The Grassroots Corner May 23, 2022

  • by:
  • Source: FAIRtax
  • 05/23/2022

HOSTILE ARGUMENT: THE FAIRTAX WILL HURT STATE AND LOCAL GOVERNMENTS THAT ISSUE BONDS

 
This Grassroots Corner continues a series on dealing with hostile questions, comments, and myths that people may raise about the FAIRtax. Many of these suggested responses will be good comebacks for you to have in your pocket when you need them. However, some of these suggested responses can be too long to insert into an actual conversation. You may want to boil them down to where they'll be more useful when talking face-to-face with someone attacking the FAIRtax.
 
This week, we take on an argument that you may not have heardabout the FAIRtax. A member of my town council voiced concern that under the FAIRtax, towns, counties, and states would have a more challenging time borrowing money. Under today's federal tax code, state and local governments can issueincome-tax-free bonds to their lenders. 
 
The tax free status of those bonds makes them attractive investments, even at lower interest rates. In today’s world, corporate bondholders have to pay income tax on the interest they receive from those bonds.  In turn, corporations have to pay higher interest rates on their bonds to make them competitive with the tax free bonds.
 
My town council member was concerned that the FAIRtax would erase the tax advantage that government bonds currently enjoy over corporate bonds.  With government and corporate bonds competing for investors’ money on an even playing field, he was afraid that the FAIRtax would make it more expensive for state and local governments to borrow money.
 
But there is a flip side to my town council member’s argument. Under today’s tax code, only high-income lenders would find state and local tax-free bonds attractive. The FAIRtax would open the state and local government market to a whole new class of investors. This new class of investors would increase the supply of funds from which state and local governments can borrow, thereby driving down the cost of borrowing.
 
Perhaps there is a non-tax reason why state and localgovernment bonds would still be attractive relative to corporate bonds - safety. Governments are less likely to default because they can compel their taxpayers to cover the debt in a way that corporations cannot.
 
Upon its implementation, the FAIRtax may give a windfall to those who just bought corporate bonds as the tax liability goes away while the higher interest rates stay. Corporations may call those bonds.  However, over time, the differences will even outand the FAIRtax will have accomplished one of its major design goals—be fair to everyone by treating everyone the same.
 
I would love to hear your thoughts about corporate and municipal bonds under the FAIRtax. How can we squeeze this explanation into a soundbite?


Take Back Control!

Jim Bennett
AFFT Grassroots Coordinator & Secretary

 

🇺🇸   Call For Pictures & WriteUps - When others see your activity, they are inspired, the process snowballs and Representatives, Senators and, yes, even the President start to listen to you and me. Please send your material to me at Jim.Bennett@FAIRtax.org.

🇺🇸   The Official FAIRtax Store - Don’t forget to order your FAIRtax gear from the FAIRtax Store.

🇺🇸   We've Got You Covered, If You Let Us Know - If you are planning an event, we have event insurance coverage available for you. Email me the "who-what-where-when" and I will obtain for you a COI. Once the event is underway, it's too late.
 

Help FAIRtax Become The Number One Issue in 2022

Enacting the FAIRtax must be a prominent topic in these times. We did it before, we can do it again, but we need your help!

Help out with a One-Time Contribution

Your gift of $25, $50, $100 – even $1,000 or more if you can possibly spare it – will help FAIRtax.org bring an end to the IRS and promote a FAIRtax. So, I urge you, please give as generously as you can.

Billing information (REQUIRED)

Payment information (REQUIRED)

To donate by check:
Americans for Fair Taxation
PO Box 4929
Clearwater, FL 33758

If you need to make changes to your existing Monthly Re-Occurring Donation with new card or billing address information, then Please call Adam Yomtov our New York State Co-Director. He is assisting with the administration of our donations, technology services, and website.

Please note: Inputting your new information at our website won't update your donation. The only way to update is by calling Adam Yomtov 917-689-3931 mobile.


Americans for Fair Taxation® is a 501(c)(4) non-profit, non-partisan grassroots organization solely dedicated to replacing the current income tax system with a fair, simple and transparent national consumption tax – the FAIRtax® Plan. We rely entirely on contributions from concerned citizens like you who want a tax system that will generate jobs and stimulate the economy. Welcome to the FAIRtax team!

Connect

Share