THE INCOME/PAYROLL TAX, THE FAIRTAX AND ILLEGAL INCOME
IRS Publication 17, Tax Guide 2021, is 180 pages long—48 pages longer than HR 25, the FAIRtax Act. The Guide instructs us that the following income is reportable:
- Bribes
- Gambling winnings
- Cash payments
- Value of barter received for goods or services
- Money received from the sale of illegal drugs
- The fair market value of anything you steal
- Kickback payments you receive
If you report receiving any illegal money, you are admitting to breaking the law. In that case, you can be prosecuted, and in many cases the crimes to which you admit carry much more severe penalties than any prison sentence for failing to report the illegal money.
Many have argued that making people report income from criminal activity on their income tax return is a violation of the Fifth Amendment protection against self-incrimination. In the case of United States v. Sullivan, 274 U.S. 259, 264 (1927), the Supreme Court ruled that the Fifth Amendment’s self-incrimination protection can be employed to protect the taxpayer from having to reveal the source of any illegal income, but it does not relieve the taxpayer of the obligation to report that income on his tax return. This ruling has been followed by the courts and is applicable.
So how does this impact the US Treasury? Assume a drug dealer is making $100,000 a year selling illegal drugs and not reporting it. In that case, the Treasury loses $15,000 in federal income taxes, plus another $15,000 in self-employment Social Security taxes for a total of $30,000.
In addition, the dealer is not paying any state or local income taxes either.
People who receive income from illegal sources generally take precautions to ensure that the money cannot be traced back to them. They make purchases in cash and through other entities that cannot be traced to them. These people live in our country and benefit from the income/payroll taxes the rest of us pay, but contribute nothing.
THE FAIRTAX AND ILLEGAL INCOME
Because the FAIRtax is collected on retail sales of new goods and services, there is no requirement to report income—legal or illegal.
The FAIRtax is collected on each retail sale of new goods and services. Sellers of new retail goods and retail services are required to register with their state revenue department and collect the FAIRtax on each sale. If a retail seller does not collect and remit the FAIRtax on each sale, they are in violation of the law and can be prosecuted.
No one expects that sellers of illegal items will register and collect the FAIRtax on their sales any more than they will report their illegal income on federal tax returns.
However, there is a major difference between the present income/payroll tax and the FAIRtax. Those receiving illegal income will still spend that money making retail purchases. Consequently, the drug dealer making $100,000 a year and paying no income tax becomes a taxpayer under the FAIRtax each time the drug dealer makes a purchase of new retail goods and services.
CONCLUSION
Al Capone was sent to prison for criminal tax evasion. However, he stated the obvious when he said, They can't collect legal taxes from illegal money.Capone was talking about the income tax, not the FAIRtax. Will people receiving illegal income willingly pay the FAIRtax? If they make retail purchases, they will. Again, the FAIRtax doesn’t distinguish between legally and illegally obtained money. It’s collected on every retail purchase of new goods and services.
Of course, people failing to report and pay taxes on illegal money are responsible for only a small portion of the nearly $1 trillion a year tax gap. Most of that gap is created by people in legitimate businesses who do not report all of their income or who exaggerate their deductions.
When this $1 trillion is spent, the portion going to new retail goods and services will be subject to the FAIRtax.
The FAIRtax can make a dramatic impact on all of our lives for the good. We can TAKE BACK CONTROL OF OUR LIVES!
Since we still have elections, we have the ability to elect federal representatives who will replace the complex income/payroll tax system with the FAIRtax.
We just need to keep pointing out the insanity of the complex income tax and the benefits of the FAIRtax to everyone. Our friends and neighbors who we need to vote with us for a sane system of taxation just need to be informed.
WHAT CAN EACH OF US DO?
We can write letters and make calls to our elected representatives demanding that if the government really wants to eliminate the burden of filing income tax returns, they should enact the FAIRtax and do away with tax returns altogether.
The great 18th century Irish statesman Edmund Burke made a statement that applies in many ways,
“Nobody made a greater mistake than he who did nothing because he could do only a little.”
If you want to prevent the IRS from being further weaponized to punish those of us who may object to the D.C. opinions and dictates of what is good for us, then help us PASS THE FAIRTAX!
The IRS will be gone and we will pay our taxes when we make purchases. WE and not D.C. Elites will decide how much federal tax we pay!
If you have friends who don’t know about the FAIRtax, send them to FAIRtax.org. Have them watch the white boards under “How It Works” and, if they agree, ask them to please join us.
Then contact your Members of Congress and the President and demand that Congress pass -the FAIRtax—the only fair tax.
Remember, if we don't continue to tell the truth and demand a change, then this quote from George Orwell's 1984 may foretell our children's future:
“If you want a picture of the future, imagine a boot stamping on a human face—forever.”
Is it hopeless? When confronted with a seemingly impossible problem, remember the statement attributed to the author George Bernard Shaw who wrote, You see things; and you say “Why?” But I dream things that never were; and I say “Why not?”
Isn’t it time for us to ask, “Why not?”
HELP BRING ABOUT REAL TAX REFORM AND STOP FUTURE IRS ABUSES
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