The Fair Tax

The 2008 presidential campaign brought the Fair Tax proposal to national prominence.  The radical tax reform proposal was endorsed by candidate Mike Huckabee in the Republican presidential primaries that year and was subsequently granted even more publicity by the advent of the grass roots Tea Party movement.

Many conservatives believe that the current tax system is broken.  The income tax takes away the incentive to produce because, as a person makes more money, they are taxed at higher and higher rates.  Filing tax returns costs Americans millions of dollars and untold hours of work.  The system is so complex that many taxpayers pay more than they have to, while many others, like Obama supporter General Electric, pay nothing at all.  Fraud is rampant and enforcement is expensive.  The IRS has a budget of more than $13 billion.

The Fair Tax aims to solve these problems by scrapping the current tax code and abolishing the IRS.  The proposal is perhaps most associated with Georgians John Linder and Neal Boortz, but was actually created by the group Americans for Fair Taxation.  John Linder is the Republican representing Georgia’s seventh district in the U.S. House of Representatives.  Boortz is the libertarian-leaning “Talkmaster,” a radio talk show host of Atlanta’s WSB AM-750.

The Fair Tax has been around as an idea since 1999 when the Fair Tax bill was first introduced in Congress.  The bill has never emerged from committee for a vote.  In 2005, the proposal got a boost when Linder and Boortz authored The Fair Tax Book.  The two also collaborated on a second book, Fair Tax:  The Truth:  Answering the Critics.

The centerpiece of the Fair Tax is the replacement of the federal income tax (as well as Social Security, estate, capital gains, Medicare, gift and corporate taxes) with a flat rate consumption tax.  The tax would be a sales tax levied on the final purchase of new goods and services for personal consumption.  There would be no tax on the sale of used items or business-to-business transactions.  Since there would be no withholding, workers would be able to keep their entire paychecks.

Neal Boortz (Wikimedia Commons/ eltonsaulsberry/)

Because a sales tax would be regressive, it would place an undue burden on the poor, the Fair Tax would include a prebate.  Every American with a valid Social Security number who resides in the U.S. would receive a reimbursement, paid in advance each month, which would equal the tax paid on goods and services up to the poverty level.  Prebate levels are posted on the Fair Tax website’s FAQ page.  For example, a two-parent household with two children would receive a prebate of $559 per month.

The Fair Tax is designed to be revenue neutral, that is, it would bring in the same amount of tax revenues as the taxes it would replace.  To do that, economists estimate that the Fair Tax rate would have to be approximately 23%.  That means that the tax on a $10 item would be $2.30.  Similarly the tax on a $100,000 house would be $23,000. 

The 23% rate seems high at first, but in reality is offset by several factors.  First and most obvious, people would have more money in their pockets to start with because there would be no withholding of taxes from their paychecks.  Second, the base price of goods and services would be less because the embedded taxes that we pay now since currently taxes (for example, payroll and capital gains taxes) are collected at every level of production.  Third, no one would be forced to pay the Fair Tax.  People who do not want to pay taxes could simply buy used products and avoid the tax.

The Fair Tax is a progressive tax because it falls most heavily on the biggest consumers.  The wealthy who consume the most goods and services will pay the most in taxes.  The poorest of society will have to pay very few or no taxes and much of what they do pay will be reimbursed by the prebate.  The poor will also benefit because if they choose to buy secondhand items, they will not be taxed at all.

There are other advantages to the Fair Tax as well.  By removing the embedded taxes in American products, American companies will become more competitive and will be able to boost their sales.  The elimination of the corporate tax will discourage outsourcing and will actually encourage companies to move to the U.S.    

The Fair Tax will also expand the U.S. tax base.  Currently, only U.S. citizens and residents pay the income tax.  However, since the Fair Tax is paid at the point of sale, the tax burden will be shared by anyone who buys new goods or services in the U.S.  This would include tourists, foreigners on work or student visas, and even illegal aliens.

Finally, the Fair Tax would encourage people to work harder and save more.  Unlike an income tax, which takes more as you earn more, the Fair Tax would allow workers to keep their entire paycheck, no matter how much they earn.  Under the current system, there is also little incentive to save.  In fact, there are actually disincentives for saving in the form of taxes on capital gains, gifts, and estates.  Since the Fair Tax is levied as money is spent, it would encourage people not to spend as much money and save or invest it instead. 

How a government shutdown might affect you

The government may shut down Friday night. (Diliff/Wikimedia Commons)

As the debate over control of the federal budget speeds the government toward a shutdown, many Georgians are likely wondering what effect a shutdown would have on local services provided by the federal government.  The federal government pervades American life at all levels from mail delivery by the postal service to government checks for Social Security recipients and, most obviously and importantly, protection by the U.S. military and federal law enforcement agencies. 

A government shutdown is not a disaster and is not unprecedented.  In fact, there have been five government shutdowns since 1981.  The most famous was the last series of shutdowns in 1995 and 1996 when President Bill Clinton sparred with Speaker of the House and Georgia native Newt Gingrich.  The Republicans actually won a balanced-budget agreement in the confrontation, but suffered politically.  The balanced budget of the late 1990s is remembered as Clinton’s achievement and helped him to win re-election.

The debate is similar to that of the 1990s.  The current problem stems from the fact that Democrats did not pass a federal budget for 2011 while they held large majorities in both houses of Congress prior to the last elections.  According to federal law, a budget should have been passed by October 1 of last year.  Instead, Congress has passed a series of temporary spending measures.

According to the Wall St. Journal, the Obama Administration will have borrowed approximately $3.7 trillion in its first three years, “more than the entire accumulated national debt for the first 225 years of U.S. history.”  The Democratic budget proposal cuts a meager $6.5 billion from the federal budget for 2011.  The Republicans, responding to voter anger over increasing deficits and spending, want $61 billion in cuts for 2011 and are ultimately eyeing $6.2 trillion in cuts over ten years as a part of Paul Ryan’s “Path to Prosperity.”

If the two parties cannot reach agreement and pass a budget, parts of the federal government will cease operations until an agreement is reached.  Essential services of the government, as well as parts of the government that are funded by other means, such as user fees, would remain in operation.  Some of the areas that are deemed essential services are military operations, border security and air traffic control.  Federal courts and the justice system would also remain open.  These areas of government were unaffected by previous shutdowns.

Mail deliveries by the Post Office would likely continue.  The Post Office gets some federal funds, but much of its operation is funded by the sale of stamps and delivery fees on packages.  The Federal Reserve would also remain open.

Recipients of entitlement checks such as Social Security and Welfare can also rest easy.  The government would continue to send out checks to existing recipients, but applications for new benefits would not be processed.  Medicare would also continue to be funded.

The main affect of the shutdown would likely be on administrative workers.  In addition to entitlement applications, other applications, such as those for firearms and explosive permits from the BATF or visas and passports from the State Department, would not be processed.  In the past, health care for veterans and clinical trials at the National Institutes of Health have also been delayed, along with work on bankruptcy and delinquent child-support cases.  Tracking of diseases by the CDC, headquartered in Atlanta, might also be interrupted.  Processing of farm credit, small business loans and government-backed mortgages would also cease.  Toxic waste cleanup at EPA Superfund sites was also stopped in previous shutdowns.  It is also possible that some tax refunds would be delayed, but audits would also be suspended.

Georgia’s many national parks and historic sites might well be affected since admission is free.  Georgia has eleven national parks that would almost certainly be closed in a government shutdown.  National museums such as the Smithsonian Institute in Washington, D.C. would also close.  Of course, Georgia’s state parks and historic sites would remain unaffected.

Perhaps most disturbing is the possibility that soldiers and military retirees would not be paid during a government shutdown.  Military personnel would continue to accrue pay, but may not receive pay checks until a new budget is passed.

Ironically, a government shutdown will probably not save the government money.  Government shutdowns actually cost more than normal operations because the government loses revenue when it is not in operation.  Current estimates are that a shutdown might cost taxpayers more than $100 million per day.  Depending on the length of the shutdown and the success of the Republicans at getting their desired cuts, taxpayers might end up saving money with a short shutdown rather than having billions more dollars in deficit spending enacted into law under the Democratic plan.

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Billboards highlight black abortion "genocide"

Courtesy of Life Always

A pro-life billboard in New York City has sparked a controversy about abortion among black women.  The ad, similar to billboards erected in Augusta last year, depicts a happy young black girl.  The message emblazoned above her head reads “The most dangerous place for an African-American is in the womb.”  The billboard also gives the web address thatsabortion.com, a division of Life Always. 

The billboard debuted last month in New York for Black History Month before being displayed in other cities.  Although the N.Y. billboard has been torn down, new ones have been recently placed in Chicago and St. Louis.  The Augusta billboards were placed by different groups, The Radiance Foundation and Georgia Right to Life.

In both cases, the billboards are meant to highlight what Life Always founder Stephen Broden says is “a genocidal plot is carried out through abortion.” 

Specifically, the billboards draw attention to the fact that black babies are aborted at a much higher rate than whites.  In December 2010, New York’s health department released figures that almost 60% of black pregnancies resulted in abortion.  The rate was 41% for all pregnancies.  Nationally, according to the Guttmacher Institute, black women get 30% of abortions even though blacks make up only 13% of the population.  In Georgia, black women get 58% of abortions.  This makes Georgia the leading state for black abortions.

Atlanta native and black pro-life activist Alveda King said, “Black people in New York and all over the country should be outraged at the numbers of black babies we lose every single day to abortion. An astonishing 60 percent of African-American pregnancies in the five boroughs of New York City end in abortion. That’s unfathomable!” 

New York’s public advocate, Bill de Blasio, said, “The ad violates the values of New Yorkers and is grossly offensive to women and minorities.”  He continued, “A mix of intolerance and bad judgment put this ad up.  Common decency demands it be taken down.”

King, who is the daughter of Alfred Daniel King and niece of Martin Luther King, further stated, “It is an outrageous act of censorship that this billboard was taken down.  This billboard should be posted in every city of the country. And it should provoke outrage in the African-American community-not because it is racist, but because of the truth it reveals; the truth that is being kept from the African-American community.”

It seems that a difference between pro-life and pro-choice groups is that pro-lifers are offended and angered by the death of thousands of babies of all colors.  On the other hand, pro-choicers are offended when the horrible statistics about abortion are brought to light.  It is a question of defending the lives of actual babies or the consciences of abortionists.

The tactic of attempting to silence pro-life groups is not new.  In the past, the government has used RICO laws to limit free speech of anti-abortion protesters.  This mirrors the attempts to intimidate and drive speech supporting traditional marriage and anything deemed critical of homosexuality from the public forum.  Rather than defending their positions in a public debate proponents of abortion and same-sex marriage are too often trying to stifle debate.  They do this by intimidation, name-calling and, in this case, removing the pro-life message from the billboard.  Freedom of speech and expression is not the only area in which liberals are inconsistent when it comes to abortion.

Courtesy of Life Always

The controversy over the billboard also included the girl’s family, which allegedly told a N.Y. city councilwoman that the girl’s picture was used for a purpose other than what they were told.  Life Always said that the picture was purchased from Getty Images.  Getty Images said that they had a model release for the girl on file.

The controversy is likely to continue.  A new billboard design from Life Always recalls a Super Bowl ad that was rejected a few years ago.  It depicts a likeness of President Obama says, “every 21 minutes, our next possible leader is aborted.”  President Obama was not the result of a planned pregnancy and the future president was raised by a single mother and her family.

Life Always has not yet responded to a query about whether they will place the billboards in the Atlanta area, but given Georgia’s status as a top provider of abortions for black women it is likely that Georgians may soon see the controversial signs along local highways.