The Chairman’s Report May 20, 2022

  • by:
  • Source: FAIRtax
  • 05/20/2022

The Tax Foundation Is Advocating Sales Tax!


The Surprising Regressivity of Grocery Tax Exemptions is the title of a study written by Jared Walczak for the Tax Foundation.  Here are some of the findings:
 
  • Exempting groceries from the state sales tax base reduces economic efficiency without achieving its objective of enhancing tax progressivity.
  • A household in the fifth income group spends almost 70 percent more on groceries than a household in the lowest income group, and a household in the top decile spends over three times as much as a household in the lowest.
  • If lower-income families spend moderately more on groceries, as a share of income, but substantially more on other household goods, then they will be worse off under a tax system which exempts groceries but imposes a higher rate on other goods than would be necessary if groceries were included in the base.
  • Grocery purchases are a sizable and stable share of personal consumption, and exempting them from the primary consumption tax not only erodes the sales tax base, necessitating higher rates on other goods, but also increases revenue volatility.
  • The poorest group of households pay 9 percent more sales tax liability with a grocery tax exemption than they would if groceries were taxed and the general rate was reduced commensurately.
  • Grocery tax credits provide actual progressivity at a lower cost than the broad exemption of groceries. Under a revenue-neutral expansion paired with a $75 per person credit, the poorest decile of households would save 31 percent on sales tax liability.
  • Income taxes reduce the return on both labor and investment. They are a tax on both present and future consumption. Conversely, sales taxes affect only present consumption.  Therefore, a sales tax does not have the same impact as an income tax on economic decision-making that affects labor supply, capital investment, or productivity gains. All else being equal, heavier reliance on sales taxes rather than income taxes is better for a state’s competitiveness and economic growth.
  • Sales taxes are more stable and pro-growth than many other forms of taxation, especially income taxes, so policymakers have an opportunity to increase tax progressivity, enhance revenue stability, and improve economic competitiveness by taxing groceries, providing a credit, and using the remaining revenue from base broadening to cut income taxes.
The last finding has been set in bold because what is being stated as true is evidence of the growing, sometimes reluctant, recognition by the Tax Foundation that “…sales taxes are more stable and pro-growth than many other forms of taxation, especially income taxes...”

This conclusion further confirms the economic analysis done by groups in Alabama, Georgia and Nebraska where there are bills pending to replace those state’s income taxes with a consumption tax modeled on the FAIRtax.

The big elephant in the room is the federal income/payroll tax which raises the prices of everything we buy by at least 10% and, in some cases, maybe as high as 20%.  In addition, because of the payroll tax and income tax withholding, there is already between an 8% and 25% tax on all purchases because you can only purchase goods and services from your net pay after taxes.

Reforming a state’s tax system does not remedy the federal situation but of course it will help.  The state FAIRtax proposals in Alabama, Georgia and Nebraska contain a prebate, as does the national bill, and makes the sales tax much less regressive—a common complaint raised against sales taxes.

In addition, and this was the point of the above study, the state FAIRtax will lower the overall rate and help all citizens—particularly the lower income citizens who, in addition to receiving the prebate, will pay less for the things that they purchase the most.
 

Conclusion


Like many foundations in D.C. that owe their continuing livelihood to the income/payroll tax system, the Tax Foundation has not endorsed the FAIRtax.

However, the Tax Foundation seems to be slowly recognizing the economic truth that sales taxes are better than income taxes.  There is no economic or policy reason for the Tax Foundation not to endorse the FAIRtax.   

Our members should write to the Tax Foundation, reference this study and ask, ”If it works for the states, why wouldn’t a national retail sales tax work for the entire nation?”

The Ruling Class and their minions in D.C. are feverishly working to justify continuing the corrupt and failing income/payroll tax system.  They have control of the media, but they don’t have control of the basic intelligence and common sense of the American people.

The rapidly growing level of income tax evasion and the growing condemnation of the income/payroll tax system signal that the Ruling Class’s efforts to convince us that “black is white” are coming to an end.

As Walt Disney said, All our dreams can come true if we have the courage to pursue them.

The income/payroll tax system is broken and no longer working—we can’t repair it but we can replace it with the FAIRTAX!
 

Join us and TAKE BACK CONTROL OF OUR COUNTRY—NOT WITH BULLETS BUT WITH THE ELIMINATION OF ONE OF THE BIGGEST THREATS TO OUR LIBERTY AND ECONOMIC PROSPERITY—THE INCOME/PAYROLL TAX.

We all should remember Edmund Burke’s warning that applies to our efforts to TAKE BACK CONTROL,
 
“Nobody made a greater mistake than he who did nothing because he could do only a little.”

We should also remember this quote from George Orwell's 1984, which, if we do nothing, may foretell your and your children's future:

“If you want a picture of the future, imagine a boot stamping on a human face—forever.”


What Can Each Of Us Do?

 

We can write letters and make calls to our elected representatives and attend Zoom town hall meetings demanding that if they really want to allow Americans to “TAKE BACK CONTROL”, the first step is to eliminate the income/payroll tax system and enact the FAIRTAX!

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?”

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