Tag Archives: Fair Tax

How to Never Need to Keep Tax Records Again

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So today is tax day in America yet again.  Sometime in the last few months you probably had to gather your receipts, W-2 forms, and 1099’s.  You had to buy some tax software or set up a meeting with an accountant.  Either way, you were out at least $100 because the forms are too complicated to someone to just fill out.  You then spent several hours away from your family filling in information.  You probably also had to call various places for receipts, send money or letters of authorization to transfer money into IRAs and HSAs before the deadline.  You then needed to go to the post office and stand in line to send in your forms, or sent them in electronically despite warnings from the IRS that many tax returns are being stolen each year when filed electronically and the information used for identity theft.  You do all this because the law says you need to in order to pay your taxes.

If you’re like most people, you probably also got a big refund check back.  You may look forward to receiving that check, and maybe you use it to pay down a credit card bill or just blow it on something, but realize that is your money that the government had all year-long without paying you a dime of interest.  Maybe you paid credit card interest all year because Uncle Sam was holding onto that money.  At 15% per year, that’s $600 per year you are losing if your refund is $4,000.  Even at $2000 per year, that’s $300 you are losing.


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There is a better way and it’s called the Fair Tax.    With the Fair Tax you would receive your entire paycheck each month with no deductions taken out so your paycheck would be at least 20% bigger.  You wouldn’t pay a dime in taxes until you bought a new item, at which point you would pay a sales tax.  That would be the end of your obligation as far as taxes went.  You wouldn’t need to save any receipts.  You wouldn’t need to file anything.  You would pay at the cash register and then go on with your life.

One argument against a sales tax is that it is regressive since people who make less spend a higher percentage of their income.  This is also addressed in the Fair Tax with a prefund.  Each year (or each month) everyone who works would get a deposit in their accounts from the government to cover a portion of the sales tax they pay.  For example, if the Fair Tax is 20% and you wanted to make sure no one who made less that $30,000 paid anything in taxes, you would issue a prefund of $600 per year to everyone.  Then the prefund would cover the taxes on the first $30,000 you spent.  Only those spending more than $30,000 per year would then be paying taxes.  You could set the prefund as high or as low as you wished depending on how much you needed to collect in taxes and at what income threshold you wished people to start paying taxes.


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Another argument is that people don’t want to be paying a 20% sales tax (an estimate for the sales tax that would be needed to raise the same amount of money as is currently raised through the payroll taxes and income tax).  Realize first of all that you are already paying 12% or more of your income out before you get your check.  Including the employer match for Social Security and Medicare, you are paying around 20%.  This is not just on the money you spend, but also on the money you save.  It is also expected that because retailers will no longer need to spend as much money on tax planning, and because they would no longer pay income tax on their earnings, that prices would fall, perhaps by enough to cover most, if not all, of the sales tax.  It is very likely that the government will be raising the same amount in taxes while you are paying a lower percentage of your (increased) income in taxes.

If this sounds great to you, go to www.fairtax.org. learn more, and learn how you can help get the Fair Tax passed.  Let’s have 2016 be the last year you need to spend time away from your family filling out forms.

What do you think?  Don’t like the Fair Tax?  Why not?  What do you think is the best way to collect taxes? Please leave a comment.


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To ask a question, email vtsioriginal@yahoo.com or leave the question in a comment.

Follow on Twitter to get news about new articles. @SmallIvy_SI

Disclaimer: This blog is not meant to give financial planning advice, it gives information on a specific investment strategy and picking stocks. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

How to Never File Taxes Again

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"Come and Take It" Flag from Revolutionary War

“Come and Take It” Flag from Revolutionary War

How would you like to never need to file taxes again?  Never save a receipt.  Never worry about making a contribution to your IRA before April 15th again.  Never need to give your Social Security number to your employer, or even have a social security number at all.  How would this be possible?

The answer is the Fair Tax.  The Fair Tax would replace all federal income taxes and payroll taxes with a national sales tax on new goods sold.  This means that you would get your whole paycheck (there would be no withholding) and then only pay taxes when you buy things.  Any money you save and invest would not be taxed until you cashed in your investments and bought something.

But wouldn’t this be a regressive tax, hitting those at the bottom who needed to spend most of their income by necessity, while those who made a lot of money would pay very little?

The answer is “no,” because the Fair Tax also includes a prebate, by which everyone receives a check at the beginning of the year or the beginning of each month that covers the taxes for a certain level of income.  For example, if the Fair Tax was 20% and you got a prebate of $5,000 per year, you would not be paying any taxes until you spent $25,000 of income.  This mean that people making up to $25,000 per year would not pay any taxes even if they spent all of their money.  People making $10,000 per year would actually be getting more back than they paid since they would be paying at most $2,000 in taxes but receiving $6,000 in their prebate.  You could set the prebate at whatever level you wanted to exempt enough spending to cover basic necessities.

But 20% in taxes seems high.  Isn’t that a lot more than I pay now?

Probably not.  Even if you’re in the lowest tax bracket, you’re paying about 10% of your income in taxes plus 13% in payroll taxes (Social Security and Medicare).  This means that you’re paying 23% on all of your income even if you save it all.  The other factor is that corporations wouldn’t be paying taxes on income either, which means they could lower their prices because they wouldn’t need to spend so much money on tax planning and taxes.  Plus, you wouldn’t need to spend your time or your money preparing your taxes and keeping records, which represents another savings.  Think of all of the money wasted preparing tax returns and filing receipts.

Is that it?  Any other advantages?

The biggest advantage is that you would no longer need to keep records.  Just as you don’t need to keep records with state sales tax, you wouldn’t need to keep anything for federal taxes.  You’d just buy something, pay the tax, and be done.  The only ones the IRS would need to check on is the merchants, meaning there would be a lot fewer IRS agents needed.

So, we could fund the country but get rid of all of the paperwork.  We’d pay less since there would be a lot less money being spent on tax compliance, tax avoidance, and record keeping.

So where do I sign up?

Write to your representative and both senators at least once a year (how about April 15th) requesting they enact the Fair Tax.  You can email them from the government sites for the House and Senate.  Plus, tell a friend, or two or three.  Tweet about the Fair Tax.  Put a post on FaceBook.  People who hear about the Fair Tax generally like it – it is just a matter of educating people. It will take time (change is always difficult to create), but if enough people write and request it, it will happen.

Got and investing question? Please send it to vtsioriginal@yahoo.com or leave in a comment.

Follow on Twitter to get news about new articles. @SmallIvy_SI

Disclaimer: This blog is not meant to give financial planning or tax advice. It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

Why Would You Not Want the Fair Tax

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Under my bed is a cardboard box that is bulging at the seams.  It contains my stock purchase/sales slips and my tax returns for the last 25 years or so.  I keep these because my accountant advises me to keep my tax returns forever, just in case the tax man wants to see them.  You would think he’d have a copy, along with hundreds of nefarious people who have broken into his database or intercepted my return out of the ether and stolen my information.

The sad thing is, there is no reason to live like this.  We could fund the government without needing to keep all of these records to prove that we are following the tax laws.  (Note also that a lot of people are cheating on their taxes anyway since there are only so many tax investigators to go around.  Per usual, those of us who follow the laws are made to suffer because of others who don’t.)  The way this could happen would be for us to enact the Fair Tax.

Details on the Fair Tax can be found here:

https://fairtax.org/about/how-fairtax-works

Read it now and forward the link to five of your closest friends, three acquaintances, and four people you really don’t like all that much.

In a nut shell, with the Fair Tax you would replace the income taxes, Social Security taxes, and the rest of those things with a sales tax that is paid on spending beyond what is needed for basic necessities.  (Spending on necessities would be tax-free because you would receive a check from the government that covers any taxes you pay below a specified amount each year.)   It would be collected when you buy things just as you pay sales taxes now.  Simple – no forms, no tracking spending, no special, tax-free accounts to manage.  Nothing.

Things that the Fair Tax would do:

1.  Fund the government without anyone needing to file a tax return, keep a receipt, make a contribution to a tax deferred account, or lift a finger.

2. Reduce business tax compliance costs, which means prices would drop (probably by enough to cover the sales tax that would be created).  You’d fund the government using the money you’re now paying for tax compliance.

3.  Take away the power from the IRS to inflict fear in taxpayers.  It would also eliminate the ability to use the IRS as a political weapon (are you reading this, Ms. Lehrner?).

4.  Make drug dealers, pimps, the Russian Mafia, and everyone else pay taxes like everyone else.

5.  Improve the economy as people focus on doing important work rather than going through machinations to save on taxes.

6.  Reward people for saving and investing (good for you) and punish people for spending frivolously (bad for you).

So what’s wrong with the Fair Tax?  Why isn’t everyone out there demanding that it be passed first thing next week?  Do you like the IRS?  Do you like filling out forms?  Do you like the challenge of figuring out how to take advantage of the most deductions?  Do you think that using TurboTax is more fun than playing Doom or World of Warcraft?  Do you think that your accountant is cute and like spending a few hours with him/her every year even if it costs you a couple of hundred bucks?  Anyone?

If you like the Fair Tax, tell your representative and senators.  Then, post a comment to this post letting me know you did.  We can do this if enough people ask.

Investing questions?  Something to share?  Please send to vtsioriginal@yahoo.com or leave in a comment.

Follow on Twitter to get news about new articles. @SmallIvy_SI

Disclaimer: This blog is not meant to give financial planning or tax advice. It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

Things You Wouldn’t Need to Do with the Fair Tax

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OLYMPUS DIGITAL CAMERAPromoters of the Fair Tax point to things like the ability to collect your entire paycheck instead of having a portion withdrawn for taxes before you see it.  They also talk about how under-the-counter businesses would pay their fair share, instead of getting money tax-free as they do now, since they would be buying things too.  Even drug dealers and prostitutes would be contributing to the tax base, lowering taxes for everyone.   Still interest has been limited, largely I believe because people don’t realize just how much of a timesaver it would be for everyone.

In a nutshell, the Fair Tax is a sales tax on new goods that would replace the income tax, Social Security Taxes, and all other Federal taxes.  You would still see state income taxes if you are foolish enough to live in a state that has them (I’m talking about you, California), but there would be no federal taxes.  There would also be no corporate income taxes, which means that groups like Burger King would not be fleeing the country for places with lower taxes like Canada.  Instead, businesses would be flocking here because they would not need to waste lots of money on tax planning and tax avoidance.

To prevent being regressive, meaning that poor people wouldn’t end up paying a greater percentage of their income than rich people, there would be a prebate where everyone would get a check from the government to cover a portion of the taxes.  For example, give a $10,000 per year prebate out to everyone with a 20% Fair Tax and no one who makes less than $50,000 per year would pay any taxes, even if they spent their entire paycheck on stuff that was subject to the Fair Tax.

A lot of the advantages of the Fair Tax go beyond getting your whole paycheck each month.  The Fair Tax greatly simplifies accounting and record keeping since you would not need to prove to the IRS what you made and what you spent on deductible items.  What would you not need to do if there were a Fair Tax instead of an Income Tax?  Let me list them:

1.  You would not need to give you Social Security number for a job, a bank account, or any other purpose, because there would be no Social Security numbers.  Credit card companies would actually need to do their jobs and verify your identity instead of relying on a number.

2.  You would not need to turn in a W-4 listing dependants, because there would be no withholding of taxes from your paycheck.

3.  You would not need to keep a receipt from the doctor’s office, because there would be no need to prove medical deductions.  You could throw them out.

4.  There would be no need to keep charitable donation receipts, because you would not need to claim them on your taxes.  Worried about losing the deduction?  Don’t be – you’ll be taking home more money, leaving you free to give or keep as you desire.  Your “charity” would not even need to be  officially recognized by the IRS.

5.  Conservative and Liberal groups would not need to submit any paperwork to the IRS for approval, because there would be no taxes on any contributions they received.

6.   You would not need to fill out paperwork for home energy improvements to get a tax deduction.  Politicians would just make such items exempt from the Fair Tax or reduce the Fair Tax on them if they wanted to keep using the tax system to drive behaviors.

7.  Seniors wouldn’t need to worry about paying income taxes on the Social Security benefits if they made too much money before retirement age and were taking benefits early, because there would be no income taxes.

8.  You would not need to fill out tax forms in April, because there would be no income tax and the IRS would never bother you unless you ran a business that collected the Fair Tax.  The IRS could be cut by 95% or more.  There go the Star Trek skits.

9.  You would not need to worry about contributing to medical savings accounts, retirement accounts, and college savings accounts before a certain date each year. You could start whatever accounts you wanted and fund them as you wish, because there would be no income taxes on the earnings.  You could also withdraw the money as needed because there would be no penalties to pay.

10.  You could give as much money as you wanted to your children or whomever else you wanted at any time because you would not need to pay estate or gift taxes.

So, what will you do with all of the time you’ll be saving by not needing to fill out tax forms, not needing to fill out  employment forms, and not needing to keep and organize receipts?

Follow on Twitter to get news about new articles. @SmallIvy_SI. Email me at VTSIOriginal@yahoo.com or leave a comment.

Disclaimer: This blog is not meant to give financial planning or tax advice. It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

Time to Get Your Taxes In

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The deadline for filing your state and federal income taxes is looming.  Sure it’s spring and you need to do some spring cleaning, plant your garden, paint your windows, break out your yard furniture, and do a thousand other things, but you’ll face a big penalty if you don’t spend several hours in a dark room in front of a computer filling in minutia of your finances into TurboTax.  At least the advertisements for the software make it seem exciting, like your writing an autobiography of your life instead of doing mind-numbing fill-in-the-blank for hours on end.

It doesn’t have to be this way next year.  If we were to pass the Fair Tax, there would be no need to fill in any forms.  You would just pay a sales tax when you bought a new item to the store you bought it from.  You wouldn’t need to keep any receipts.  You wouldn’t need to remember to send a check to an IRA or an HSA before December 31 or April 15th.  You wouldn’t need to calculate your income, figure out if you could deduct a child or a home improvement, or segregate a part of your home as a home office.  April 15th would just be another beautiful spring day.

Better yet, you would get a check from the government instead of sending a check to the government.  You see, the Fair Tax, in order to prevent it from being regressive, meaning to prevent people at low-income levels from paying a greater portion of their income in taxes than wealthy individuals, would include a provision by which everyone would receive checks from the government, probably once a month, to cover a portion of the taxes paid at the register.  If everyone received $10,000 per year and the tax rate were 20%, no one making less than $50,000 per year would be paying a dime of taxes even if they spent their whole income.

And don’t let that 20% number scare you.  Remember that you would receive your whole paycheck, instead of the portion that is left over after FICA and Federal withholding, so your check would be bigger to start with.  Stores would also not need to spend a lot of time doing tax accounting and tax planning, so they could lower their prices.  Some predictions are that the entire 20% would be erased since prices would fall by 20% due to the savings.

The Fair Tax would also encourage saving.  If you spent less than $50,000 per year, you would get to pocket a portion of that $10,000 the government sent you.  Compare this with current tax policies that encourage people to overspend on houses so they can deduct the interest or buy new windows and electric cars so they can get a tax deductions.  Wouldn’t it be better if people were saving so they would have money available to take care of themselves when they lose a job or need to go to the hospital instead of these costs falling on society since everyone spends every dime they get?

Want to make it even better?  How about collecting the Fair Tax at the state level and then having the states decide what functions they want the Federal Government to do and what functions they want to do for themselves.  If they decide they’d like the Federal Government to take care of interstates, they’d send a portion of their money to the Feds.  If they found the feds were wasting the money, they could hold back and do the roads themselves instead.  If the Federal Government had less money, and if they had state legislatures, who are made up of people you can actually find at the grocery store and question about a dubious vote, you wouldn’t see these pork barrel projects in individual states to buy votes or spending hundreds of millions of dollars on vacations for senior government officials.  Of course the states could decide this is needed and send the money for it, but I’m thinking they would be inclined to hold onto it instead of sending the President and 100 of his closest friends to Europe.

If this sounds good to you, contact your Congressman and your Senators and tell them you want the Fair Tax.

To ask a question, email vtsioriginal@yahoo.com or leave the question in a comment.

Follow on Twitter to get news about new articles. @SmallIvy_SI

Disclaimer: This blog is not meant to give financial planning advice, it gives information on a specific investment strategy and picking stocks. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

Why Don’t People Want the Fair Tax?

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Since posting this entry, I’ve had a couple of people rate the entry as “poor” instead of leaving a comment.  I’m thinking they’re actually rating the Fair Tax as poor rather than the post and I’d love to know why.  Please leave a comment and let me know why you don’t like the Fair Tax if this is the case.  If you can’t express a reason, maybe you need to rethink your stance.

I’ve made a few posts in the past about the Fair Tax.  In a nutshell, the Fair Tax would replace all of the existing Federal income taxes, including the Federal Income Tax itself, Social Security Taxes, and Medicare Taxes.  It would be a consumption tax on new goods and services (meaning your yard sale items wouldn’t be taxed, nor would your used car).  It is estimated that the tax rate would be about 20% if tax revenue levels were left the same.  Compare this with income taxes, which are around 10% for those in the middle class, Social Security taxes, which are 6.5% for the employee and the employer, meaning about 13% total, and Medicare taxes, which are about 4% between the employee and employer.  This means your paycheck would increase by about 27% in exchange for paying a 20% sales tax.  Sounds good to me.

But wait, there’s more.  Because businesses would no longer be paying corporate income taxes, and because they would no longer need to maintain a huge staff to handle payroll deductions, tax deferred accounts like 401k accounts, and planning to avoid corporate income taxes, their costs would go down.  This might increase profits a little for the shareholders if the company retains some of this savings, but most of that savings in the cost of providing goods and services would go to lowering their prices and raising salaries.  It is estimated that most of the 20% sales tax would be offset by the reduction in the prices of goods, meaning that the actual price you pay may be about the same, even including the sales tax.

Having less of a paperwork burden would also make it easier for people to open businesses.  If all you had to do was hire people and hand them a paycheck, rather than needing to have an elaborate accounting system to figure out tax withholding and all of the other corporate taxes, more people would be willing to start a business.  This would mean more competition for both customers and workers, meaning more selection, lower prices, and higher wages.

The tax is also not regressive because there is a prefund.  With the prefund every American would receive an electronic deposit from the government at the start of the year or the start of each month to cover part of the sales taxes.  For example, if you wanted the first $20,000 of spending to be tax-free to help low-income earners and the Fair Tax was 20%, you would send a prefund of $4,000 per year to each citizen.  This means that even if a person at the low end of the income spectrum spent their whole paycheck, they would not be paying any taxes.  If they saved a bit they would be getting a supplement to their income.

I’ve created posts on the Fair Tax before, but have gotten few responses.  I also am not seeing the activity needed to get one enacted.  Understand that politicians like the current income tax because it both gives them some control over their constituents and allows them to give special favors to big donors, which in turn helps get them re-elected.  If they want you to buy special windows or certain cars, they can create a tax deduction for those items.  Likewise, they can create special exemptions for coal companies, farmers, or sugar importers and in exchange get donations from those groups who want to keep the special tax break in place.  They even use Social Security to control seniors since all incumbents need to do to defeat a challenger that might restore some fiscal sanity to federal budgets is say she will cut Social Security or Medicare and get the seniors out in mass against her.  To replace the income tax with the Fair Tax, which would take all of the power away from the politicians and take away all of the ability of the IRS to stoke fear in the hearts of taxpayers, would take an enormous ground-swell of people demanding it be enacted.  It might also require some incumbents who enjoy the power they weild and wealth they gain with the existing tax system be replaced.

So my question is, why so little interest?  Do you like paying $100 to buy TurboTax each year or $300 to hire an accountant to help with your taxes?  Do you like to live in fear of an audit?  Do you like to save all of your receipts for business expenses, medical expenses, and write down the mileage from your car odometer after each business trip?  Do you like to keep seven years’ worth of tax returns just in case you get a call wanting you to prove your home office expenses from 2008?

I think it would be wonderful to get my whole paycheck rather than what is left after all of the taxes are removed.  I think it would be great to just throw out those receipts and not worry about what price I paid for a stock back in 1982.  I would love to not need to worry about making deposits to an IRA account before a certain date or worry about the limits for deposits to an HSA.  So what am I missing?

Please leave a comment with your reasons for not wanting the Fair Tax if there is something I’m missing.  If you support a Fair Tax, how about leaving a comment saying that so others could see this is not some crazy idea.  And if you do want the Fair Tax, how about writing a quick email to your Representative and Senators (just search for the US House of Representatives and the US Senate in Google and you’ll get the contact information in a few seconds).  And when politicians come calling or the political parties come asking for a donation, how about expressing your desire for a Fair Tax to them.  Maybe 2014 could be the last year where you’ll need to file income taxes.

Contact me at vtsioriginal@yahoo.com, or leave a comment.

Disclaimer: This blog is not meant to give financial planning advice, it gives information on a specific investment strategy and picking stocks. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

10 Reasons Why You Should Like the Fair Tax

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The Fair Tax  is gaining momentum.   My Congresswoman said that she has heard a lot of people calling for the Fair Tax since the IRS scandal broke.  Perhaps you should call or write to your congressman today and demand they pass the Fair Tax.

Why should you?  What’s in it for you?  Well, here are ten reasons you should like the Fair Tax.

10.  You would get your whole paycheck.  There would be no taxes taken out (ok, maybe state taxes, depending where you live).  No federal income taxes, no Social Security taxes, no Medicare taxes.  This means you’d start with 20-45% more money.

9.  You would not need to keep any paperwork.  With the income tax you need to keep documentation of what you made, what you gave, what you bought, and other things.  All of this goes away with the Fair Tax.

8.  The tax can be as level or progressive as you want.  The tax gives a prefund – money sent out to every citizen each month or each year – to cover a share of the taxes paid.  By raising the level of the prefund, you raise the spending level at which people start to pay taxes.  For example, if the prefund is $4000 and the tax rate is 20%, then no one would pay any taxes on the first $20,000 per year that they spent.  This would be enough for most families to buy food, shelter, and basic clothing.

7.  Paying taxes would be as easy as paying sales tax.  The Fair Tax is a national tax on the purchase of new goods.  You would just be told what to pay when you were buying new goods and services – no complex forms required.  You pay the tax and then forget about it.

6.  April 15th would be just another day.  Why ruin a nice spring day with needing to get your forms filled out and sent in.

5.  Income tax forms are a prime target for identity thieves.  Just think about it – your social security number, full name, address, employer, dependants, and bank account data all in one place.  No wonder thieves are stealing these forms from mail boxes and from accountants who file electronically.

4.  Everyone who spends money would pay the tax.  Drug dealers, prostitutes, hitmen, bootleggers, illegal aliens, people paid under-the-table and everyone else who doesn’t typically file income taxes on their income now still spends money.  They would pay the tax like everyone else when they did so, meaning that taxes could be lower for everyone else.

3.  Costs of products would be lower since businesses would not need to spend lots of money figuring out the best way to shelter their incomes.

2.  You would not need to spend hours filling out forms, paying an accountant a few hundred dollars to help you, or even fifty dollars for tax software each year.

1.  The IRS would no longer be needed and have no power over anyone.  Because you would pay your taxes when you bought things and not need to prove to anyone what your income was and what deductions you qualify for, there would be no fear of a letter in the mail or a phone call about an audit.  There would still need to be enforcement to make sure businesses were not dealing under the table, but this would be a lot less subjective.

There are plenty of other reasons to like the Fair Tax.  Learn more about it, then tell a friend if you like what you see.  Things can change – it will just take a lot of people making their voices heard.

Please contact me via vtsioriginal@yahoo.com or leave a comment.

Follow me on Twitter to get news about new articles and find out what I’m investing in.  @SmallIvy_SI

Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

The IRS Scandal Expands – Are You Ready for the Fair Tax Yet?

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The IRS Scandal – Another Reason for the Fair Tax, was written at the start of the IRS scandal.  From testimony since that point it appears that 1)there are officials at the IRS who have been using their power to target Conservative groups for years, 2) people in the IRS have given confidential information from one group to a political opponent (specifically the donor list of the Conservative group so that the Liberal group could harass those donors and quell their free speech) and 3) officials who have been engaged in this activity have been rewarded and promoted.  We also learned today that managers at the IRS have spent a lot of money on conferences, including stays in $3500 per night Presidential Suites and making expensive, embarrassing videos using lavish sets, all paid for by the taxpayer.

I must say that I’m disappointed to not hear from people advocating for the  Fair Tax  as I requested in the last post.  Again, with the Fair Tax, a national sales tax is levied on the sale of new goods and services to consumers.  To keep the tax from being regressive, each citizen would receive a check (or an electronic deposit) from the Government to cover a portion of the taxes.  Those who spent little, perhaps just enough for basic necessities, would therefore pay no taxes, while those who spent a lot, perhaps on a lot of luxuries, would pay more taxes.

One huge benefit of the Fair Tax is not needing to fill out all sorts of paperwork, requiring a lot of time and expense.  You would just pay a sales tax when you bought a new good or service – no paperwork at all for the consumer.   You would also not need to give the Government all sorts of information about your income, giving, and expenses as is currently required with the income tax.  We have now seen that people in the Government can, and apparently do abuse access to that information for political reasons.

Just as it is easy to pay state sales taxes (you just go to the register and the clerk tells you how much it is and you pay it), paying your Federal taxes could be just as easy.  You would not need to keep receipts.  You would not need to lock money away in special accounts or perform fiscal gymnastics when transferring retirement assets from a 401k to an IRA anymore.  The businesses would need to collect the taxes and send them in, but this would be an easy calculation.  Everyone would pay, no matter how they earned their income.  This includes pimps and drug dealers since they buy things too.

Best of all, we could scale back the IRS staff and their power dramatically if the Fair Tax was passed.  With the Fair Tax, we could cut the IRS staff and budget by 90% because they would only need to verify that merchants were collecting and sending in taxes on the items they sold. There are a lot fewer merchants than citizens, and the amount of paperwork would be a lot less, so this would require a lot fewer agents and auditors.  This would remove the ability of Government to abuse citizens with the power of the IRS, through targeted audits, slow walking approvals, or giving out private  information.  While the current scandal should result in a lot of people who engaged in these activities going to jail, I hope you agree that it is clear that a group of elected, political individuals cannot be trusted with this kind of power again.  Next time it might be Liberal organizations who are targeted.

We need people to advocate to their representatives for implementing the Fair Tax or it will never happen.  We need to flood inboxes, mail boxes, and phone banks with calls.  We need postings on blogs, in comment sections, and letters sent to the editors of newspapers.   Everyone needs to learn about the Fair Tax and then discuss it with their friends and family.  Read more about the Fair Tax (don’t take my word for how great it would be), and then forward the link to a friend of three.   Then call or write to your congressman today and demand they pass the Fair Tax.

Once again, when you do, please comment here or write me a note (vtsioriginal@yahoo.com) to let me know you did.  This will also let others know that they are not alone and help build the momentum.  Do something today!

Please contact me via vtsioriginal@yahoo.com or leave a comment.

Follow me on Twitter to get news about new articles and find out what I’m investing in.  @SmallIvy_SI

Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

The IRS Scandal – Another Reason for the Fair Tax.

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The details are still a little foggy, what with the managers pleading the fifth or using the Clintonesque response – “I don’t recall” in the hearings before Congress, but it appears that there was a systematic targeting of Conservative groups filing for tax exempt status.  No applications had been approved for more than two years, while those for Liberal groups sailed through in a matter of a few weeks.  Groups with things like “Tea Party” or “Patriot” in their names were asked things like “How much money do you have in your wallets?”  “What do you discuss at your meetings?”  “Will your board of directors swear under oath to not protest Planned Parenthood?”  “Can you provide your donor list?”  And, the best one of all, “What does your bard of directors pray about?”  There also appears to be targeting of Conservative individuals such as talk show hosts for audits, although that part of the scandal has not yet hit the front pages.

All I can ask is why would anyone want to leave that much power with an agency that could be used in such a fashion?  The IRS has enormous amounts of power to make individuals and groups’ lives miserable.  Even if the agency is run in an ethical fashion, it is necessary to keep receipts, record mileage, spend hours searching the internet to get values for donated items, track any and all income, calculate estimated taxes and minimal withdrawals from retirement accounts, send checks to IRAs and children’s educational IRAs before specific dates, and either spend hours each year filing out returns or paying hundreds of dollars for professional to do so for you.  Get it wrong and you can plan on a fine and paying interest.  Overpay and don’t plan on getting any interest back.  And then save the returns and receipts for years in case the IRS decides to audit you and you need to prove your income and expenses.

Why do this when it is so unnecessary?  The Fair Tax doesn’t reduce taxes (although it could, if desired, just by lowering the rate).  All it does is make it easy to calculate and pay taxes, both for individuals and businesses.

With the Fair Tax, a national sales tax is levied on the sale of new goods and services to consumers.  To keep the tax from being regressive, each citizen would receive a check (or an electronic deposit) from the Government to cover a portion of the taxes.  Those who spent little, perhaps just enough for basic necessities, would therefore pay no taxes, while those who spent a lot, perhaps on a lot of luxuries, would pay more taxes.  This would not penalize production, as the income tax does, but instead penalize  spending.  Making money means that people are providing for the needs of others and doing something useful – which should be rewarded.  Spending means that things are being consumed.  Too much spending leads to debt, broken marriages, and homeless kittens, which should be discouraged.  The Fair Tax does not penalize earning – it penalizes spending.

Just as it is easy to pay state sales taxes (you just go to the register and the clerk tells you how much it is and you pay it), paying your Federal taxes could be just as easy.  You would not need to keep receipts.  You would not need to lock money away in special accounts or perform fiscal gymnastics when transferring retirement assets from a 401k to an IRA anymore.  The businesses would need to collect the taxes and send them in, but this would be an easy calculation.  Even the IRS commissioner, when testifying this week, complained that they don’t have enough money for enforcement.  With the Fair tax, we could cut the IRS staff and budget by 90% because they would only need to verify that merchants were collecting and sending in taxes on the items they sold.  There are a lot fewer merchants than citizens, and the amount of paperwork would be a lot less, so this would require a lot fewer agents and auditors.

Advantages to the Fair Tax:

1.  Costs of good would go down because the cost of tax compliance for businesses would also drop.  This would offset some of the tax, meaning you would get the same government services for less money.

2.  Everyone would get about a 25% raise in their take-home pay since taxes would not be taken out.  Stick 15% of pay in stocks, which would be easier with the extra income, and you could be a millionaire before you were forty, probably without cutting your lifestyle from what it is now.

3.  There would be no more fear of the IRS, and a lot of the workers in the IRS could go find something more productive to do.

4.  No individuals would need to fill out tax returns.  Returns for businesses would be simple – just the total of sales on one line, the tax on another, and maybe an address.

5.  We could do away with Social Security numbers.  You wouldn’t need to spend tens of hours cleaning up your credit because your doctor’s office or employer had a rogue employee who stole your number and sold it on the internet.

6.  April 15th would be just another day in spring.

7.  Everyone, including drug dealers, prostitutes, illegal aliens, and venture capitalists would pay taxes.

The political will has never been better for implementing the Fair Tax.  This won’t happen, however, unless people start to demand it.  Don’t wait for your audit to come.  Read more about the Fair Tax (don’t take my word for how great it would be).   Then call or write to your congressman today and demand they pass the Fair Tax.  If you do, please comment here or write me a note (vtsioriginal@yahoo.com) to let me know.

Share this post with your friends on Facebook.  Tweet and retweet, or just let a friend know about the Fair Tax at work.  Let’s see if we can get 100,000 calls or emails before the month is out and cancel the 2013 tax season.  Let’s not spend another year keeping receipts and having FICA keep our money.

Please contact me via vtsioriginal@yahoo.com or leave a comment.

Follow me on Twitter to get news about new articles and find out what I’m investing in.  @SmallIvy_SI

Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

It’s (Past) Time to Switch to the Fair Tax

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It’s tax time again.  Once again people are gathering receipts, getting their 1099’s together, and either spending their weekends with TurboTax or going to an accountant to have their taxes prepared.  It is likely that most people are spending something like $400 on tax prep fees and/or between ten and twenty hours pulling together the paperwork and filling out forms.  Some have payments due and will need to find the money to write a big check.  Others will be getting a refund, which sounds great until you realize that you have made an interest free loan to the government.  Given that refunds are going out later this year due to the uncertainty at the end of the year, that means the government is keeping your money an extra month or two, still interest free.

The saddest thing is that it doesn’t need to be this way.  If the current income tax (and Payroll taxes) were replaced with a national sales tax, all of the hassle surrounding the filing of taxes would be eliminated.  April 15th would just be another day in the Spring.  You wouldn’t need to set up special tax-deferred retirement accounts and worry if you’d made your yearly contribution.  You wouldn’t need to launder your prescription money through Health Flexible spending accounts and be accused of being a meth maker because you were buying a bunch of cold medicine to avoid losing your remaining balance.  You wouldn’t need to worry if selling a stock would trigger taxes, or buy special windows or appliances to save on taxes.  And finally, you would never need to worry about the IRS or need to keep seven years of receipts handy just in case they call you in for an audit.

The answer is the Fair Tax.  Here’s how it works:

1.  The income and the payroll taxes would be eliminated, meaning that you would receive your entire paycheck.  There would be no need to worry about taxes, fill out W2’s, or track anything for tax purposes.  Without all of these taxes, your paycheck would be at least 25% bigger.

2.  Anytime you buy any new goods or services, a sales tax would be charged.  In order to keep collecting the same revenue as the government currently does, this sales tax would be about 23%.  This sounds hefty, but again your paycheck would be 25% bigger, so you should be saving at least $1000 per year on a $50,000 salary.  If you didn’t spend your entire paycheck, you would save even more.

3.  Unlike the VAT which is being pushed by some to use in addition to the income tax to generate more revenue, goods would only be charged when sold retail to the consumer.  This means that companies could lower the amount they charge since they would not be paying corporate taxes on their income and they would also not need to pay for all of the tax planning they do.  They wouldn’t need to pay for the big HR department to handle tax collections from their workers, meanig they could hire more people to actually make things!  This savings would be passed along to the consumer, in part, meaning that the price of goods would fall.  It is speculated that much of the 23% tax would be offset by the reduction in the cost of goods due to the savings created.

4.  To prevent a regressive tax system, a “prefund” would be sent out at the start of the year.  This would reduce or eliminate the taxes paid on the first dollars of each person’s spending.  For example, if each individual received a $5,000 prefund and the Fair Tax were 20%, no one would be paying taxes on the first $25,000 of their income (because any sales taxes collected would be offset by the $5000 prefund they received).  By setting the prefund appropriately, no one would be paying taxes at all on necessities – it would just be the spending beyond that.  The poor would not pay taxes, nor would people who live modestly and invest for their future while they were building up wealth.

There are a lot of advantages to this system besides not needing to fill out paperwork.  Because it is a sales tax and would be harder to dodge than an income tax, there would be less cheating which means lower taxes for everyone.  Even drug dealers and prostitutes would be paying taxes when they spent their money.  So  would people being paid under-the-table.

Also, it rewards saving and penalizes spending.  Because a society of savers is able to take care of themselves better than a society of spenders, this would make the nation better able to weather downturns in the economy.  It would also mean a lot more investment since investment returns would not be taxed until they were spent, so there would be a lot more innovation and jobs.

If you would like to never worry about keeping track of your income and no longer be in fear that the IRS will come knocking, support the Fair Tax today.  Like this post and share it with as many people as you can.  Tweet about it (#FairTaxNow), put it on your FaceBook wall and talk to all of your friends about it.  Go to the Fair Tax website and learn more.  If you are a blogger, please copy and reblog this post on your site or write your own post about it.  Finally, call, write, and email your representatives and let them know that you want the Fair Tax.  This will be a difficult change to make because people in general are fearful of change and politicians like the current tax system since it lets them reward their special interest groups.  Once people learn the facts, however, they’ll see that it would be a much better system.  Let’s change things this year and let 2012 be the last year you need to file income taxes!

Any concerns about the Fair Tax?  Any ideas on how we could get it enacted?

Please contact me via vtsioriginal@yahoo.com or leave a comment.

Follow me on Twitter to get news about new articles and find out what I’m investing in.  @SmallIvy_SI

Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.