Income Tax Plans

Flat Tax Plan of 2010 proposed by Fremont V. Brown III

Flat Tax

Individuals: 5% tax on every individual of their taxable earned income.

Taxable earned income would be considered income earned and earned income would be considered wages, salaries, or professional fees received from sources within the United States for personal services actually rendered.

Business, Corporate or Trades: 5% on every person engaged in a business activity located in the United States on business taxable income of such person on the taxpayer’s share of the net profits of such business, corporation or trade, received from sources within the United States shall be considered as earned income. Net profit is income from sales or services minus standard business expensive.

The present U.S. Income Tax act would be completely repealed.

Also, the following taxes and programs in placed now would be completely repealed: Estate Tax, Capital Gains Tax, Dividend Taxes, Payroll Taxes, Taxes on Social Security payments to retirees, Unemployment Taxes, all Welfare and Foreign Aid programs.

Social Security would be phased out. Starting in a year to be chosen, those that have not started paying in to the plan would not be in the plan. People would become responsible for their own retirement programs.

Also, all tax-exempt organizations and non-profits would no longer be exempt from income taxes.  They would pay the same 5% as everyone else.

Included in the above Act is the following, Congress would add an amendment to the U.S. Constitution, that Senate and Representatives could not spend more than 80% of the income taxes received from the previous year. Also, included would be a law that the 20% balance of the taxes collected the year before MUST be used to pay down the debt till it is paid off. Once the debt is paid in full, the 20% then could be used as the above 80%. NO NEW DEBT EVER, programs can only be funded from year to year.

The 16th Amendment which states: The Congress shall have the power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census and enumeration. A new amendment replacing the 16th will need to read: The Congress shall have the power to lay and collect taxes on incomes earned from within the borders of the USA, without apportionment among the several States, and without regard to any census and enumeration. At a rate no higher than 5% for individuals, corporations and trades.

Reasons and benefits to the Flat Tax Plan of 2010 proposed by Fremont V. Brown III

By repealing the Estate Tax, which steals the American Dream of someone building a foundation for their family to grow and prosper. And by repealing the Capital Gains Tax and Dividend Tax will cause more investment in companies and they will build and invest and in the process create jobs.

The Flat Tax would draw businesses that left the US back as the Corporate Tax would be about 34% less than it is now. Also, it should bring new businesses to the US as our Corporate Tax would be much lower than many other countries.

Once Unemployment Taxes are repealed and the income to the Government increases due to the lower-income tax rate, retraining programs could be started. But, if the education system was changed at the local level to say something like: First through sixth grade the teachers must teach the students the BASICS like math, speaking, spelling, reading and writing. Teach math without calculators. Teach the student what type questions to ask themselves to reason out the answers for themselves. Teach US history with solid knowledge of the Constitution and Bill of Rights, plus world history and geography are a must. Then starting in 7th grade the courses change to three hours a day for courses to prepare the student for college. One hour a day for a course called LIFE. This course would teach the student EVERYTHING they need to know once they begin life after 12th grade. Like cooking, washing the clothes, balance the checkbook, understanding the interest rates on loans, how to do a budget and stick to it, etc. Then four hours of vocation/trade skills. These courses would teach skills to be a plumber, carpenter, chef, landscapers, auto mechanic, dental tech, nursing, etc. The courses would also include management, purchasing, accounting and all of the skills needed to run a business. At the end of the courses the instructors would or would not issue a certificate that guarantees the employer that the student can do the job without supervision and correctly. The student could in many cases finish school with three to six skills. I am pretty sure the drop out rate would be much lower than it is now. And the students would be more prepared to start life on their own. And if, they lose a job, they will not need any retraining.

The Flat Tax would take less time and money to prepare at the end of the year. For Individuals, the tax return would be the size of a 3″ x 5″ index card. For Business, Corporations or the Trades the tax return would be the size of a 8.5″ x 11″ sheet of paper. It would, also greatly reduce the size of the IRS. As the tax returns would be much smaller and less complex, there would be much less for them to do.

Flat Tax would be a job creator as with more money left in the taxpayer and businesses pockets, they will have more money to spend and save. To spend on hobbies, vacations, fixing things around the house, buying a second home, etc.

Flat Tax would also, create lower prices as less taxes means less cost added into the products and services which equals lower wholesale, distributor and retail prices. The cost of living goes down. Even more money left in the taxpayers pockets.

Something to think about: Everyone should support their country, as their country should treat all of its citizens equally. As all men are created equal, everyone should pay the same percentage.

It is a proven fact that lower tax rates increase revenue to the taxing agency, because people have more money in their pocket to spend on investments, goods, and savings, etc. This creates more jobs and growth.

Higher taxes give people reasons to not report or under report income or to earn less income. Higher taxes are one of the reasons for lower productivity and lower living standards of the people. Along with too much government regulation. It is also the cause of less money for research and development expenditures. It removes money from the private sector. The private sector is where wealth is created. The Government sector does not create wealth. The larger the government the more it takes from the people and produces nothing, but overhead (expenses) in return.

PS: I have been told “Your plan would create a negative score because we wouldn’t get the dynamic score of additional growth to offset.” I answered “Mistake is thinking it would not “include additional growth to offset” as it would BRING back all the funds overseas that then would be invested here plus ALL the studies show that when taxes are lower that funds to the taxing agency INCREASES as people and companies have MUCH more money to spend. Americans for the most part LOVE to spend, just look at the credit card debt.” I should have added that the provision of EVERYONE being taxed widens and expands for the growth to offset.

 

Video about the US Tax Code: The Onerous Compliance Cost of the Internal Revenue Code

Links to other sites you may find of interest and that support the above:
Slovakia’s Flat-Tax Hit
Center For Freedom and Prosperity
The Global Flat Tax Revolution
Lower Taxes, Greater Growth
Capital Markets: The Importance of Lower Taxes
A Brief Guide to the Flat Tax
by Daniel J. Mitchell, Ph.D., July 7, 2005

Microsoft Warns Of Tax Law Consequences
Hong Kong Tax: A Beginners Guide, Hong Kong Tax the Basic Facts, By Rory Boland, About.com Guide
Tax Briefing Book, Edited by Joe Barnett, National Center for Policy Analysis
Flat Tax, National Center for Policy Analysis
Do Taxes Affect Economic Growth?
The Flat Tax
By Robert E. Hall and Alvin Rabushka, senior fellows at the Hoover Institution

Tax Reform Websites:
Americans for Tax Reform
Brookings
Value-Added Taxes: Lessons Learned from Other Countries on Compliance Risks, Administrative Costs, Compliance Burden, and Transition
Tax Reform Information


Problems with the FairTax

Hr25 Sec.101 IMPOSITION OF SALES TAX.

(a) In General- There is hereby imposed a tax on the use or consumption in the United States of taxable property or services.

Problems, I see with the FairTax

no fair taxFairTax tax rate of 23% = 30% + NC state sales tax = 37% plus out of your pocket, for each dollar you spend.

As the tax is figured on the selling price: Say on a house you wish to clear $250,250 on you would need to mark up 30% to sell it for $325,000. Subtract 23% tax ($74,750) off the $325,00 selling price to clear $250,250 on the house.

Something to think about if, the FairTax applies to new houses, new cars and other high ticket items: Purchase a new house and then 33.8% (30% plus the new 3.8% Fed. Home Tax) really hits you. Say you purchase a house for $250,250 the tax added on to the cost would be at least $74,750 with just the 30% tax. Then the Fed’s jump in with their 3.8% sales tax and you add $12,350 making the total $337,350. That’s $87,100 more. Then add the cost of financing over a 30 year period. Sounds like a great buy doesn’t? Will the banks finance the $87,100 in taxes along with the house loan? I don’t think so. Now, figure the FairTax on a new car with the state tax figured in – think, you may think twice before you buy?

The FairTax would hurt sales of new homes because of the size of the tax. Which in turn would hurt contractors, painters, cement companies, lumber companies, etc.. Plus, it could cause people to purchase used homes, driving the availability down and the cost up. The same problem with vehicles and other high priced items.

Because of the problems, caused with homes new and used, stated above, more people may rent. Causing a shortage problem and higher rental prices of Apartments.

Will make customers think twice about a purchase when they see the 30 cents plus NC state sales tax of 7% added in to the cost for each for each dollar. Most likely it will reduce sales. Less sales, less jobs, less merchandise sold, and around and around we go. FairTax states why punish the producer? Well it does, with less sales there are less items to be produced. Less items produced the less jobs, etc.

Why the Prebate check? The Prebate makes the FairTax more complicated then is needed.. Lower the tax rate. Delete the Prebate. Plus, where’s the government getting the money to pay the prebate, if its mailed before they collect tax? What about the cost of figuring, processing and mailing of the prebate checks?

Is this the first “Small” step toward a VAT tax? Is that the “REAL PLAN”? What’s to stop the government from changing the FairTax into a VAT tax by charging the 23% gross tax at the manufacturing and distributor level? Once the consumer gets use to the tax. Note: a VAT tax is not a value added tax. Tax does not add value. VAT taxes the market value of a product or the material added at each step of manufacture or distribution. It’s a CAT, a cost added tax. All taxes add to the cost of whatever it taxes.

Most (99%) of the people in business I ask how they feel about the FairTax, state they don’t like it, mostly for the above reasons. The number one reason is they feel it would drive sales down and hurt the economy. And keep it down.

Does not abolish the IRS, as the IRS or United States Department of Revenue, or whatever they will call it, will be needed to collect the taxes collected by the States. The States will also need to be audited. The States will need to audit the merchants who collect the FairTax from their customers. This plan also moves the balk of the cost of collecting the tax to the States. See processing of prebate checks above, as the IRS will be needed to process the prebate checks.

Been introduced each year in Congress for the last 12 years or so. And still no go. Why? Maybe, because it gives the states control of collecting the tax giving Congress the hebeegeebees. Will the states submit the funds to the US Treasury if, they get ticked off at the Federal Government?

Consumption tax ie the Nat Sales Tax, is still a tax on income as without income you have no money to spend on consuming goods. The theory is that you are earning more then your spending. Not, so for many people – as most people are in debt – they spend more then they earn. So, they are being taxed more with a consumption tax.

My conclusion the FairTax is an economy-killer.

Links to Sites about the FairTax
H.R.25, Fair Tax Act of 2009 (Introduced in House)
FlatTax.Org