Wednesday, June 25, 2014

Recent Posts and Articles about the FairTax

Repeal the 16th Amendment

The IRS is an Irredeemably Corrupted Organization and it is Time for it to Go Away

Times of Trenton Letters to the Editor - June 23

Letters - scroll down to "IRS ABUSES"

The immigration question neither candidate will answer, and 4 other keys from Tuesday's Palmer-DeMarco forum - scroll down to takeaway #4

Thursday, June 19, 2014

The Latest Trend - U.S. Companies Acquiring Overseas Companies and Relocating Overseas


The latest trend in Corporate America to avoid paying taxes to Uncle Sam is to acquire or merge with a company headquartered in corporate-tax friendly countries, allowing them to and relocate the U.S. headquarters overseas to that country. In a sense, U.S. corporations are acquiring tax havens.

The latest to do this is Medtronic, a medical device maker currently headquartered in Minneapolis, Minnesota, USA. The tax haven they are acquiring is Covidien, also a medical device maker but headquartered in Dublin, Ireland. Ireland's top income tax rate for corporations is 12%, significantly less than the United States' 35% top income tax rate for corporations.

Guess where the headquarters of Medtronic will be after the acquisition? It's already decided. No surprise, it will be in Dublin, according to Medtronic's press release. That means the new Medronic will likely funnel all profits into Dublin and keep it out of the U.S.

Now, Medtronic did say in its press release that they will commit an additional $10 billion in technology investments over the next 10 years. Nevertheless, billions of dollars in overseas profits will not be introduced to the U.S. economy.

In fact, Medtronic is already withholding overseas profits from the U.S. economy. On page 12 of its 2013 annual report, they disclosed that "repatriation of certain earnings of subsidiaries outside the U.S. may result in substantial U.S. tax cost."  The way I translate that is they have no plans to repatriate overseas profits under penalty of the Internal Revenue Code.

This acquisition is just the latest example. The trend has already started. The Internal Revenue Code is essentially causing the job creators to leave the U.S.  The best way to stop that is to repeal the Internal Revenue Code.

The FairTax proposal (H.R. 25) will do just that – repeal income taxes not only for corporations but also individuals and replace the revenue with a consumption tax. With corporate income taxes no more, global companies would be able to freely move their overseas profits to the U.S. tax free. With more money in U.S. banks, there would be more money to loan. The more money borrowed in the U.S., the more money spent in the U.S., the more jobs created in the U.S. 

For more information about the FairTax, visit the official FairTax website at http://www.fairtax.org

Sunday, April 24, 2011

Dennis Calabrese and Mike Papantonio debate the FairTax



In this video aired on Fox Business, Dennis Calabrese and Mike Papantonio debate the FairTax bills that have been introduced in Congress. The FairTax bills (H.R. 25 and S.B. 13) propose a national sales tax on new goods and services to replace the current personal and corporate income tax. Businesses large and small would be exempt from paying the FairTax if the purchase is for business purposes. As part of the FairTax, all households would get a prebate (a rebate paid in advance) every month for sales tax paid for purchases up to the poverty level for that size of household. The FairTax bill also calls for the repeal of the16th Amendment, the constitutional amendment that authorized the federal income tax.

Dennis argued for the FairTax and Mike argued against it. Mike used an example of a person making $15,000 per year who wants to buy a car and that the tax on the car purchase would eat up that person’s buying power. Dennis counterargued that the FairTax eliminates the corporate income tax that gets passed on to its customers. As a result, car manufacturers and dealers would be able to pass that savings on to their customers in the form of lower sticker prices.

I agree with Dennis’s counter argument and have an additional counter argument of my own that I would like to share. In reality, most people who make that small amount of income buy used vehicles for transportation, because that is all they could afford. Since purchases of used goods are exempt from the FairTax, that person would not have to pay any FairTax if the car purchased was a used car.

I believe that the current personal income tax and corporate income tax systems has hurt and continues to hurt the economy in the United States. It discourages productivity by taxing the income progressively. It encourages borrowing and spending and by granting deductions for purchases, contributing to the current credit crisis. It encourages corporations to keep their profits on overseas operations out of the United States to avoid taxation on those profits instead of bringing profits back to the United States where it could be used to create jobs in the United States. Finally, it requires a lot of resources to administer and enforce.

I favor the FairTax because it encourages productivity and discourages spending, allowing more Americans to save money. The FairTax eliminates the corporate income tax, encouraging corporations to locate their operations into the United States and create jobs. The FairTax also requires a lot less resources to administer and enforce since only businesses would be required to file tax returns.

Please let your Representative and Senator know that you support the FairTax bills.

Friday, April 15, 2011

CNBC Documentary Shows Problems with Income Tax Compliance and Enforcement

Last night, CNBC aired The American Tax Cheat, a program produced by CNBC and hosted by Becky Quick. The documentary showed how huge of a problem tax evasion is and how easy the tax code can turn otherwise law abiding citizens into criminals by evading taxes. According to the documentary, as much as $300 billion dollars goes uncollected every year due to tax evasion.

The documentary mostly showed the IRS going after individual citizens. Some of those citizens flat out refused to pay income taxes while others relied on tax professionals that used illegal methods. Either way, the citizens that were caught were penalized severely.

The documentary also mentioned how complex the tax code is, that many taxpayers do not understand the tax code, and that the tax preparation industry rely on the complexity of the tax code. The cost of a professionally prepared return averaged $245, according to the documentary.

The documentary clearly shows the need for the FairTax. The FairTax bill (H.R. 25 and S.B. 13) proposes a national sales tax on new goods and services to replace the current personal and corporate income tax. As part of the FairTax, all households would get a prebate (a rebate paid in advance) every month for sales tax paid for purchases up to the poverty level for that size of household. The FairTax bill also calls for the repeal of the16th Amendment, the constitutional amendment that authorized the federal income tax.

The FairTax compels everyone (citizens, tourists, undocumented persons, and even criminals) in the United States to pay taxes without requiring them to fill out forms. The businesses would collect the tax and submit it to the government. If businesses don’t, the business would be held responsible, not their law abiding customers.

Because individuals won’t have to fill out forms, they won’t have to pay professionals to pay taxes. That money would be better spent taking the family to a ball game, amusement park, or pay other bills.

Monday, April 4, 2011

Rep. Rigell is now an H.R. 25 co-sponsor

Rep. Scott Rigell (VA 2nd Congressional District) added his name to the co-sponsor list for the FairTax bill (H.R. 25). That bill now has one sponsor and 58 co-sponsors. The Senate version (S. 13) has one sponsor and six co-sponsors.

National Small Business Association Endorses FairTax

The National Small Business Association (NSBA) has issued a statement on their website endorsing the FairTax. In the statement, NSBA endorsed the FairTax for the following reasons:

  • “The current U.S. income tax system discourages personal savings and investments by taxing capital gains, dividends and earned interest. Business owners and wage earners struggle under the burden of a very regressive payroll tax.”

  • The FairTax replaces the individual federal income tax, the capital gains tax, all payroll taxes, corporate income taxes, the self-employment tax and the estate and gift taxes.

  • The income tax is “unbelievably complex, time consuming, and costly to administer”. The FairTax, on the other hand, would reduce the cost of compliance for Americans from $225 billion to less than $10 billion.

  • Business-to-business purchases for the production of goods and services would not be taxed.

“NSBA supports fundamental reform and looks forward to working with supporters of the Fair Tax to educate taxpayers about the proposal,” according to their statement.

Saturday, March 26, 2011

GE Has No Tax Liability for 2010 Despite Profits

The New York Times reporter David Kocieniewski reported in an article that General Electric had a profitable year in 2010--$14.2 billion in profits including $5.1 billion from its U.S. operations. The real point of the article, though, is the fact that GE did not owe any income taxes on any of those profits and instead claimed a $3.2 billion tax credit.

According to the article, GE achieved this by executing “an aggressive strategy that mixes fierce lobbying for tax breaks and innovative accounting that enables it to concentrate its profits offshore,” which pretty much means what happens outside of the United States stays outside of the US. GE’s tax department staff includes former US Treasury, IRS, and congressional tax-writing committee officials.

GE should not be looked at as a villain. As a public corporation, GE has a fiduciary duty to its shareholders to find lawful ways to reduce their tax liability.

In fact, I thank GE for demonstrating the evil’s with the US tax code. GE’s tax strategy exposes these negatives in the tax code:

  • Tax code discourages repatriation (bringing offshore profits stateside). By keeping cash profits offshore creates jobs and investments overseas instead of in the US. Conversely, bringing cash profits to the US can create jobs and investments in the US.
  • GE’s size gave them more opportunities to arrange their finances to avoid tax liabilities. Their smaller competitors do not enjoy those same opportunities and, consequently, pay up to 35% of their profits in income taxes.
  • Companies spend money complying with the tax code and lobbying for tax breaks. Money spent on such activities is money passed on to their customers.

The FairTax fixes those problems. The FairTax allows repatriation without any tax liability, creates a favorable tax environment to locate business operations in the United States, levels the playing field for smaller competitors, and drastically reduces spending on tax code compliance.