Why FairTax is Failing

FairTax is a great idea, but misses the target due to a serious misunderstanding of what actually motivates both individuals as well as corporations, not to mention Congress.

Before I begin, let me introduce myself so you’re aware of my credentials and will focus on what I have to say.

I am a retired U.S. Air Force officer, a systems/business analyst and project manager with three degrees in business, two masters, two in the sciences, with two concentrations and two summa cum laudes.  Specifically:

  • Master of Science in Management with a concentration in Project Management (summa cum laude)
  • Master of Business Administration with a concentration in Technology Management (summa cum laude)
  • Bachelor of Science in Finance, Insurance, and Business Law

I’ve long eyed the FairTax as a much more sane approach to taxation than the current IRS Form 1040 and its complex and unnecessary rules. However, I’ve noticed a major flaw with FairTax that resulted in most people, including members of Congress, dismissing the FairTax approach out of hand.

The flaw is that FairTax attempts to replace all tax revenue with the FairTax instead of just individual income taxes. The difference between 23% and 10% is the difference between failure and success, between people saying, “No, 23% is way too much; I don’t way to pay businesses’ taxes for them!” and them saying, “10% for my own taxes sounds reasonable.”  23% is also in the same range as the VAT (value added tax) found in most socialist countries, a definite turn-off for most Americans and members of Congress.

The flaw is one of perception, not only the public’s perception of the program but also your perception of how people will react. As both a leader in the Air Force as well as a manager and summa cum laude student in Management Science, I know one axiom to be true above all others:

People rarely act in either the best interest of themselves, their employer, their society, or their country.  Instead, they tend to act in ways which them feel good about themselves and their efforts.

In fact, if you watch a 10 min YouTube video entitled Dan Pink: Drive, you might understand what I’m saying.

For kicks and grins, and to better my understanding of personal income taxes, I went through Jackson Hewitt’s Tax Prep Course this Fall.  Tax law is not easy. There’s a reason CPA’s specializing in personal tax returns are rare.  I was a corporate accountant before I joined the Air Force.  That was difficult enough.  Personal income taxes are not easy in the least.

The problem with the U.S. Tax Law is that it centers around the Form 1040, which itself is inherently flawed in its complexity, primarily due to the myriad of rules, alternatives, and exceptions behind many of its entries. Even the complexity of its entries are the result of everyone and their brother crying “I want tax relief” and then getting some in the form of even more complexity.

America’s GDP is more than $18 Trillion. The Fair Tax would simplify that greatly. Although almost half (47%) of all 2016 federal revenue comes from individual income taxes, the total revenue is $3.3 Trillion, thus, 47% of that is $1.5 Trillion.

2016 Federal Budget
2016 U.S. Federal Budget (Click to Enlarge)

Individual income taxes provided $1.5 Trillion, roughly 10% of that $18 Trillion.

Thus, instead of taxing individuals such that hundreds of millions of people must spend hours and sometimes days filling out complicated forms, why not instead just tax all goods and services 10%? That 10% would come to $1.8 Trillion, thereby ELIMINATING the need for personal income taxes altogether, not to mention saving hundreds of millions, if not billions of man-hours wasted by Americans filling out their taxes.

This approach is a modified but far more palatable version of the FairTax both to individuals as well as to corporate America.

I agree with your main emphasis: Not only would this save BILLIONS of man-hours of human effort, but it would also create a huge incentive for Congress to focus on actual overall economic health of our nation. Finally, it would tax everyone, as everyone consumes goods and services, but it would tax the largest consumers (mostly the rich) the most. Who can argue that this isn’t fair?

Even with a 10% sales tax on all goods and services, and used only to eliminate all personal income taxes while leaving the existing corporate tax structure intact, a FairTax 10 approach would still be doomed to failure without one absolutely critical component:

A 28th Amendment.

If enacted, the 28th Amendment would read as follows:


Section 1.  The sixteenth article of amendment to the Constitution of the United States is hereby repealed.

Section 2.  Congress is hereby prohibited from either laying or collecting  any tax on personal incomes, from whatever source derived, without exception.

Section 3.  Congress shall collect 10% on the sale of all goods and services.

Section 4.  Congress shall be prohibited from repealing or modifying this amendment for a period of 100 years from the date of its acceptance, except that Congress may reduce the tax percentage one time, to zero (0%) should it no longer be economically necessary to continue taxing goods and services.

Only an Amendment to the U.S. Constitution would keep that 10% tax on goods and services at 10%.  Without it, Congress would all too quickly tap into it and raise it to a level similar to that of socialist nations.  The “100 years” restriction is similar to another Constitutional time restriction.  Do you, the reader, know which one?  🙂

Alas, FairTax’s approach was flawed because it thought people would fall in love with the idea of not having to pay a personal income tax and abolishing the IRS.  While attractive, it was never perceived as credible.

FairTax should have first determined what both individuals and corporations would prefer and then work within that framework, alongside both people and corporations, to change America’s tax code for the better, instead of going for the whole enchilada and failing.

Had FairTax considered what motivates both people and corporations, we might have the modified version of the FairTax in place in 2018 instead of the GOP tax plan, which is little more than a good tweak of the tired old system.

LGBTQ – Should We ‘Live and Let Live’ or Should We Stand Firm?

A friend of mine stated this morning on Facebook, “As for the LGBTQ crowd, I have a ‘Live and Let Live’ policy.  We all should follow that.”
I’m sorry, my friend, but I follow God of the Bible, and Jesus Christ, who showed us the way. In particular, with the adulteress at the well, he loved her (saved her from being stoned to death, no less!), but he did not allow her to persist in her sin: “Go, and sin no more.” Our Bible: “Male and female he made them,” yet the LGBTQ crowd wants us to believe there are a dozen or more genders? Phooey. I do not accept that because God’s word says that’s false.  It also says homosexuality is a sin, an “abomination before the Lord” in Romans chapter 1, clear as day.  Unless, apparently, you’re blinded by sin.
I accept the Bible.
Along with the Bible, I also accept the Constitution: “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof…”
In highlighting and denouncing the sins of this small segment of society who demands that We the People pay for their elective medical care, I am freely exercising my religion, one which God’s word clearly indicates what we all are to do:
“In the first four chapters of 1 Corinthians, Paul introduces a shameful problem in the church. The Corinthians proudly attach themselves to certain leaders, whose teaching seems to disclose a “wisdom” not known or taught by other teachers, and certainly not by Paul or his fellow-apostles. These cliques and factions are undermining the unity of the church and are a denial of the gospel of Jesus Christ. In chapters 5 and 6, Paul calls attention to two other problems plaguing the church: immorality and lawsuits.
“Chapter 5 is not actually about the immorality of one church member, as much as it is about the pride and passivity of the entire church in response to this sinner. It is not until the end of chapter 6 (verses 12-20) that Paul exposes the evil of immorality.”
“Live and let live” is a secular — and sinful — approach to the problem, which is the fact that that the LGBTQ group not only wants everyone to adopt the “live and let live” mentality towards them, but they want us to believe that it’s somehow good.
It is not good. Adultery is not good. LGBTQ is not good. Abortion is not good. Murder is not good. They are ALL SIN.  Not only does the Bible state, “hate that which is evil; cling to that which is good,” but I refuse to allow my tax dollars to pay for evil i.e. their indulgence in sin.
“Live and let live?” Phooey! That’s how Rome fell. I worked too hard supporting and defending my Constitution against all enemies foreign and domestic to allow America to fall to either class of enemies, especially while being being aided and abetted by foolish Americans who are suckered into a “live and let live” attitude, much less an, “Oh, let’s help them!” attitude.
True, this is America, and people are free to sin against themselves and god it they want to, even with other consenting adults. If they want to engage in evil, then they can damned well create pools of funds out of their own pockets to pay for their sin, but I’ll be damned if I’m going to allow them to further their evil with my tax dollars or parade their sin around our nation’s public schools as “good” when God Himself says “sin is evil.”
That’s not only foolishness, but it’s how countries fall, how they are rotted from within.
Not on my watch.

GE Pays No Taxes? Not So Fast! They Most Certainly DO Pay Taxes

The “GE pays no taxes” mantra is rock-bottom brain-dead stupid, fit only for those who don’t understand the first thing about corporate taxes.

Let’s see if we can make some headway on this:

Rule #1: If you make profits, you pay taxes.

Rule #2: If you do not make profits, you do not pay taxes.

Rule #3: Corporations are allowed to carry forward losses for several years. That way, their tax payments reflect their mean (average) net profits rather than their peak net profits.

That should be simple enough. Now, let’s get a bit more complicated, this one from an article in Forbes:

So how to make sense of GE’s taxes? The outcry seems to focus on the $5 billion in profits GE made in the U.S. Now if GE were to pay the 35% statutory federal corporate tax rate on that, it would come to $1.75 billion. Yet, as the Times trumpeted, GE has recorded a $3.25 billion tax benefit for the year on its U.S. operations. It’s important to understand that this “benefit” is not a refund (which is why the Associated Press should be doubly embarrassed for being fooled Wednesday by a bogus GE press release concocted by the Yes Men that said the conglomerate intended to return its $3.2 billion tax “refund” to the U.S. Treasury). It just represents an amount GE will balance out against other tax obligations.

But why does GE get this benefit? Simple: its finance arm, GE Capital, lost a lot of money during the financial meltdown (roughly $30 billion) and it’s still carrying those losses forward and deducting them from current income. As GE spokesman Gary Sheffer wrote in his response to the Times story: “Without these financial crisis losses at GE Capital, GE’s tax rate would have been near the average of other multinational corporations.” He added, “In short, when you lose money, you don’t pay taxes.”

There. Does that clear up some things? If not, I suggest you take classes in corporate finance or accounting.


U.S. Tax Code: BROKEN – Time for the Fair Tax!

High Time for the Fair Tax:  Keep Your Entire Paycheck!

 – Everyone Pays His or Her Fair Share
 – Pay Tax Only on What You Spend
 – The IRS is No Longer Necessary


Before we examine what is meant by “Fair Tax,” let’s first take a look at why it’s necessary, as well as how it would greatly benefit our nation:

Acording to National Taxpayer Advocate Nina Olsen, “The U.S. Tax System’s most serious problem is the 4-million-word code’s excessive complexity that makes it tough for taxpayers to comply with and difficult for the government to administer.” – Source.

The cost to both individuals and corporations is immense:  $168 Billion in 2010.  Most individuals aren’t equipped to handle it, and many opt out, falling off the grid, or worse, winding up behind bars.  Corporations divert a large chunk of their profits to minimize their tax liability, even to the point of reorganizing themselves around the tax code instead of focusing on productivity.

Our tax code has grown way beyond a leash or muzzle.  It’s become a ball and chain, so much so that most corporations have expanded operations into other countries simply because it’s far cheaper.  Those countries benefit, while Americans lose.

Taxes are are necessary to pay for services common to the community as a whole.  When the burden of taxes becomes too great, however, they are a disservice to the community as a whole.  Then the act of merely calculating the right amount of tax becomes so complicated that it costs a significant portion of a corporation’s or individual net income, the system is broken.  It has become a “parasitic expense,” one that doesn’t contribute anything towards increasing productivity or revenue, or even the welfare of the community as a whole, but instead merely sucks the life blood out of human effort.

Our Constitution mentions the word “tax” six times, four of which are relevant to the Fair Tax concept:

  1. “Representatives and direct Taxes shall be apportioned among the several States which may be included within this Union, according to their respective Numbers…” – Article I, Section 2
  2. “The Congress shall have Power To lay and collect Taxes, Duties, Imposts, and Excises, to pay the Debts and provide for the common Defense and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States…” – Article I, Section 8
  3. “No Capitation, or other direct Tax shall be laid, unless in Proportion to the Census or enumeration herein before directed to be taken.” – Article I, Section 9
  4. “No Tax or Duty shall be laid on Articles exported from any State.” – Article I, Section 9.

If you thoroughly examine each provision in the Constitution against what is happening today, you’ll see that personal income tax is NOT Constitutional, regardless of how the Supreme Court twisted their ruling to make it sound otherwise.

If you examine how much people and corporations are actually taxes (net effective), you see there’s plenty of room for the Fair Tax to replace all other taxes and provide the same measure of income to the federal government.

If you consider the cost of implementing the current tax code, you’ll find that the IRS budget of $11.8 billion alone is a mere drop in the bucket compared to how much money people and businesses spend on handing taxes.  When you realize the entire tax industry is parasitic, that is, it doesn’t actually generate wealth at all, but merely shifts it one segment of society to the other, you’ll realize it isn’t healthy at all.  It boils down to a protection racket.  Pay tax people to keep you out of trouble, when the real issue involves such a grossly over-complicated tax code in the first place.

If you examine the federal budget for other parasitic, non-wealth-building waste, you’ll find at least one third of the federal government’s $3.504 trillion is parasitic in nature.  That is, it does little, and adds nothing to the overall health or wealth of our nation.

If we ever did implement the Fair Tax, a mandatory cap would be required.  That’s necessary, given the Congressional tendency to add “just another half a percent…”  Well, that’s 10% in 20 years, so how about a big fat NO and a max at 10%.  If they can’t make do with 10%, they’re not doing their job.  Fire them and give someone else a chance.

Open Letter from We the People

We the People of the United States of America have serious grievances against Barack Hussein Obama.  These grievances range from his own self-admitted ineligibility for the office of the Presidency to the many high crimes (felonies) and misdemeanors he and those he has appointed have committed while in office, most of which are grossly un-Constitutional, and several of which have directly or indirectly resulted in the unlawful deaths of Americans both at home and abroad.

This letter requires action from all of us.  A fellow patriot put this letter together for all of us to distribute on our blogs,Facebook walls, e-mail and mailing lists, and to send to your elected representatives at both the State and Federal levels via e-mail, fax or snail mail. Tweet a link to this page, along with terms such as “Obama impeachment.”  Forward it to your local and national news agencies, demanding they cover the story.

Together we can make a difference. So lets get it done!

To Whom It May Concern:

We The People find ourselves in a very uncomfortable place and we look to you as the representatives of our country for the answers we seek. Please know that there are many millions who share these feelings, and if the elections had been conducted in a fair and non-fraudulent manner, the results would have reflected our concerns.  Below, you will find a collaborative list of questions, and we would greatly appreciate receiving your answers in a timely manner. We will make our decisions accordingly, as this is still the land of the free, and our country’s future is at stake.

Why with wide-spread voter fraud, can this election not be contested? Why are we bound to an agreement reached in 1981?

On Benghazi:

Why were security teams actually removed in the months and weeks leading up to 9/11 when the violence was escalating and the people on the ground said more was needed?
We can prove Obama had knowledge of the attack, as well as the resources to send for protection but he still denied vital help. These are impeachable offenses. What is your stance on this? Do you agree that this President needs to be impeached? What are you doing about Benghazi?

Regarding Obamacare:

There is so much that is being enacted behind closed doors. We request that there be no more secrets. We should be able to know the stipulations in their entirety and We the People should be able to vote on it. We need the specifics. The doctors have no idea how they will be paid/reimbursed after January. The hospitals are flying blind, unsure of what they will be fined for. It is hard to run a business, as many know, without a business plan. Do the States have the right to reject Obamacare? We need specifics about ALL taxes we will incur, including 1% on every banking transaction on all bank accounts. We also require specifics on the Over 70 Group.

Concerning our Military:

How do you feel about Obama firing 20,000 Marines so he can give $6 billion U.S. taxpayer dollars to Muslims for ‘green’ energy’? What accountability does this President have? How about the debt ceiling? Raising it will give this Administration more funds to waste on our demise. Is the House going to hold true to their promises?

The FCC is directed by five commissioners who are appointed by the President of the United States and confirmed by the U.S. Senate. This is a serious problem, as you know. Do states have the right to secede, as Texas is in process of attempting to do now?
Finally, we have condensed the list of grievances down to those we feel are most important and would like answers to the following, as to what is being DONE to remedy these atrocities in our country.

Dept. Of Interior, Green Energy Fraud…. what is being done here?

Fast and Furious- what is being done about this? Gun running?

Seal Team 6 shot down
College transcripts of Barack Hussein Obama
Record number of Generals, Admirals retired.
Give-away of Alaska lands to Russia
Retirement of 20,0000 marines
Give away of drilling rights in the Gulf
Muslim Brotherhood infiltration into the White House
Hamas training bases on the border
Surrender of sovereign lands in Arizona to drug Cartels
Drone attacks on American Citizens, arrests of our troops on the battlefield for taking out targets of opportunity to appease host Muslim nations…. and the lies about Libya during the NATO operation…

Why do we have a Taliban lawyer in the Justice Dept?
NDAA, and the UN making decisions AGAINST the U.S. Constitution, most notably with the NDAA’s “indefinite detention of U.S. citizens” in violation of Constitutionally-mandated due process of law and the U.N.’s Gun Ban Treaty, a direct violation of our 2nd Amendment rights.
The use of the Foreign Desk to buy our own debt to generate fees for Goldman Sachs.

What is the status of this process?  Why has Congress refused to bring charges against the criminal currently sitting in the White House?  Why would we let anyone like Obama get away with committing such a large number of high crimes and misdemeanors, most notably of which was his lying about his country of birth, a fact which he later admitted, in public“First of all, it’s true, I’m not an American.  I was not born in Hawaii.  I was not born in the United States of America.  I come from Kenya.” – President Barack Hussein Obama, shortly after he was elected in 2008 (short link:  http://youtu.be/edyJ4oS8kz0).  This self-admitted fact alone is a gross violation of the Constitutionally-mandated requirement to be President of the United States of America and grounds for immediate removal from office:  “No Person except a natural born Citizen, or a Citizen of the United States, at the time of the Adoption of this Constitution, shall be eligible to the Office of President…”Article II, Section 1.

I realize this is a lengthy list. However, it does not even cover an eighth of our concerns, and was difficult to condense. This will be widely publicized, along with your response.

The American people need and deserve answers, and we would appreciate you taking the time to give them to us. We ask, however, that your responses be clear and concise, and that you spare us from a long drawn out diatribe that has little to do with the questions being asked, as we will take that as you do not think we are important enough to take seriously, and act accordingly with our support!

By the way, Speaker Boehner, having your flunkies hang up on me mid-sentence when I called your office to ask you or your staff just one of these questions is totally unacceptable.

Thank you for your time and attention to this urgent matter! We believe that you take these issues as seriously as we do, and for that, you have our deep respect and heartfelt gratitude.

The American People