advantage of a useless taxpayer subsidy of the sales. There remains only a historically small demand among those who either didn’t qualify for the tax break or didn’t need it, or perhaps a cadre of buyers who think that Congress will create yet another subsidy for sales and are waiting them out.

Remember when the Obama administration announced its plan to spend billions of dollars to prevent foreclosures? Again, it’s the Associated Press informing people today that there will be more foreclosures in 2010 than there were in 2009, breaking records again:

More than 1 million American households are likely to lose their homes to foreclosure this year, as lenders work their way through a huge backlog of borrowers who have fallen behind on their loans.

Nearly 528,000 homes were taken over by lenders in the first six months of the year, a rate that is on track to eclipse the more than 900,000 homes repossessed in 2009, according to data released Thursday by RealtyTrac Inc., a foreclosure listing service.
“That would be unprecedented,” said Rick Sharga, a senior vice president at RealtyTrac.
By comparison, lenders have historically taken over about 100,000 homes a year, Sharga said.

None of the stimuli and the rescue plans worked, because none of them addressed the core problem: joblessness. Without jobs, people lose their homes no matter how much the government intervenes to stop it. Until we get people back to work, these programs are simply futile. A homebuyer tax break doesn’t help someone without a job qualify as a buyer, and restructuring plans for existing mortgages can’t help an unemployed person make a mortgage payment. We need to shift gears quickly to reduce the massive uncertainties created by the radical Democratic agenda, reduce taxes and the regulatory burden, and get capital working in the US again so that we have employment at a level where foreclosures return to their normal level. Only then will housing markets stabilize.

Help to pass HR 25 (the FairTax): Replacement to our tax system (July 2008)

The FairTax Book (Synopsis)
Saying Goodbye to the Income Tax and the IRS
By Neil Boortz and John Linder

1. The History of Our Tax System
• 1776 - No National Taxation, Only Local Govt - Alcohol, Carriages, Consumer Items (Sugar and Tobacco)
• 1812 - Luxury Items Taxed due to war of 1812
• 1817 - Tax system abolished, Govt Funded by Tariffs on Imports
• 1861 - Union passes bill assessing 3% income tax on earnings btwn $600-$10,000 and 5% plus and inheritance tax on earnings +$10,000 (+$166,700 today) – Confederate states adopted similar system
• 1872 - Feds remove tax system after Civil War due to the displeasure of American Citizens. Returned to taxing tobacco and alcohol
• 1894 – After Panic of 1893 (Railroad and dependant banks fell into receivership) 2% tax on income +$4,000/year (+$50,000 today) – State and local govt officials are EXEMPT from this tax – became law without signature of President Grover Cleveland who found it unconstitutional. This split the govt into the Democratic (pro tax) and Republican (anti tax) parties
• 1896 to 1908 – public told the income tax would “soak the rich” by Democrats and would leave middle class alone. Joseph Bailey (D) hoped to show Republicans as hostile to poor by introducing a bill calling for the income tax. Liberal Republicans voted for the bill in hopes to derail it with the condition that an amendment had to be passed as a result of an amendment to the Constitution. Democrats pushed idea that any income tax would be directed ONLY at the wealthy and that ordinary Americans would be left virtually untaxed (tobacco and alcohol).
• 1913 – 16th Amendment Ratified with very little objection
2. …Then Came Withholding
• The 1913 law that established the income tax also allowed the federal govt to withhold taxes from paychecks
• 1917 – American citizens complained to their representatives and a law was passed barring the practice of withholding taxes
• Taxpayers would calculate the full amount of income taxes they owed for the previous tax year and write one check to the IRS in one lump sum. (This meant no Medicare, social security, etc was withheld for every paycheck during the year)
• Withholding was a means to camouflage the actual tax burden pressed upon the American people and under the guise of patriotism and propaganda during World War II, the funding needs of the federal government could no longer be sustained by the wealthy, everyone had to chip in.
• 1942 – Walt Disney creates “The New Spirit”, a cartoon, at the urging of the Treasury Department, in which Donald Duck telling the public “it is your privilege to help your government paying your tax and paying it promptly.”
• 1943 – The Ruml Plan (Current Tax Payment Act of 1943) was created to gain more supporters of the withholding tax. If individuals supported the plan, they were told they would not have to pay taxes for 1942 in March 15th, 1943. In reality, during the course of the year of 1943, they would be paying the previous year’s taxes paycheck by paycheck. 
• 1970’s – President Jimmy Carter attempts to have withholding extended to interest and dividend earnings. The public cried foul and the effort failed.
• 1982 – The interest and dividend idea was brought up again during President Ronald Reagan, in which Congress authorized the additional withholding measure. It was repealed a month later due to public outcry
3. The Myth of Corporate Taxes
• Myth : We pay less as individuals when taxes are transferred to businesses and corporations
• In reality, corporations have never paid or ever will pay taxes. The burden will always fall to the individual
• Businesses and corporations merely collect taxes from individuals and pass them on to the government. Taxes are paid from wages, and in America, only individuals pay taxes
• For example, a fictional company, Gilco, has 100 shareholders, and fifty employees who make 200 widgets per year. The company sells the product at $100,000 each. Gilco’s gross revenues in $20 million per year. It costs the company $18 million a year (labor cost, federal taxes, marketing and production) to make the widgets. This leaves $2 million in profit.
• If the federal government decides to create a 5% corporate tax increase, this means that Gilco will owe $100,000 more in federal income taxes where will that money come from?
1. It can come from the $2 million profit. This profit, though, belongs to the shareholders who, when receiving their dividend checks will see a decrease. The corporation hasn’t paid the tax in this scenario
2. Raise the price of widgets to cover the tax increase. The customers end up paying for the tax increase. The corporation doesn’t pay here either
3. Cut costs of running Gilco to cover the additional tax. This will most likely mean either cutting employee benefits, lay off some employees and increase productivity on the remaining employees. The individual employee ends up paying for the tax increase. The corporation pays nothing.
4. Cut costs of running Gilco to cover the additional tax. You can buy cheaper components to make the widgets. Cheaper components come from Company X who can afford to sell cheap because they’ve had to cut back by paying their employees less or cutting benefits. Your supplier takes a beating and passes it down to their employees and suppliers. The corporation doesn’t pay here too.
4. Our Current Tax Code: The Cost of Compliance
• 52.8% of tax compliance costs are paid by businesses, 2.8% are paid by nonprofit organizations, and 44.4% are paid by individual American citizens (Remember that the taxes paid by businesses come from the individual)
• Opportunity Cost – money lost as a result of business decisions that prevented you from exploiting certain opportunities
• In 2002, $950 billion in individual income taxes were collected from the government by withheld taxes from individual paychecks. Should the taxpayers had been able to keep that money when it was due – and invested that money in T-bills – nearly $24 billion dollars in interest payments could have been pocketed by the American taxpayers. The $24 billion is the opportunity cost.
• Under the FairTax, there would be no income tax, meaning that the estimated $950 billion collected from the taxpayers paychecks would have stayed in the hands of those individuals who earned it.
5. The Embedded Costs of Our Tax Code
• When a consumer item is purchased (bread, car, house, eggs, etc.) part of the cost goes to the people who had a hand in producing and selling you that item. Part of that cost is given to the Federal Government as taxes
• 22% of the price paid for a consumer item represents embedded taxes. That 22% of what you spend supports the Federal Government in addition to the money taken out of your check in income taxes and payroll taxes!!
• The embedded tax exists also in services as well (cable, electric, doctors visits, etc)
• Under the FairTax, only 23% of the price paid for consumer items and services will go to the government, but that is all. There wouldn’t be anything withheld from income and payroll taxes because there would be no taxes!
6. Bringing American Business Back Home
• American corporations are moving overseas to escape the punishing tax structure here in America, acting on the best interests of their shareholders, employees and customers.
• For example, if DaimlerChrysler were headquartered in the United States, they would face a 67.5% tax rate, while the actual company is located in Germany, pays 44%. Under the current tax system, moving a corporation overseas is better for the stockholders and customers. Unfortunately, the American employees would be more likely to suffer.
• The FairTax would completely remove corporate income taxes, thus eliminating the need for American businesses to move out of the country. This will also give incentive for foreign companies to move into America. The end result would be more jobs, better opportunities and higher wages for the American individual.
7. The Birth of the FairTax
• • Began by a group of Americans who formed the Americans for Fair Taxation (AFFT) whose goal was to develop a new tax system that would raise the same amount of revenue for the government as our current tax system, but would be less intrusive, abusive, coercive and corrosive. This is after researching other tax systems (the flat tax, VAT (value added tax) and consumption tax)
• The FairTax (www.fairtax.org) is a method of taxation that would be totally voluntary, that would allow citizens to pay what they choose, when they choose, by how they choose to spend their money. It is a national sales tax on goods and services sold at the retail level.
8. The FairTax Explained
• The Fairtax will repeal (remove)
• The individual income tax
• The alternative minimum tax (AMT)
• Corporate and business income taxes
• Capital gains taxes
• Social Security taxes
• Medicare taxes (along with other federal payroll taxes)
• The self-employment tax
• Estate taxes
• Gift taxes
• The FairTax is not a Value-Added Tax (VAT) as in Europe. VATs are added at every stage of production and hide tax costs in the price of goods. In contrast, the FairTax is levied once, and only once, at the retail cash register and is printed on the receipt for all to see.
• The FairTax is a replacement for, not an addition to, our current federal taxes. It is not at tax cut nor is it a tax increase.
• The FairTax abolishes all taxes on income. Consumers will way an embedded personal consumption tax in the amount of 23% on all goods and services sold at the retail level. (This also includes doctors visits, dentists, lawyers, accountants, and internet sales) The 23% tax will not be imposed on the sale of used or previously owned items (including used cars, homes). It is a ONE time tax on new items.
• True, this is a 1% increase to the current embedded taxes for our goods today. Yet consider this: if a company doesn’t have to pay a federal tax on their product, they could sell that product at the same price and make a profit. Because of competition with other products, prices will eventually decrease because one company will find that they can get more business will lower prices. Eventually, the other companies will follow suit. It is estimated that the price of goods and services may fall 20%.
• The FairTax is revenue neutral. This means the sales tax rate will be set to ensure that the federal government, and all the programs within it, will receive from the national retail sales tax exactly what they have been receiving under the current tax system. It will also treat government purchases as taxable purchases. State, local, and federal government purchases will also pay the tax.
• The FairTax will eliminate the tax burden on the middle- and lower-income Americans, allowing them to save money and judge for themselves when and how they’re comfortable making taxable purchases.
• The FairTax allows everyone to be treated fairly because it provides that the federal government will send every family in America a prebate (advanced rebate) to cover taxes on the basic necessities of life. Every head of household will receive this prebate every single month, to reimburse every American family for the sales tax that family will pay on all spending up to the federal poverty level, plus extra to prevent any marriage penalty. The end result? Low-income and many middle-income families would be exempted from paying the national retail sales tax on all or most of their spending.
9. The FairTax Prebate: The Key to Fairness
• The Earned Income Tax Credit (EITC) was passed to relieve lower-income Americans of the tax they pay for Social Security and Medicare. This also includes the income tax paid for our defense, parks, courts, FBI, housing, education, etc. The budget to pay for this (which comes from American taxpayers) has grown to $38 billion.
• Under the FairTax, the poor—along with everyone else—will no longer have Social Security or Medicare taxes withheld from their paychecks. Whatever they earn, they get on payday. This would mean an immediate 25-30% increase in take-home pay.
• 22% is already inflating the retail sales prices we all pay in the form of embedded taxes buried in the cost of all consumer goods. The price of goods will fall 20% on transportation, food, clothing, and shelter once the embedded taxes have been removed. (I.e. if groceries cost $45 a week under the current system, once the 22% embedded tax has been removed, the price falls to $35.10. Add the FairTax 23% and the groceries would cost $45.58—a few pennies more. But remember, you also get to take home 100% of your paycheck, does this sound bad to you?)
• The FairTax prebate (monthly check from the government towards basic necessities) will be based on the government’s published poverty levels for various sized households. This number would be updated every year to keep up with inflation. (i.e. in 2005, a household of a married couple with two children would be granted a consumption allowance—a government estimate of what a household of that size would spend for that year to buy the basic necessities of life for that family—of $25,660. The sales tax on this amount would equal $5,902. This amount would be rebated back to the household in 12 equal monthly installments of just under $492.) Therefore, the tax that would have been paid for the basic necessities of life for that year would be returned during the course of that year (meaning no tax for the goods needed to survive!)
• The purpose of the FairTax prebate is that no American has to pay the FairTax on the basic necessities of life. This covers all Americans, poor and rich alike, unlike our current tax system eliminating the need for class envy.
• To prevent scams on the system, the name and social security number for everyone under your household must be provided every year to collect the prebate. This includes households as small as one person up to however many you can claim as dependants.
• In the end, everyone would receive 100% (given that the individual state governments adopt this system, otherwise, its more like 90-95%) of their paychecks and a prebate check every month in addition, and lower prices on goods and services.
10. Underground and Offshore Economy…Taxed at Last!
• There is a “shadow economy”—the world of legal activities that are not reported for tax purposes. Add to this figure the “underground economy,” the world of illegal activities—drug dealers, hookers, and the like—and the magnitude of the problem becomes clear. In 2000, a survey concluded that our shadow economy counts for more than 10% ($355 billion) of America’s GDP that isn’t getting taxed
• The problem is, this loss is made up by the people who pay their taxes. Each of the 150 million American taxpayers pays an average of $2,000 extra every year to the IRS to cover the missing revenue
• Trillions of dollars are sent into offshore financial centers (OFCs) in places like Switzerland and the Cayman Islands:
• OFCs are used to set up international business corporations (IBCs), which are popular (tax and regulation free) vehicles for managing investment funds
• Insurance companies use OFCs for reinsuring catastrophic risks, which often have lower actuarial requirements and capital standards.
• Wealthy individuals use OFCs to protect assets and for tax planning
• Foreign wealth is often kept in OFCs, to be protected from weak banking systems Tax evasion and money laundering schemes are difficult to track down in OFCs
• With the FairTax in place the trillions of dollars in those OFCs would flow back home to America for the very reason they found themselves offshore to start with. Even more so, trillions more from foreign nations would flow into the United States because of the same reasons.
• The shadow economy, under the FairTax, would be paying into the federal tax system every time a purchase is made in the United States. Illegal immigrants and foreign visitors would even be contributing to the tax system under the FairTax.

In closing, there are an additional 6 chapters which covers the main opposition to H.R. 25 (The FairTax bill), IRS horror stories, a question/answer section, and a chapter on what you can do to get this passed. I urge all who’ve read this to spread the word, talk to your representative, newspapers, friends and family and get this movement going! The website for more information is http://www.fairtax.org/ .