The Pronk Pops Show 366, November 7, 2014, Story 1: Only 214,000 Jobs Created in October Yet Unemployment Rate Falls to 5.8% With A Very Low Labor Participation Rate At 62.8% — 36 Year Low — Normal Would Be 66-67% Range — Big Government Leads To Low Growth and Higher Unemployment — Videos

Posted on November 7, 2014. Filed under: American History, Banking System, Benghazi, Blogroll, Budgetary Policy, Business, College, Communications, Consitutional Law, Constitutional Law, Corruption, Crime, Culture, Economics, Elections, Empires, Employment, European History, Fast and Furious, Federal Government, Fiscal Policy, Foreign Policy, Genocide, Government, Government Dependency, Government Spending, Health Care, Health Care Insurance, High Crimes, History, Illegal Immigration, Illegal Immigration, Immigration, Impeachment, Insurance, Investments, IRS, Labor Economics, Law, Legal Immigration, Media, Monetary Policy, Oil, Philosophy, Photos, Politics, Polls, Public Sector Unions, Radio, Regulation, Resources, Scandals, Security, Social Networking, Success, Tax Policy, Taxes, Technology, Terror, Terrorism, Unemployment, Unions, United States Constitution, Videos, Violence, War, Wealth, Weapons, Wisdom | Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , |

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The Pronk Pops Show Podcasts

Pronk Pops Show 366: November 7, 2014

Pronk Pops Show 365: November 6, 2014

Pronk Pops Show 364: November 5, 2014

Pronk Pops Show 363: November 4, 2014

Pronk Pops Show 362: November 3, 2014

Pronk Pops Show 361: October 31, 2014

Pronk Pops Show 360: October 30, 2014

Pronk Pops Show 359: October 29, 2014

Pronk Pops Show 358: October 28, 2014

Pronk Pops Show 357: October 27, 2014

Pronk Pops Show 356: October 24, 2014

Pronk Pops Show 355: October 23, 2014

Pronk Pops Show 354: October 22, 2014

Pronk Pops Show 353: October 21, 2014

Pronk Pops Show 352: October 20, 2014

Pronk Pops Show 351: October 17, 2014

Pronk Pops Show 350: October 16, 2014

Pronk Pops Show 349: October 15, 2014

Pronk Pops Show 348: October 14, 2014

Pronk Pops Show 347: October 13, 2014

Pronk Pops Show 346: October 9, 2014

Pronk Pops Show 345: October 8, 2014

Pronk Pops Show 344: October 6, 2014

Pronk Pops Show 343: October 3, 2014

Pronk Pops Show 342: October 2, 2014

Pronk Pops Show 341: October 1, 2014

Pronk Pops Show 340: September 30, 2014

Pronk Pops Show 339: September 29, 2014

Pronk Pops Show 338: September 26, 2014

Pronk Pops Show 337: September 25, 2014

Pronk Pops Show 336: September 24, 2014

Pronk Pops Show 335: September 23 2014

Pronk Pops Show 334: September 22 2014

Pronk Pops Show 333: September 19 2014

Pronk Pops Show 332: September 18 2014

Pronk Pops Show 331: September 17, 2014

Pronk Pops Show 330: September 16, 2014

Pronk Pops Show 329: September 15, 2014

Pronk Pops Show 328: September 12, 2014

Pronk Pops Show 327: September 11, 2014

Pronk Pops Show 326: September 10, 2014

Pronk Pops Show 325: September 9, 2014

Pronk Pops Show 324: September 8, 2014

Pronk Pops Show 323: September 5, 2014

Pronk Pops Show 322: September 4, 2014

Pronk Pops Show 321: September 3, 2014

Pronk Pops Show 320: August 29, 2014

Pronk Pops Show 319: August 28, 2014

Pronk Pops Show 318: August 27, 2014 

Pronk Pops Show 317: August 22, 2014

Pronk Pops Show 316: August 20, 2014

Pronk Pops Show 315: August 18, 2014

Pronk Pops Show 314: August 15, 2014

Pronk Pops Show 313: August 14, 2014

Pronk Pops Show 312: August 13, 2014

Pronk Pops Show 311: August 11, 2014

Pronk Pops Show 310: August 8, 2014

Pronk Pops Show 309: August 6, 2014

Pronk Pops Show 308: August 4, 2014

Pronk Pops Show 307: August 1, 2014

Story 1: Only 214,000 Jobs Created in October Yet Unemployment Rate Falls to 5.8% With A Very Low Labor Participation Rate At 62.8% — 36 Year Low — Normal Would Be 66-67% Range — Big Government Leads To Low Growth and Higher Unemployment — Videos

labor-force-participation-rate-obama-unemploymenlabor_force_participation_rate

civilian-labor-force-participation-rate

part1202121_big

Labor-Force-Participation-Rate1

labor-participation-rate-1979-2013

U.S. Labor Participation Rate – Graph of Reagan vs obama

Labor participation rate is down to unprecedented levels

Manipulated Unemployment Rate Drops As The Economic Collapse Accelerates

JEC Chair Brady discusses the importance of declining labor force participation rate

Explaining Labor Participation Rates

Labor Secretary Perez: Paid Leave Would Boost Labor Force Participation

Plosser: Labor Participation Rate Down Since 2002

Labor Secretary Dismisses Historical Drop in Labor Participation Rate

Labor Participation Rate Drops To 36 Year Low- Record 92.6 Million Amerikan Not In Labor Force

Vice Chairman Brady Questions Commissioner Hall about Labor Force Participation Rate at JEC Hearing

Uploaded on Apr 1, 2011

At a Joint Economic Committee Hearing on the Employment Situation, Representative Kevin Brady, Vice Chairman, questions Witness Dr. Keith Hall, Commissioner, Bureau of Labor Statistics about the Labor Force Participation Rate in the March Employment Report.

Hot News| Unemployment drops, Americans not happy#1| November 7, 2014

Labor Department reports employers added 214,000 jobs in October

Unemployment and the Unemployment Rate

Types of Unemployment

Big Government vs. Small Government

What We Believe, Part 1: Small Government and Free Enterprise

What We Believe, Part 2: The Problem with Elitism

What We Believe, Part 3: Wealth Creation

What We Believe, Part 6: Immigration

 

MARC FABER Gives His Predictions on Stock Market Collapse, Gold, US Dollar ECON

Home Depot Hacking, Jobs Report, Cargo Backlog – Today’s Investor News

U.S. Oil Slides to 3-year Low as Saudi Discount Adds to Woes

Gasoline Prices: Why Are They Going Down Now?

What’s behind the sudden drop in US gas prices?

MARC FABER on OIL PRICES – Oil Prices Wont Go Below $70 For A Long Time

U.S. wage growth needed before Fed will raise rates – Decision Economics

Optimistic jobs report October

November Small Biz Jobs Report a Mixed Bag | NFIB

US Dollar Collapse and the Rise of China – Peter Schiff‬‬

JIM ROGERS – Sell Everything & Run For Your Lives

Consumer Sentiment in U.S. Increases to a Seven-Year High

Consumer confidence in the U.S. unexpectedly rose in October to the highest level in seven years, showing a brightening in Americans’ moods as gas prices drop and the labor market gains traction.

The Thomson Reuters/University of Michigan preliminary sentiment index for this month increased to 86.4, the strongest since July 2007, from a final reading of 84.6 in September. The median projection in a Bloomberg survey of 67 economists called for 84.

Job gains on pace for their strongest year since 1999 and cheaper gas prices are keeping households upbeat about economic expansion amid the weakening in Europe and emerging nations. Faster wage increases and more broad-based improvement in the labor market would help further spur the consumer spending that makes up about 70 percent of the economy.

“An improving job market and lower energy costs are going to offset a lot of what’s happening,” said Joseph LaVorgna, chief U.S. economist of Deutsche Bank Securities Inc. in New York, who projected the index would rise to 86.

Estimates in the Bloomberg survey ranged from 81 to 87. The index averaged 89 in the five years before December 2007, when the last recession began, and 64.2 in the 18-month contraction that followed.
Shares Rally

 

 

 

sgs-emp

 

Employment Level

147,283,000

Series Id:           LNS12000000
Seasonally Adjusted
Series title:        (Seas) Employment Level
Labor force status:  Employed
Type of data:        Number in thousands
Age:                 16 years and over

employment level

Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Annual
2000 136559(1) 136598 136701 137270 136630 136940 136531 136662 136893 137088 137322 137614
2001 137778 137612 137783 137299 137092 136873 137071 136241 136846 136392 136238 136047
2002 135701 136438 136177 136126 136539 136415 136413 136705 137302 137008 136521 136426
2003 137417(1) 137482 137434 137633 137544 137790 137474 137549 137609 137984 138424 138411
2004 138472(1) 138542 138453 138680 138852 139174 139556 139573 139487 139732 140231 140125
2005 140245(1) 140385 140654 141254 141609 141714 142026 142434 142401 142548 142499 142752
2006 143150(1) 143457 143741 143761 144089 144353 144202 144625 144815 145314 145534 145970
2007 146028(1) 146057 146320 145586 145903 146063 145905 145682 146244 145946 146595 146273
2008 146378(1) 146156 146086 146132 145908 145737 145532 145203 145076 144802 144100 143369
2009 142152(1) 141640 140707 140656 140248 140009 139901 139492 138818 138432 138659 138013
2010 138451(1) 138599 138752 139309 139247 139148 139179 139427 139393 139111 139030 139266
2011 139287(1) 139422 139655 139622 139653 139409 139524 139904 140154 140335 140747 140836
2012 141677(1) 141943 142079 141963 142257 142432 142272 142204 142947 143369 143233 143212
2013 143384(1) 143464 143393 143676 143919 144075 144285 144179 144270 143485 144443 144586
2014 145224(1) 145266 145742 145669 145814 146221 146352 146368 146600 147283
1 : Data affected by changes in population controls.

 

Civilian Labor Force Level

156,278,000




Series Id:           LNS11000000
Seasonally Adjusted
Series title:        (Seas) Civilian Labor Force Level
Labor force status:  Civilian labor force
Type of data:        Number in thousands
Age:                 16 years and over

civilian labor force level
Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Annual
2000 142267(1) 142456 142434 142751 142388 142591 142278 142514 142518 142622 142962 143248
2001 143800 143701 143924 143569 143318 143357 143654 143284 143989 144086 144240 144305
2002 143883 144653 144481 144725 144938 144808 144803 145009 145552 145314 145041 145066
2003 145937(1) 146100 146022 146474 146500 147056 146485 146445 146530 146716 147000 146729
2004 146842(1) 146709 146944 146850 147065 147460 147692 147564 147415 147793 148162 148059
2005 148029(1) 148364 148391 148926 149261 149238 149432 149779 149954 150001 150065 150030
2006 150214(1) 150641 150813 150881 151069 151354 151377 151716 151662 152041 152406 152732
2007 153144(1) 152983 153051 152435 152670 153041 153054 152749 153414 153183 153835 153918
2008 154063(1) 153653 153908 153769 154303 154313 154469 154641 154570 154876 154639 154655
2009 154210(1) 154538 154133 154509 154747 154716 154502 154307 153827 153784 153878 153111
2010 153404(1) 153720 153964 154642 154106 153631 153706 154087 153971 153631 154127 153639
2011 153198(1) 153280 153403 153566 153526 153379 153309 153724 154059 153940 154072 153927
2012 154328(1) 154826 154811 154565 154946 155134 154970 154669 155018 155507 155279 155485
2013 155699(1) 155511 155099 155359 155609 155822 155693 155435 155473 154625 155284 154937
2014 155460(1) 155724 156227 155421 155613 155694 156023 155959 155862 156278
1 : Data affected by changes in population controls.

Civilian Labor Participation Rate

62.8%

Series Id:           LNS11300000
Seasonally Adjusted
Series title:        (Seas) Labor Force Participation Rate
Labor force status:  Civilian labor force participation rate
Type of data:        Percent or rate
Age:                 16 years and over
civilian labor participation rate
Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Annual
2000 67.3 67.3 67.3 67.3 67.1 67.1 66.9 66.9 66.9 66.8 66.9 67.0
2001 67.2 67.1 67.2 66.9 66.7 66.7 66.8 66.5 66.8 66.7 66.7 66.7
2002 66.5 66.8 66.6 66.7 66.7 66.6 66.5 66.6 66.7 66.6 66.4 66.3
2003 66.4 66.4 66.3 66.4 66.4 66.5 66.2 66.1 66.1 66.1 66.1 65.9
2004 66.1 66.0 66.0 65.9 66.0 66.1 66.1 66.0 65.8 65.9 66.0 65.9
2005 65.8 65.9 65.9 66.1 66.1 66.1 66.1 66.2 66.1 66.1 66.0 66.0
2006 66.0 66.1 66.2 66.1 66.1 66.2 66.1 66.2 66.1 66.2 66.3 66.4
2007 66.4 66.3 66.2 65.9 66.0 66.0 66.0 65.8 66.0 65.8 66.0 66.0
2008 66.2 66.0 66.1 65.9 66.1 66.1 66.1 66.1 66.0 66.0 65.9 65.8
2009 65.7 65.8 65.6 65.7 65.7 65.7 65.5 65.4 65.1 65.0 65.0 64.6
2010 64.8 64.9 64.9 65.2 64.9 64.6 64.6 64.7 64.6 64.4 64.6 64.3
2011 64.2 64.2 64.2 64.2 64.2 64.0 64.0 64.1 64.2 64.1 64.1 64.0
2012 63.7 63.9 63.8 63.7 63.8 63.8 63.7 63.5 63.6 63.7 63.6 63.6
2013 63.6 63.5 63.3 63.4 63.4 63.5 63.4 63.2 63.2 62.8 63.0 62.8
2014 63.0 63.0 63.2 62.8 62.8 62.8 62.9 62.8 62.7 62.8

 

Unemployment Level

 

8,995,000

Series Id:           LNS13000000
Seasonally Adjusted
Series title:        (Seas) Unemployment Level
Labor force status:  Unemployed
Type of data:        Number in thousands
Age:                 16 years and over

unemployment level

Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Annual
2000 5708 5858 5733 5481 5758 5651 5747 5853 5625 5534 5639 5634
2001 6023 6089 6141 6271 6226 6484 6583 7042 7142 7694 8003 8258
2002 8182 8215 8304 8599 8399 8393 8390 8304 8251 8307 8520 8640
2003 8520 8618 8588 8842 8957 9266 9011 8896 8921 8732 8576 8317
2004 8370 8167 8491 8170 8212 8286 8136 7990 7927 8061 7932 7934
2005 7784 7980 7737 7672 7651 7524 7406 7345 7553 7453 7566 7279
2006 7064 7184 7072 7120 6980 7001 7175 7091 6847 6727 6872 6762
2007 7116 6927 6731 6850 6766 6979 7149 7067 7170 7237 7240 7645
2008 7685 7497 7822 7637 8395 8575 8937 9438 9494 10074 10538 11286
2009 12058 12898 13426 13853 14499 14707 14601 14814 15009 15352 15219 15098
2010 14953 15121 15212 15333 14858 14483 14527 14660 14578 14520 15097 14373
2011 13910 13858 13748 13944 13873 13971 13785 13820 13905 13604 13326 13090
2012 12650 12883 12732 12603 12689 12702 12698 12464 12070 12138 12045 12273
2013 12315 12047 11706 11683 11690 11747 11408 11256 11203 11140 10841 10351
2014 10236 10459 10486 9753 9799 9474 9671 9591 9262 8995

Unemployment Rate U-3

5.8%

Series Id:           LNS14000000
Seasonally Adjusted
Series title:        (Seas) Unemployment Rate
Labor force status:  Unemployment rate
Type of data:        Percent or rate
Age:                 16 years and over

unemployment_rate_U_3


2014

 

Year
2000
2001

Employment-Population Ratio

59.2%

Series Id:           LNS12300000
Seasonally Adjusted
Series title:        (Seas) Employment-Population Ratio
Labor force status:  Employment-population ratio
Type of data:        Percent or rate
Age:                 16 years and over

employment_population_level

Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Annual
2000 64.6 64.6 64.6 64.7 64.4 64.5 64.2 64.2 64.2 64.2 64.3 64.4
2001 64.4 64.3 64.3 64.0 63.8 63.7 63.7 63.2 63.5 63.2 63.0 62.9
2002 62.7 63.0 62.8 62.7 62.9 62.7 62.7 62.7 63.0 62.7 62.5 62.4
2003 62.5 62.5 62.4 62.4 62.3 62.3 62.1 62.1 62.0 62.1 62.3 62.2
2004 62.3 62.3 62.2 62.3 62.3 62.4 62.5 62.4 62.3 62.3 62.5 62.4
2005 62.4 62.4 62.4 62.7 62.8 62.7 62.8 62.9 62.8 62.8 62.7 62.8
2006 62.9 63.0 63.1 63.0 63.1 63.1 63.0 63.1 63.1 63.3 63.3 63.4
2007 63.3 63.3 63.3 63.0 63.0 63.0 62.9 62.7 62.9 62.7 62.9 62.7
2008 62.9 62.8 62.7 62.7 62.5 62.4 62.2 62.0 61.9 61.7 61.4 61.0
2009 60.6 60.3 59.9 59.8 59.6 59.4 59.3 59.1 58.7 58.5 58.6 58.3
2010 58.5 58.5 58.5 58.7 58.6 58.5 58.5 58.6 58.5 58.3 58.2 58.3
2011 58.4 58.4 58.4 58.4 58.4 58.2 58.2 58.3 58.4 58.4 58.5 58.5
2012 58.5 58.5 58.6 58.5 58.6 58.6 58.5 58.4 58.6 58.8 58.7 58.6
2013 58.6 58.6 58.5 58.6 58.7 58.7 58.7 58.6 58.6 58.2 58.6 58.6
2014 58.8 58.8 58.9 58.9 58.9 59.0 59.0 59.0 59.0 59.2

 

Unmployment Rate -16-19 Years Old

18.6%

Series Id:           LNS14000012
Seasonally Adjusted
Series title:        (Seas) Unemployment Rate - 16-19 yrs.
Labor force status:  Unemployment rate
Type of data:        Percent or rate
Age:                 16 to 19 years

teenage_unemployment_rate


 

Black or African American Unemployment Rate

 

10.9%

 



Series Id:           LNS14000006
Seasonally Adjusted
Series title:        (Seas) Unemployment Rate - Black or African American
Labor force status:  Unemployment rate
Type of data:        Percent or rate
Age:                 16 years and over
Race:                Black or African American

Black_unemployment_rate


 

 

 

Employment Level Part-Time for Economic Reasons

 

7,027,ooo

Series Id:                      LNS12032194
Seasonally Adjusted
Series title:                   (Seas) Employment Level - Part-Time for Economic Reasons, All Industries
Labor force status:             Employed
Type of data:                   Number in thousands
Age:                            16 years and over
Hours at work:                  1 to 34 hours
Reasons work not as scheduled:  Economic reasons
Worker status/schedules:        At work part time

Part_Time_Employment_Level

Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Annual
2000 3208 3167 3231 3186 3283 3209 3144 3211 3217 3179 3467 3243
2001 3332 3296 3280 3289 3439 3792 3556 3380 4233 4437 4317 4393
2002 4112 4289 4101 4199 4103 4048 4145 4301 4329 4314 4329 4321
2003 4607 4844 4652 4798 4570 4592 4648 4419 4882 4813 4862 4750
2004 4705 4549 4742 4568 4588 4443 4449 4474 4487 4820 4547 4427
2005 4389 4250 4388 4278 4315 4432 4400 4491 4675 4269 4219 4115
2006 4123 4174 3972 3900 4111 4318 4303 4195 4115 4352 4190 4187
2007 4279 4220 4253 4313 4473 4342 4410 4576 4521 4325 4494 4618
2008 4846 4902 4904 5220 5286 5540 5930 5851 6148 6690 7311 8029
2009 8046 8796 9145 8908 9113 9024 8891 9029 8847 8979 9114 9098
2010 8500 8904 9216 9181 8833 8607 8547 8829 9199 8870 8880 8941
2011 8440 8403 8635 8664 8583 8486 8342 8820 9068 8675 8457 8177
2012 8228 8133 7780 7913 8138 8154 8163 8045 8572 8231 8164 7929
2013 7983 7991 7663 7929 7917 8194 8180 7898 7914 8016 7723 7771
2014 7257 7186 7411 7465 7269 7544 7511 7277 7103 7027

 

 

Total Unemployment Rate U-6

 

11.5%

 

total_unemployment_rate_U_6

 

Series Id:           LNS13327709
Seasonally Adjusted
Series title:        (seas) Total unemployed, plus all marginally attached workers plus total employed part time for economic reasons, as a percent of all civilian labor force plus all marginally attached workers
Labor force status:  Aggregated totals unemployed
Type of data:        Percent or rate
Age:                 16 years and over
Percent/rates:       Unemployed and mrg attached and pt for econ reas as percent of labor force plus marg attached
Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Annual
2000 7.1 7.2 7.1 6.9 7.1 7.0 7.0 7.1 7.0 6.8 7.1 6.9
2001 7.3 7.4 7.3 7.4 7.5 7.9 7.8 8.1 8.7 9.3 9.4 9.6
2002 9.5 9.5 9.4 9.7 9.5 9.5 9.6 9.6 9.6 9.6 9.7 9.8
2003 10.0 10.2 10.0 10.2 10.1 10.3 10.3 10.1 10.4 10.2 10.0 9.8
2004 9.9 9.7 10.0 9.6 9.6 9.5 9.5 9.4 9.4 9.7 9.4 9.2
2005 9.3 9.3 9.1 8.9 8.9 9.0 8.8 8.9 9.0 8.7 8.7 8.6
2006 8.4 8.4 8.2 8.1 8.2 8.4 8.5 8.4 8.0 8.2 8.1 7.9
2007 8.4 8.2 8.0 8.2 8.2 8.3 8.4 8.4 8.4 8.4 8.4 8.8
2008 9.2 9.0 9.1 9.2 9.7 10.1 10.5 10.8 11.0 11.8 12.6 13.6
2009 14.2 15.2 15.8 15.9 16.5 16.5 16.4 16.7 16.7 17.1 17.1 17.1
2010 16.7 17.0 17.1 17.2 16.6 16.4 16.4 16.5 16.8 16.6 16.9 16.6
2011 16.1 16.0 15.9 16.1 15.8 16.1 16.0 16.1 16.3 15.9 15.6 15.2
2012 15.1 15.0 14.5 14.6 14.8 14.8 14.9 14.7 14.7 14.4 14.4 14.4
2013 14.4 14.3 13.8 13.9 13.8 14.2 13.9 13.6 13.6 13.7 13.1 13.1
2014 12.7 12.6 12.7 12.3 12.2 12.1 12.2 12.0 11.8 11.5

Employment Situation Summary

Transmission of material in this release is embargoed until              USDL-14-2037
8:30 a.m. (EST) Friday, November 7, 2014

Technical information:
 Household data:       (202) 691-6378  *  cpsinfo@bls.gov  *  www.bls.gov/cps
 Establishment data:   (202) 691-6555  *  cesinfo@bls.gov  *  www.bls.gov/ces

Media contact:         (202) 691-5902  *  PressOffice@bls.gov


                         THE EMPLOYMENT SITUATION -- OCTOBER 2014


Total nonfarm payroll employment rose by 214,000 in October, and the unemployment 
rate edged down to 5.8 percent, the U.S. Bureau of Labor Statistics reported today. 
Employment increased in food services and drinking places, retail trade, and 
health care. 

Household Survey Data

Both the unemployment rate (5.8 percent) and the number of unemployed persons 
(9.0 million) edged down in October. Since the beginning of the year, the 
unemployment rate and the number of unemployed persons have declined by 0.8 
percentage point and 1.2 million, respectively. (See table A-1.)

Among the major worker groups, the unemployment rate for whites declined to 4.8 
percent in October. The rates for adult men (5.1 percent), adult women (5.4 
percent), teenagers (18.6 percent), blacks (10.9 percent), and Hispanics (6.8 
percent) changed little over the month. The jobless rate for Asians was 5.0 percent 
(not seasonally adjusted), little changed from a year earlier. (See tables A-1, A-2, 
and A-3.)

In October, the number of long-term unemployed (those jobless for 27 weeks or 
more) was little changed at 2.9 million. These individuals accounted for 32.0 
percent of the unemployed. Over the past 12 months, the number of long-term 
unemployed has declined by 1.1 million. (See table A-12.)

The civilian labor force participation rate was little changed at 62.8 percent 
in October and has been essentially flat since April. The employment-population 
ratio increased to 59.2 percent in October. (See table A-1.)

The number of persons employed part time for economic reasons (sometimes 
referred to as involuntary part-time workers) was about unchanged in October 
at 7.0 million. These individuals, who would have preferred full-time employment, 
were working part time because their hours had been cut back or because they 
were unable to find a full-time job. (See table A-8.)

In October, 2.2 million persons were marginally attached to the labor force, 
little changed from a year earlier. (The data are not seasonally adjusted.) 
These individuals were not in the labor force, wanted and were available for 
work, and had looked for a job sometime in the prior 12 months. They were not 
counted as unemployed because they had not searched for work in the 4 weeks 
preceding the survey. (See table A-16.)

Among the marginally attached, there were 770,000 discouraged workers in 
October, essentially unchanged from a year earlier. (The data are not seasonally 
adjusted.) Discouraged workers are persons not currently looking for work 
because they believe no jobs are available for them. The remaining 1.4 million 
persons marginally attached to the labor force in October had not searched for 
work for reasons such as school attendance or family responsibilities. (See 
table A-16.)

Establishment Survey Data

Total nonfarm payroll employment increased by 214,000 in October, in line with 
the average monthly gain of 222,000 over the prior 12 months. In October, job 
growth occurred in food services and drinking places, retail trade, and health 
care. (See table B-1.)

Food services and drinking places added 42,000 jobs in October, compared 
with an average gain of 26,000 jobs per month over the prior 12 months.

Employment in retail trade rose by 27,000 in October. Within the industry, 
employment grew in general merchandise stores (+12,000) and automobile dealers 
(+4,000). Retail trade has added 249,000 jobs over the past year. 

Health care added 25,000 jobs in October, about in line with the prior 12-month 
average gain of 21,000 jobs per month. In October, employment rose in ambulatory 
health care services (+19,000). 

Employment in professional and business services continued to trend up over 
the month (+37,000).  Over the prior 12 months, job gains averaged 56,000 per 
month. In October, employment continued to trend up in temporary help services 
(+15,000) and in computer systems design and related services (+7,000). 

In October, manufacturing employment continued on an upward trend (+15,000). 
Within the industry, job gains occurred in machinery (+5,000), furniture and 
related products (+4,000), and semiconductors and electronic components (+2,000). 
Over the year, manufacturing has added 170,000 jobs, largely in durable goods.

Employment also continued to trend up in transportation and warehousing (+13,000) 
and construction (+12,000). 

Employment in other major industries, including mining and logging, wholesale 
trade, information, financial activities, and government, showed little change 
over the month.

In October, the average workweek for all employees on private nonfarm payrolls 
edged up by 0.1 hour to 34.6 hours. The manufacturing workweek was unchanged at 
40.8 hours, and factory overtime edged down by 0.1 hour to 3.4 hours. The average 
workweek for production and nonsupervisory employees on private nonfarm payrolls 
edged up by 0.1 hour to 33.8 hours. (See tables B-2 and B-7.)

Average hourly earnings for all employees on private nonfarm payrolls rose by 3 
cents to $24.57 in October. Over the year, average hourly earnings have risen by 
2.0 percent. In October, average hourly earnings of private-sector production and 
nonsupervisory employees increased by 4 cents to $20.70. (See tables B-3 and B-8.)

The change in total nonfarm payroll employment for August was revised from 
+180,000 to +203,000, and the change for September was revised from +248,000 
to +256,000. With these revisions, employment gains in August and September 
combined were 31,000 more than previously reported.

_____________
The Employment Situation for November is scheduled to be released on Friday, 
December 5, 2014, at 8:30 a.m. (EST).



 

Employment Situation Summary Table A. Household data, seasonally adjusted

HOUSEHOLD DATA
Summary table A. Household data, seasonally adjusted

[Numbers in thousands]

Category Oct.
2013
Aug.
2014
Sept.
2014
Oct.
2014
Change from:
Sept.
2014-
Oct.
2014

Employment status

Civilian noninstitutional population

246,381 248,229 248,446 248,657 211

Civilian labor force

154,625 155,959 155,862 156,278 416

Participation rate

62.8 62.8 62.7 62.8 0.1

Employed

143,485 146,368 146,600 147,283 683

Employment-population ratio

58.2 59.0 59.0 59.2 0.2

Unemployed

11,140 9,591 9,262 8,995 -267

Unemployment rate

7.2 6.1 5.9 5.8 -0.1

Not in labor force

91,756 92,269 92,584 92,378 -206

Unemployment rates

Total, 16 years and over

7.2 6.1 5.9 5.8 -0.1

Adult men (20 years and over)

6.9 5.7 5.3 5.1 -0.2

Adult women (20 years and over)

6.4 5.7 5.5 5.4 -0.1

Teenagers (16 to 19 years)

22.0 19.6 20.0 18.6 -1.4

White

6.3 5.3 5.1 4.8 -0.3

Black or African American

13.0 11.4 11.0 10.9 -0.1

Asian (not seasonally adjusted)

5.2 4.5 4.3 5.0

Hispanic or Latino ethnicity

9.0 7.5 6.9 6.8 -0.1

Total, 25 years and over

6.0 5.1 4.7 4.7 0.0

Less than a high school diploma

10.8 9.1 8.4 7.9 -0.5

High school graduates, no college

7.3 6.2 5.3 5.7 0.4

Some college or associate degree

6.3 5.4 5.4 4.8 -0.6

Bachelor’s degree and higher

3.8 3.2 2.9 3.1 0.2

Reason for unemployment

Job losers and persons who completed temporary jobs

6,162 4,836 4,530 4,358 -172

Job leavers

842 860 829 794 -35

Reentrants

3,104 2,845 2,809 2,871 62

New entrants

1,217 1,066 1,105 1,063 -42

Duration of unemployment

Less than 5 weeks

2,794 2,609 2,383 2,473 90

5 to 14 weeks

2,636 2,449 2,508 2,312 -196

15 to 26 weeks

1,777 1,486 1,416 1,417 1

27 weeks and over

4,047 2,963 2,954 2,916 -38

Employed persons at work part time

Part time for economic reasons

8,016 7,277 7,103 7,027 -76

Slack work or business conditions

5,025 4,261 4,162 4,214 52

Could only find part-time work

2,585 2,587 2,562 2,447 -115

Part time for noneconomic reasons

18,755 19,526 19,561 19,769 208

Persons not in the labor force (not seasonally adjusted)

Marginally attached to the labor force

2,283 2,141 2,226 2,192

Discouraged workers

815 775 698 770

– Over-the-month changes are not displayed for not seasonally adjusted data.
NOTE: Persons whose ethnicity is identified as Hispanic or Latino may be of any race. Detail for the seasonally adjusted data shown in this table will not necessarily add to totals because of the independent seasonal adjustment of the various series. Updated population controls are introduced annually with the release of January data.

Employment Situation Summary Table B. Establishment data, seasonally adjusted

ESTABLISHMENT DATA
Summary table B. Establishment data, seasonally adjusted
Category Oct.
2013
Aug.
2014
Sept.
2014(p)
Oct.
2014(p)

EMPLOYMENT BY SELECTED INDUSTRY
(Over-the-month change, in thousands)

Total nonfarm

237 203 256 214

Total private

247 200 244 209

Goods-producing

38 22 36 28

Mining and logging

5 2 8 1

Construction

15 17 19 12

Manufacturing

18 3 9 15

Durable goods(1)

13 4 9 14

Motor vehicles and parts

4.6 -6.0 1.4 0.6

Nondurable goods

5 -1 0 1

Private service-providing(1)

209 178 208 181

Wholesale trade

-1.8 5.7 5.1 8.5

Retail trade

41.9 -3.9 34.0 27.1

Transportation and warehousing

4.8 11.4 5.2 13.3

Information

6 14 13 -4

Financial activities

7 12 12 3

Professional and business services(1)

53 49 55 37

Temporary help services

4.0 20.6 17.8 15.1

Education and health services(1)

31 50 43 41

Health care and social assistance

24.4 39.9 24.6 27.2

Leisure and hospitality

65 26 48 52

Other services

3 11 -5 3

Government

-10 3 12 5

WOMEN AND PRODUCTION AND NONSUPERVISORY EMPLOYEES(2)
AS A PERCENT OF ALL EMPLOYEES

Total nonfarm women employees

49.5 49.4 49.4 49.4

Total private women employees

48.0 47.9 47.9 47.9

Total private production and nonsupervisory employees

82.6 82.6 82.6 82.6

HOURS AND EARNINGS
ALL EMPLOYEES

Total private

Average weekly hours

34.4 34.5 34.5 34.6

Average hourly earnings

$24.09 $24.54 $24.54 $24.57

Average weekly earnings

$828.70 $846.63 $846.63 $850.12

Index of aggregate weekly hours (2007=100)(3)

99.1 101.2 101.4 101.9

Over-the-month percent change

0.0 0.2 0.2 0.5

Index of aggregate weekly payrolls (2007=100)(4)

113.9 118.5 118.7 119.4

Over-the-month percent change

0.1 0.5 0.2 0.6

HOURS AND EARNINGS
PRODUCTION AND NONSUPERVISORY EMPLOYEES

Total private

Average weekly hours

33.6 33.8 33.7 33.8

Average hourly earnings

$20.25 $20.67 $20.66 $20.70

Average weekly earnings

$680.40 $698.65 $696.24 $699.66

Index of aggregate weekly hours (2002=100)(3)

106.6 109.2 109.0 109.5

Over-the-month percent change

0.3 0.5 -0.2 0.5

Index of aggregate weekly payrolls (2002=100)(4)

144.2 150.8 150.5 151.5

Over-the-month percent change

0.5 0.7 -0.2 0.7

DIFFUSION INDEX(5)
(Over 1-month span)

Total private (264 industries)

63.4 64.2 60.4 62.3

Manufacturing (81 industries)

55.6 57.4 53.1 58.6

Footnotes
(1) Includes other industries, not shown separately.
(2) Data relate to production employees in mining and logging and manufacturing, construction employees in construction, and nonsupervisory employees in the service-providing industries.
(3) The indexes of aggregate weekly hours are calculated by dividing the current month’s estimates of aggregate hours by the corresponding annual average aggregate hours.
(4) The indexes of aggregate weekly payrolls are calculated by dividing the current month’s estimates of aggregate weekly payrolls by the corresponding annual average aggregate weekly payrolls.
(5) Figures are the percent of industries with employment increasing plus one-half of the industries with unchanged employment, where 50 percent indicates an equal balance between industries with increasing and decreasing employment.
(p) Preliminary

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The Pronk Pops Show 245, April 16, 2014, Story 1: FairTax Less — 20% Consumption Tax Replacing All Federal Income, Payroll and Estate and Gift Taxes With A $500 Per Month Prebate For Every Adult American and $100 Per Child Per Month! — Videos

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FairTax.org

“The Case for the Fair Tax”

The FairTax: It’s Time

Freedom from the IRS! – FairTax Explained – Educate Yourself!

FairTax explained – a 2 minute introduction

What is the FairTax legislation?

How is the FairTax collected?

How does the FairTax affect the economy?

How does the FairTax rate compare to today’s?

Can I pretend to be a business to avoid the sales tax?

Do corporations get a windfall break from the FairTax?

What is the impact of the FairTax on business?

If people bring home their whole paychecks how can prices fall?

Does the FairTax protect privacy and other civil liberties?

What assumptions does the FairTax make about government spending?

Why is the FairTax better than a flat income tax?

Is consumption a reliable source of revenue?

Is the FairTax rate really 23%?

How do we keep exemptions and exclusions from undermining the FairTax?

How does the FairTax impact retailers?

How will used goods be taxed?

How will the FairTax affect state sales tax systems?

What will happen to government programs like Social Security and Medicare?

How will Social Security payments be calculated under the FairTax?

How does the FairTax impact the middle class?

How will the FairTax impact seniors?

How does the FairTax impact savings?

Will the FairTax drive the economy down if people stop buying?

How does the FairTax affect tax preparers and CPAs?

How will the FairTax affect state sales tax systems?

If people bring home their whole paychecks how can prices fall?

Isn’t it a stretch to say the IRS will go away?

Will the FairTax lead to a massive underground economy?

How does the “prebate” work?

Is it fair for rich people to get the same prebate as poor people?

Wouldn’t it be more fair to exempt food and medicine from the FairTax?

Will the prebate create a massive new entitlement system?

Is the FairTax truly progressive?

How does the FairTax affect compliance costs?

How will the FairTax help people who don’t hire an accountant?

How can you tax life saving medical treatment?

How does the FairTax impact charitable giving?

Will government pay taxes under the FairTax?

What will the transition be like from the income tax to the FairTax?

Will the FairTax hurt home ownership with no mortgage interest deduction?

Is education taxed under the FairTax?

Are any significant economies funded by a sales tax?

What will happen to cities who depend on tax free bonds?

Can’t Americans just cross the border to avoid the FairTax

How does the FairTax affect illegal immigration?

How is the FairTax different from a Value Added Tax (VAT)?

Dave Ramsey Supports the Fair Tax

Neal Boortz Explain the FAIRTAX

Rob Woodall Floor Speech: The FairTax will bring jobs back to America.

Woodall: Taxing consumption instead of taxing income will grow the American economy.

Flat Tax vs. National Sales Tax

Grover Norquist: Flat Tax vs Fair Tax

Fair Tax Presentation

FairTax Show – Part 1

FairTax Show – Part 2

FairTax Show – Part 3

FairTax: Fire Up Our Economic Engine (Official HD)

My FAIRTAX Story_Paul Wizikowski

Woodall FairTax Special Order

 

Congressman John Linder, Father of the FairTax

John Linder devoted some 35 years of his life to public service, starting in the Georgia House of Representatives in 1975, and in Congress 1993 – 2011. Linder is nationally known as the father of the FairTax Act which he sponsored in Washington. Linder and radio commentator Neal Boortz wrote two books about why the FairTax is fairer than current taxation schemes. Linder spoke to the Public Policy Foundation on May 21, 1993, just a few months after he was sworn into Congress for the first of his nine terms.

 

FairTax.org

 

 

Background Information and Videos

FairTax

From Wikipedia, the free encyclopedia
The FairTax is a proposal to reform the federal tax code of the United States. It would replace all federal income taxes (including the alternative minimum taxcorporate income taxes, and capital gains taxes), payroll taxes(including Social Security and Medicare taxes), gift taxes, and estate taxes with a single broad national consumption tax on retail sales. The Fair Tax Act (H.R. 25/S. 122) would apply a tax, once, at the point of purchase on all new goods and services for personal consumption. The proposal also calls for a monthly payment to all family households of lawful U.S. residents as an advance rebate, or “prebate”, of tax on purchases up to the poverty level.[1][2] First introduced into the United States Congress in 1999, a number of congressional committees have heard testimony on the bill; however, it has not moved from committee and has yet to have any effect on the tax system. In recent years, a tax reform movement has formed behind the FairTax proposal.[3] Increased attention was created after talk radio personality Neal Boortz and Georgia Congressman John Linderpublished The FairTax Book in 2005 and additional visibility was gained in the 2008 presidential campaign.As defined in the legislation, the tax rate is 23% for the first year. This percentage is based on the total amount paid including the tax ($23 out of every $100 spent in total). This would be equivalent to a 30% traditional U.S. sales tax ($23 on top of every $77 spent—$100 total).[4] The rate would then be automatically adjusted annually based on federal receipts in the previous fiscal year.[5] With the rebate taken into consideration, the FairTax would be progressive on consumption,[2] but would also be regressive on income at higher income levels (as consumption falls as a percentage of income).[6][7] Opponents argue this would accordingly decrease the tax burden on high-income earners and increase it on the middle class.[4][8] Supporters contend that the plan would effectively tax wealth, increase purchasing power,[9][10] and decrease tax burdens by broadening the tax base.The plan’s supporters believe that a consumption tax would have a positive effect on savings and investment, that it would ease tax compliance, and that the tax would result in increased economic growth, incentives forinternational business to locate in the U.S., and increased U.S. competitiveness in international trade.[11][12][13] The plan is intended to increase cost transparency for funding the federal government, and supporters believe it would have positive effects on civil liberties, the environment, and advantages with taxing illegal activity and undocumented immigrants.[11][14] Opponents contend that a consumption tax of this size would be extremely difficult to collect, and would lead to pervasive tax evasion.[4][6] They also argue that the proposed sales tax rate would raise less revenue than the current tax system, leading to an increased budget deficit.[4][15]There are also concerns regarding the proposed repeal of the Sixteenth Amendment, removal of tax deduction incentives, transition effects on after-tax savings, incentives on credit use, and the loss of tax advantages tostate and local bonds.

 

Legislative overview and history

Rep John Linder holding the 133 page Fair Tax Act of 2007 in contrast to the then-current U.S. tax code and IRS regulations.

The Fair Tax Act is designed to replace all federal income taxes (including the alternative minimum taxcorporate income taxes, and capital gains taxes), payroll taxes (including Social Security and Medicare taxes), gift taxes, andestate taxes with a national retail sales tax on new goods and services. The legislation would remove the Internal Revenue Service (after three years), and establish an Excise Tax Bureau and a Sales Tax Bureau in the Department of the Treasury.[16] The states are granted the primary authority for the collection of sales tax revenues and the remittance of such revenues to the Treasury. The plan was created by Americans For Fair Taxation, an advocacy group formed to change the tax system. The group states that, together with economists, it developed the plan and the name “Fair Tax”, based on interviews, polls, and focus groups of the general public.[4] The FairTax legislation has been introduced in the House by Georgia Republicans John Linder (1999–2010) and Rob Woodall (2011-2014), while being introduced in the Senate by Georgia Republican Saxby Chambliss (2003-2014).

Linder first introduced the Fair Tax Act (H.R. 2525) on July 14, 1999 to the 106th United States Congress and a substantially similar bill has been reintroduced in each subsequent session of Congress. The bill attracted a total of 56 House and Senate cosponsors in the 108th Congress,[17][18] 61 in the 109th,[19][20] 76 in the 110th,[21][22] 70 in the 111th,[23][24] 78 in the 112th,[25][26] and 81 in the 113th (H.R. 25/S. 122). Former Speaker of the HouseDennis Hastert (Republican) had cosponsored the bill in the 109th–110th Congress, but it has not received support from the Democratic leadership, which still controls the Senate.[20][21][27] Democratic Representative Collin Peterson of Minnesota and Democratic Senator Zell Miller of Georgia cosponsored and introduced the bill in the 108th Congress, but Peterson is no longer cosponsoring the bill and Miller has left the Senate.[17][18] In the 109th–111th Congress, Representative Dan Boren has been the only Democrat to cosponsor the bill.[19][21] A number of congressional committees have heard testimony on the FairTax, but it has not moved from committee since its introduction in 1999. The legislation was also discussed with President George W. Bush and his Secretary of the Treasury Henry M. Paulson.[28]

To become law, the bill will need to be included in a final version of tax legislation from the U.S. House Committee on Ways and Means, pass both the House and the Senate, and finally be signed by the President. In 2005, President Bush established an advisory panel on tax reform that examined several national sales tax variants including aspects of the FairTax and noted several concerns. These included uncertainties as to the revenue that would be generated, and difficulties of enforcement and administration, which made this type of tax undesirable to recommend in their final report.[8] The panel did not examine the Fairtax as proposed in the legislation. The FairTax received visibility in the 2008 presidential election on the issue of taxes and the IRS, with several candidates supporting the bill.[29][30] A poll in 2009 by Rasmussen Reports found that 43% of Americans would support a national sales tax replacement, with 38% opposed to the idea; the sales tax was viewed as fairer by 52% of Republicans, 44% of Democrats, and 49% of unaffiliateds.[31] President Barack Obama does not support the bill,[32] arguing for more progressive changes to the income and payroll tax systems.

Tax rate

The sales tax rate, as defined in the legislation for the first year, is 23% of the total payment including the tax ($23 of every $100 spent in total—calculated similar to income taxes). This would be equivalent to a 30% traditional U.S. sales tax ($23 on top of every $77 spent—$100 total, or $30 on top of every $100 spent—$130 total).[4] After the first year of implementation, this rate is automatically adjusted annually using a predefined formula reflecting actual federal receipts in the previous fiscal year.

The effective tax rate for any household would be variable due to the fixed monthly tax rebate that are used to rebate taxes paid on purchases up to the poverty level.[2] The tax would be levied on all U.S. retail sales for personal consumption on new goods andservices. Critics argue that the sales tax rate defined in the legislation would not be revenue neutral (that is, it would collect less for the government than the current tax system), and thus would increase the budget deficit, unless government spending were equally reduced.[4]

Sales tax rate

During the first year of implementation, the FairTax legislation would apply a 23% federal retail sales tax on the total transaction value of a purchase; in other words, consumers pay to the government 23 cents of every dollar spent in total (sometimes called tax-inclusive, and presented this way to provide a direct comparison with individual income and employment taxes which reduce a person’s available money before they can make purchases). The equivalent assessed tax rate is 30% if the FairTax is applied to the pre-tax price of a good like traditional U.S. state sales taxes (sometimes called tax-exclusive; this rate is not directly comparable with existing income and employment taxes).[4] After the first year of implementation, this tax rate would be automatically adjusted annually using a formula specified in the legislation that reflects actual federal receipts in the previous fiscal year.[5]

Effective tax rate

A household’s effective tax rate on consumption would vary with the annual expenditures on taxable items and the fixed monthly tax rebate. The rebate would have the greatest effect at low spending levels, where they could lower a household’s effective rate to zero or below.[33] The lowest effective tax rate under the FairTax could be negative due to the rebate for households with annual spending amounts below poverty level spending for a specified household size. At higher spending levels, the rebate has less impact, and a household’s effective tax rate would approach 23% of total spending. A person spending at the poverty level would have an effective tax rate of 0%, whereas someone spending at four times the poverty level would have an effective tax rate of 17.2%.[33] Buying or otherwise receiving items and services not subject to federal taxation (such as a used home or car) can contribute towards a lower effective tax rate. The total amount of spending and the proportion of spending allocated to taxable items would determine a household’s effective tax rate on consumption.[33] If a rate is calculated on income, instead of the tax base, the percentage could exceed the statutory tax rate in a given year.

Monthly tax rebate[edit]

Proposed 2012 FairTax Prebate Schedule[34]
One adult household Two adult household
Family
Size
Annual
Consumption
Allowance
Annual
Prebate
Monthly
Prebate
Family
Size
Annual
Consumption
Allowance
Annual
Prebate
Monthly
Prebate
1 person $11,170 $2,569 $214 couple $22,340 $5,138 $428
and 1 child $15,130 $3,480 $290 and 1 child $26,300 $6,049 $504
and 2 children $19,090 $4,391 $366 and 2 children $30,260 $6,960 $580
and 3 children $23,050 $5,302 $442 and 3 children $34,220 $7,871 $656
and 4 children $27,010 $6,212 $518 and 4 children $38,180 $8,781 $732
and 5 children $30,970 $7,123 $594 and 5 children $42,140 $9,692 $808
and 6 children $34,930 $8,034 $699 and 6 children $46,100 $10,603 $884
and 7 children $38,890 $8,945 $745 and 7 children $50,060 $11,514 $959
The annual consumption allowance is based on the 2012 DHHS Poverty Guidelines as published in theFederal Register, January 26, 2012. There is no marriage penalty as the couple amount is twice the amount that a single adult receives. For each additional child above 7, add $3,960 to the annual consumption allowance, $911 to the annual rebate, and $76 to the monthly rebate amount. The annual consumption allowance is the amount of spending that is “untaxed” under the FairTax. Note: Alaska and Hawaii have different poverty levels and would have different FairTax rebate amounts.

Under the FairTax, family households of lawful U.S. residents would be eligible to receive a “Family Consumption Allowance” (FCA) based on family size (regardless of income) that is equal to the estimated total FairTax paid on poverty level spending according to the poverty guidelines published by the U.S. Department of Health and Human Services.[1] The FCA is a tax rebate (known as a “prebate” as it would be an advance) paid in twelve monthly installments, adjusted for inflation. The rebate is meant to eliminate the taxation of household necessities and make the plan progressive.[4] Households would register once a year with their sales tax administering authority, providing the names and social security numbers of each household member.[1] The Social Security Administration would disburse the monthly rebate payments in the form of a paper check via U.S. Mail, an electronic funds transfer to a bank account, or a “smartcard” that can be used like a debit card.[1]

Opponents of the plan criticize this tax rebate due to its costs. Economists at the Beacon Hill Institute estimated the overall rebate cost to be $489 billion (assuming 100% participation).[35] In addition, economist Bruce Bartlett has argued that the rebate would create a large opportunity for fraud,[36] treats children disparately, and would constitute a welfarepayment regardless of need.[37]

The President’s Advisory Panel for Federal Tax Reform cited the rebate as one of their chief concerns when analyzing their national sales tax, stating that it would be the largestentitlement program in American history, and contending that it would “make most American families dependent on monthly checks from the federal government”.[8][38] Estimated by the advisory panel at approximately $600 billion, “the Prebate program would cost more than all budgeted spending in 2006 on the Departments of Agriculture, Commerce, Defense, Education, Energy, Homeland Security, Housing and Urban Development, and Interior combined.”[8] Proponents point out that income tax deductions, tax preferences, loopholescredits, etc. under the current system was estimated at $945 billion by the Joint Committee on Taxation.[35] They argue this is $456 billion more than the FairTax “entitlement” (tax refund) would spend to cover each person’s tax expenses up to the poverty level. In addition, it was estimated for 2005 that the Internal Revenue Service was already sending out $270 billion in refund checks.[35]

Presentation of tax rate

Mathematically, a 23% tax out of $100 yields the same as a 30% tax on $77.

Sales and income taxes behave differently due to differing definitions of tax base, which can make comparisons between the two confusing. Under the existing individual income plus employment (Social Security; Medicare; Medicaid) tax formula, taxes to be paid are included in the base on which the tax rate is imposed (known as tax-inclusive). If an individual’s gross income is $100 and the sum of their income plus employment tax rate is 23%, taxes owed equals $23. Traditional state sales taxes are imposed on a tax base equal to the pre-tax portion of a good’s price (known as tax-exclusive). A good priced at $77 with a 30% sales tax rate yields $23 in taxes owed. To adjust an inclusive rate to an exclusive rate, divide the given rate by one minus that rate (i.e. .23/.77 = .30).

The FairTax statutory rate, unlike most U.S. state-level sales taxes, is presented on a tax base that includes the amount of FairTax paid. For example, a final after-tax price of $100 includes $23 of taxes. Although no such requirement is included in the text of the legislation, Congressman John Linder has stated that the FairTax would be implemented as an inclusive tax, which would include the tax in the retail price, not added on at checkout—an item on the shelf for five dollars would be five dollars total.[28][39] The legislation requires the receipt to display the tax as 23% of the total.[40] Linder states the FairTax is presented as a 23% tax rate for easy comparison to income and employment tax rates (the taxes it would be replacing). The plan’s opponents call the semantics deceptive. FactCheck called the presentation misleading, saying that it hides the real truth of the tax rate.[41] Bruce Bartlett stated that polls show tax reform support is extremely sensitive to the proposed rate,[37] and called the presentation confusing and deceptive based on the conventional method of calculating sales taxes.[42] Proponents believe it is both inaccurate and misleading to say that an income tax is 23% and the FairTax is 30% as it implies that the sales tax burden is higher.

Revenue neutrality

A key question surrounding the FairTax is whether the tax has the ability to be revenue-neutral; that is, whether the tax would result in an increase or reduction in overall federal tax revenues. Economists, advisory groups, and political advocacy groups disagree about the tax rate required for the FairTax to be truly revenue-neutral. Various analysts use different assumptions, time-frames, and methods resulting in dramatically different tax rates making direct comparison among the studies difficult. The choice between static ordynamic scoring further complicates any estimate of revenue-neutral rates.[43]

A 2006 study published in Tax Notes by the Beacon Hill Institute at Suffolk University and Dr. Laurence Kotlikoff estimated the FairTax would be revenue-neutral for the tax year 2007 at a rate of 23.82% (31.27% tax-exclusive).[44] The study states that purchasing power is transferred to state and local taxpayers from state and local governments. To recapture the lost revenue, state and local governments would have to raise tax rates or otherwise change tax laws in order to continue collecting the same real revenues from their taxpayers.[38][44] The Argus Group and Arduin, Laffer & Moore Econometrics each published an analysis that defended the 23% rate.[45][46][47] While proponents of the FairTax concede that the above studies did not explicitly account for tax evasion, they also claim that the studies did not altogether ignore tax evasion under the FairTax. These studies presumably incorporated some degree of tax evasion in their calculations by using National Income and Product Account based figures, which is argued to understate total household consumption.[44] The studies also did not account for capital gains that may be realized by the U.S. government if consumer prices were allowed to rise, which would reduce the real value of nominal U.S. government debt.[44] Nor did these studies account for any increased economic growth that many economists researching the plan believe would occur.[44][47][48][49]

In contrast to the above studies, William G. Gale of the Brookings Institution published a study in Tax Notes that estimated a rate of 28.2% (39.3% tax-exclusive) for 2007 assuming full taxpayer compliance and an average rate of 31% (44% tax-exclusive) from 2006–2015 (assumes that the Bush tax cuts expire on schedule and accounts for the replacement of an additional $3 trillion collected through the Alternative Minimum Tax).[4][15][50] The study also concluded that if the tax base were eroded by 10% due to tax evasion, tax avoidance, and/or legislative adjustments, the average rate would be 34% (53% tax-exclusive) for the 10 year period. A dynamic analysis in 2008 by the Baker Institute For Public Policy concluded that a 28% (38.9% tax-exclusive) rate would be revenue neutral for 2006.[51] The President’s Advisory Panel for Federal Tax Reform performed a 2006 analysis to replace the individual and corporate income tax with a retail sales tax and estimated the rate to be 25% (34% tax-exclusive) assuming 15% tax evasion, and 33% (49% tax-exclusive) with 30% tax evasion.[8] The rate would need to be substantially higher to replace the additional taxes replaced by the FairTax (payroll, estate, and gift taxes). Several economists criticized the President’s Advisory Panel’s study as having allegedly altered the terms of the FairTax, using unsound methodology, and/or failing to fully explain their calculations.[35][44][52]

Taxable items and exemptions

The tax would be levied once at the final retail sale for personal consumption on new goods and services. Purchases of used items, exports and business-to-business intermediate transactions would not be taxed. Also excluded are investments, such as purchases ofstock, corporate mergers and acquisitions and capital investmentsSavings and education tuition expenses would be exempt as they would be considered an investment (rather than final consumption).[53]

A good would be considered “used” and not taxable if a consumer already owns it before the FairTax takes effect or if the FairTax has been paid previously on the good, which may be different from the item being sold previously. Personal services such as health care, legal services, financial services, and auto repairs would be subject to the FairTax, as would renting apartments and other real property.[4] Food, clothing, prescription drugs and medical services would be taxed. (State sales taxes generally exempt these types of basic-need items in an effort to reduce the tax burden on low-income families. The FairTax would use a monthly rebate system instead of the common state exclusions.) Internet purchases would be taxed, as would retail international purchases (such as a boat or car) that are imported to the United States (collected by the U.S. Customs and Border Protection).[53]

Distribution of tax burden

Boston University study of the FairTax. Lower rates claimed on workers from a larger tax base, replacing regressive taxes, and wealth taxation.

President’s Advisory Panel’s analysis of a hybrid National Sales Tax. Higher rates claimed on the middle-class for an income tax replacement (excludes payroll, estate, and gift taxes replaced under the FairTax).

The FairTax’s effect on the distribution of taxation or tax incidence (the effect on the distribution of economic welfare) is a point of dispute. The plan’s supporters argue that the tax would broaden the tax base, that it would be progressive, and that it would decrease tax burdens and start taxing wealth (reducing the economic gap).[9][54] Opponents argue that a national sales tax would be inherently regressiveand would decrease tax burdens paid by high-income individuals.[4][55] A person earning $2 million a year could live well spending $1 million, and as a result pay a mere 11% of that year’s income in taxes.[4]Households at the lower end of the income scale spend almost all their income, while households at the higher end are more likely to devote a portion of income to saving. Therefore, according to economistWilliam G. Gale, the percentage of income taxed is regressive at higher income levels (as consumption falls as a percentage of income).[6]

Income earned and saved would not be taxed until spent under the proposal. Households at the extreme high end of consumption often finance their purchases out of savings, not income.[6][37] EconomistLaurence Kotlikoff states that the FairTax could make the tax system much more progressive and generationally equitable,[2] and argues that taxing consumption is effectively the same as taxing wages plus taxing wealth.[2] A household of three persons (this example will use two adults of any gender plus one child; the rebate does not consider marital status) spending $30,000 a year on taxable items would devote about 3.4% of total spending ( [$6,900 tax minus $5,888 rebate]/$30,000 spending ) to the FairTax after the rebate. The same household spending $125,000 on taxable items would spend around 18.3% ( [$28,750 tax minus $5,888 rebate]/$125,000 spending ) on the FairTax. At higher spending levels, the rebate has less impact and the rate approaches 23% of total spending. Thus, according to economist Laurence Kotlikoff, the effective tax rate is progressive on consumption.[2]

Studies by Kotlikoff and Daivd Rapson state that the FairTax would significantly reduce marginal taxes on work and saving, lowering overall average remaining lifetime tax burdens on current and future workers.[9][56] A study by Kotlikoff and Sabine Jokisch concluded that the long term effects of the FairTax would reward low-income households with 26.3% more purchasing power, middle-income households with 12.4% more purchasing power, and high-income households with 5% more purchasing power.[10] The Beacon Hill Institute reported that the FairTax would make the federal tax system more progressive and would benefit the average individual in almost all expenditures deciles.[7] In another study, they state the FairTax would offer the broadest tax base (an increase of over $2 trillion), which allows the FairTax to have a lower tax rate than current tax law.[57]

Gale analyzed a national sales tax (though different from the FairTax in several aspects[7][45]) and reported that the overall tax burden on middle-income Americans would increase while the tax burden on the top 1% would drop.[6] A study by the Beacon Hill Institute reported that the FairTax may have a negative effect on the well-being of mid-income earners for several years after implementation.[49]According to the President’s Advisory Panel for Federal Tax Reform report, which compared the individual and corporate income tax (excluding other taxes the FairTax replaces) to a sales tax with rebate,[8][35] the percentage of federal taxes paid by those earning from $15,000–$50,000 would rise from 3.6% to 6.7%, while the burden on those earning more than $200,000 would fall from 53.5% to 45.9%.[8] The report states that the top 5% of earners would see their burden decrease from 58.6% to 37.4%.[8][58] FairTax supporters argue that replacing the regressive payroll tax (a 15.3% total tax not included in the Tax Panel study;[8] payroll taxes include a 12.4% Social Security tax on wages up to $97,500 and a 2.9% Medicare tax, a 15.3% total tax that is often split between employee and employer) greatly changes the tax distribution, and that the FairTax would relieve the tax burden on middle-class workers.[2][52]

Predicted effects

The predicted effects of the FairTax are a source of disagreement among economists and other analysts.[41][42][55] According to Money magazine, while many economists and tax experts support the idea of a consumption tax, many of them view the FairTax proposal as having serious problems with evasion and revenue neutrality.[4] Some economists argue that a consumption tax (the FairTax is one such tax) would have a positive effect on economic growth, incentives for international business to locate in the U.S., and increased U.S. international competitiveness (border tax adjustment in global trade).[11][12][13] The FairTax would be tax-free on mortgage interest (up to a basic interest rate) and donations, but some law makers have concerns about losing tax incentives on home ownership and charitable contributions.[59] There is also concern about the effect on the income tax industry and the difficulty of repealing the Sixteenth Amendment (to prevent Congress from re-introducing an income tax).[60]

Economic

For more details on this topic, see Predicted effects of the FairTax: Economic effects

Americans For Fair Taxation states the FairTax would boost the United States economy and offers a letter signed by eighty economists, including Nobel Laureate Vernon L. Smith, that have endorsed the plan.[12] The Beacon Hill Institute estimated that within five years real GDP would increase 10.7% over the current system, domestic investment by 86.3%, capital stock by 9.3%, employment by 9.9%, real wages by 10.2%, and consumption by 1.8%.[49] Arduin, Laffer & Moore Econometrics projected the economy as measured by GDP would be 2.4% higher in the first year and 11.3% higher by the 10th year than it would otherwise be.[47] Economists Laurence Kotlikoff and Sabine Jokisch reported the incentive to work and save would increase; by 2030, the economy’s capital stock would increase by 43.7% over the current system, output by 9.4%, and real wages by 11.5%.[10] Economist John Golob estimates a consumption tax, like the FairTax, would bring long-term interest rates down by 25–35%.[61] An analysis in 2008 by the Baker Institute For Public Policy indicated that the plan would generate significant overall macroeconomic improvement in both the short and long-term, but warned of transitional issues.[51]

FairTax proponents argue that the proposal would provide tax burden visibility and reduce compliance and efficiency costs by 90%, returning a large share of money to the productive economy.[2] The Beacon Hill Institute concluded that the FairTax would save $346.51 billion in administrative costs and would be a much more efficient taxation system.[62] Bill Archer, former head of the House Ways and Means Committee, asked Princeton University Econometrics to survey 500 European and Asian companies regarding the effect on their business decisions if the United States enacted the FairTax. 400 of those companies stated they would build their next plant in the United States, and 100 companies said they would move their corporate headquarters to the United States.[63] Supporters argue that the U.S. has the highest combined statutory corporate income tax rate among OECD countries along with being the only country with no border adjustment element in its tax system.[64][65] Proponents state that because the FairTax eliminates corporate income taxes and is automatically border adjustable, the competitive tax advantage of foreign producers would be eliminated, immediately boosting U.S. competitiveness overseas and at home.[66]

Opponents point to a study commissioned by the National Retail Federation in 2000 that found a national sales tax bill filed by Billy Tauzin, the Individual Tax Freedom Act (H.R. 2717), would bring a three-year decline in the economy, a four-year decline in employment and an eight-year decline in consumer spending.[67] Wall Street Journal columnist James Taranto states the FairTax is unsuited to take advantage of supply-side effects and would create a powerful disincentive to spend money.[55] John Linder states an estimated $11 trillion is held in foreign accounts (largely for tax purposes), which he states would be repatriated back to U.S. banks if the FairTax were enacted, becoming available to U.S. capital markets, bringing down interest rates, and otherwise promoting economic growth in the United States.[11] Attorney Allen Buckley states that a tremendous amount of wealth was already repatriated under law changes in 2004 and 2005.[68] Buckley also argues that if the tax rate was significantly higher, the FairTax would discourage the consumption of new goods and hurt economic growth.[68]

Transition

For more details on this topic, see Predicted effects of the FairTax: Transition effects

Stability of the Tax Base: A comparison of Personal Consumption Expenditures and Adjusted Gross Income.

During the transition, many or most of the employees of the IRS (105,978 in 2005)[69] would face loss of employment.[44] The Beacon Hill Institute estimate is that the federal government would be able to cut $8 billion from the IRS budget of $11.01 billion (in 2007), reducing the size of federal tax administration by 73%.[44] In addition, income tax preparers (many seasonal), tax lawyers, tax compliance staff in medium-to-large businesses, and software companies which sell tax preparation software could face significant drops, changes, or loss of employment. The bill would maintain the IRS for three years after implementation before completely decommissioning the agency, providing employees time to find other employment.[16]

In the period before the FairTax is implemented, there could be a strong incentive for individuals to buy goods without the sales tax using credit. After the FairTax is in effect, the credit could be paid off using untaxed payroll. If credit incentives do not change, opponents of the FairTax worry it could exacerbate an existing consumer debt problem.[70] Proponents of the FairTax state that this effect could also allow individuals to pay off their existing (pre-FairTax) debt more quickly,[11] and studies suggest lower interest rates after FairTax passage.[61]

Individuals under the current system who accumulated savings from ordinary income (by choosing not to spend their money when the income was earned) paid taxes on that income before it was placed in savings (such as a Roth IRA or CD). When individuals spend above the poverty level with money saved under the current system, that spending would be subject to the FairTax. People living through the transition may find both their earnings and their spending taxed.[71] Critics have stated that the FairTax would result in unfair double taxation for savers and suggest it does not address the transition effect on some taxpayers who have accumulated significant savings from after-tax dollars, especially retirees who have finished their careers and switched to spending down their life savings.[38][71] Supporters of the plan argue that the current system is no different, since compliance costs and “hidden taxes” embedded in the prices of goods and services cause savings to be “taxed” a second time already when spent.[71] The rebate would supplement accrued savings, covering taxes up to the poverty level. The income taxes on capital gains, estates, social security and pension benefits would be eliminated under FairTax. In addition, the FairTax legislation adjusts Social Security benefits for changes in the price level, so a percentage increase in prices would result in an equal percentage increase to Social Security income.[16] Supporters suggest these changes would offset paying the FairTax under transition conditions.[11]

Other indirect effects

For more details on this topic, see Predicted effects of the FairTax: Other indirect effects

The FairTax would be tax free on mortgage interest up to the federal borrowing rate for like-term instruments as determined by the Treasury,[72] but since savings, education, and other investments would be tax free under the plan, the FairTax could decrease the incentive to spend more on homes. An analysis in 2008 by the Baker Institute For Public Policy concluded that the FairTax would have significant transitional issues for the housing sector since the investment would no longer be tax-favored.[51] In a 2007 study, the Beacon Hill Institute concluded that total charitable giving would increase under the FairTax, although increases in giving would not be distributed proportionately amongst the various types of charitable organizations.[73] The FairTax may also affect state and local government debt as the federal income tax system provides tax advantages to municipal bonds.[74] Proponents believe environmental benefits would result from the FairTax through environmental economics and the re-use and re-sale of used goods.[75] Former Senator Mike Gravel states the significant reduction of paperwork for IRS compliance and tax forms is estimated to save about 300,000 trees each year.[75] Advocates argue the FairTax would provide an incentive for illegal immigrants to legalize as they would otherwise not receive the rebate.[1][11] Proponents also believe that the FairTax would have positive effects on civil liberties that are sometimes charged against the income tax system, such as social inequalityeconomic inequalityfinancial privacyself-incrimination,unreasonable search and seizureburden of proof, and due process.[14][76]

If the FairTax bill were passed, permanent elimination of income taxation would not be guaranteed; the FairTax bill would repeal much of the existing tax code, but the Sixteenth Amendment would remain in place. Preventing new legislation from reintroducing income taxation would require a repeal of the Sixteenth Amendment to the United States Constitution with a separate provision expressly prohibiting a federal income tax.[60] This is referred to as an “aggressive repeal”. Separate income taxes enforced by individual states would be unaffected by the federal repeal. Passing the FairTax would require only a simple majority in each house of the United States Congress along with the signature of the President, whereas enactment of a constitutional amendment must be approved by two thirds of each house of the Congress, and three-quarters of the individual U.S. states. It is therefore possible that passage of the FairTax bill would simply add another taxation system. If a new income tax bill were passed after the FairTax passage, a hybrid system could develop; albeit, there is nothing preventing a bill for a hybrid system today. To address this issue and preclude that possibility, in the 111th Congress John Linder introduced a contingent sunset provision in H.R. 25. It would require the repeal of the Sixteenth Amendment within 8 years after the implementation of the FairTax or, failing that, the FairTax would expire.[77] Critics have also argued that a tax on state government consumption could be unconstitutional.[68]

Changes in the retail economy

See also: Tax: Economics of taxationEffect of taxes and subsidies on price

Since the FairTax would not tax used goods, the value would be determined by the supply and demand in relation to new goods.[78] The price differential/margins between used and new goods would stay consistent, as the cost and value of used goods are in direct relationship to the cost and value of the new goods. Because the U.S. tax system has a hidden effect on prices, it is expected that moving to the FairTax would decrease production costs from the removal of business taxes and compliance costs, which is predicted to offset a portion of the FairTax effect on prices.[11]

Value of used goods

Since the FairTax would not tax used goods, some critics have argued that this would create a differential between the price of new and used goods, which may take years to equalize.[37] Such a differential would certainly influence the sale of new goods like vehicles and homes. Similarly, some supporters have claimed that this would create an incentive to buy used goods, creating environmental benefits of re-use and re-sale.[75] Conversely, it is argued that like the income tax system that contains embedded tax cost (seeTheories of retail pricing),[79] used goods would contain the embedded FairTax cost.[71] While the FairTax would not be applied to the retail sales of used goods, the inherent value of a used good includes the taxes paid when the good was sold at retail. The value is determined by the supply and demand in relation to new goods.[78] The price differential / margins between used and new goods should stay consistent, as the cost and value of used goods are in direct relationship to the cost and value of the new goods.

Theories of retail pricing

supply and demand diagram illustrating taxes’ effect on prices.

Based on a study conducted by Dale Jorgenson, proponents state that production cost of domestic goods and services could decrease by approximately 22% on average after embedded tax costs are removed, leaving the sale nearly the same after taxes. The study concludes that producer prices would drop between 15% and 26% (depending on the type of good/service).[80] Jorgenson’s research included all income and payroll taxes in the embedded tax estimation, which assumes employee take-home pay (net income) remains unchanged from pre-FairTax levels.[4][81] Price and wage changes after the FairTax would largely depend on the response of the Federal Reserve monetary authorities.[28][37][82] Non-accommodation of the money supply would suggest retail prices and take home pay stay the same—embedded taxes are replaced by the FairTax. Full accommodation would suggest prices and incomes rise by the exclusive rate (i.e. 30%)—embedded taxes become windfall gains. Partial accommodation would suggest a varying degree in-between.[28][82]

If businesses provided employees with gross pay (including income tax withholding and the employee share of payroll taxes),[44] Arduin, Laffer & Moore Econometrics estimated production costs could decrease by a minimum of 11.55% (partial accommodation).[47] This reduction would be from the removal of the remaining embedded costs, including corporate taxes, compliance costs, and the employer share of payroll taxes. This decrease would offset a portion of the FairTax amount reflected in retail prices, which proponents suggest as the most likely scenario.[28] Bruce Bartlett states that it is unlikely that nominal wages would be reduced, which he believes would result in a recession, but that the Federal Reserve would likely increase the money supply to accommodate price increases.[37] David Tuerck states “The monetary authorities would have to consider how the degree of accommodation, varying from none to full, would affect the overall economy and how it would affect the well-being of various groups such as retirees.”[82]

Social Security benefits would be adjusted for any price changes due to FairTax implementation.[16] The Beacon Hill Institute states that it would not matter, apart from transition issues, whether prices fall or rise—the relative tax burden and tax rate remains the same.[44] Decreases in production cost would not fully apply to imported products; so according to proponents, it would provide tax advantages for domestic production and increase U.S. competitiveness in global trade (see Border adjustability). To ease the transition, U.S. retailers will receive a tax credit equal to the FairTax on their inventory to allow for quick cost reduction. Retailers would also receive an administrative fee equal to the greater of $200 or 0.25% of the remitted tax as compensation for compliance costs,[83] which amounts to around $5 billion.

Effects on tax code compliance

One avenue for non-compliance is the black market. FairTax supporters state that the black market is largely untaxed under the current tax system. Economists estimate the underground economy in the United States to be between one and three trillion dollars annually.[84][85] By imposing a sales tax, supporters argue that black market activity would be taxed when proceeds from such activity are spent on legal consumption.[86] For example, the sale of illegal narcotics would remain untaxed (instead of being guilty of income tax evasion, drug dealers would be guilty of failing to submit sales tax), but they would face taxation when they used drug proceeds to buy consumer goods such as food, clothing, and cars. By taxing this previously untaxed money, FairTax supporters argue that non-filers would be paying part of their share of what would otherwise be uncollected income and payroll taxes.[11][87]

Other economists and analysts have argued that the underground economy would continue to bear the same tax burden as before.[13][86][87][88] They state that replacing the current tax system with a consumption tax would not change the tax revenue generated from the underground economy—while illicit income is not taxed directly, spending of income from illicit activity results in business income and wages that are taxed.[13][86][87]

Tax compliance and evasion

“No, No! Not That Way”—Political cartoonfrom 1933 commenting on a general sales tax over an income tax.

Proponents state the FairTax would reduce the number of tax filers by about 86% (from 100 million to 14 million) and reduce the filing complexity to a simplified state sales tax form.[52] The Government Accountability Office(GAO), among others, have specifically identified the negative relationship between compliance costs and the number of focal points for collection.[89] Under the FairTax, the federal government would be able to concentrate tax enforcement efforts on a single tax. Retailers would receive an administrative fee equal to the greater of $200 or 0.25% of the remitted tax as compensation for compliance costs.[83] In addition, supporters state that the overwhelming majority of purchases occur in major retail outlets, which are very unlikely to evade the FairTax and risk losing their business licenses.[44] Economic Census figures for 2002 show that 48.5% of merchandise sales are made by just 688 businesses (“Big-Box” retailers). 85.7% of all retail sales are made by 92,334 businesses, which is 3.6% of American companies. In the service sector, approximately 80% of sales are made by 1.2% of U.S. businesses.[28]

The FairTax is a national tax, but can be administered by the states rather than a federal agency,[90] which may have a bearing on compliance as the states’ own agencies could monitor and audit businesses within that state. The 0.25% retained by the states amounts to $5 billion the states would have available for enforcement and administration. For example, California should receive over $500 million for enforcement and administration, which is more than the $327 million budget for the state’s sales and excise taxes.[91] Because the federal money paid to the states would be a percentage of the total revenue collected, John Linder claims the states would have an incentive to maximize collections.[11] Proponents believe that states that choose to conform to the federal tax base would have advantages in enforcement, information sharing, and clear interstate revenue allocation rules.[89][90] A study by the Beacon Hill Institute concluded that, on average, states could more than halve their sales tax rates and that state economies would benefit greatly from adopting a state-level FairTax.[89]

FairTax opponents state that compliance decreases when taxes are not automatically withheld from citizens, and that massive tax evasion could result by collecting at just one point in the economic system.[37] Compliance rates can also fall when taxed entities, rather than a third party, self-report their tax liability. For example, ordinary personal income taxes can be automatically withheld and are reported to the government by a third party. Taxes without withholding and with self-reporting, such as the FairTax, can see higher evasion rates. Economist Jane Gravelle of the Congressional Research Service found studies showing that evasion rates of sales taxes are often above 10%, even when the sales tax rate is in the single digits.[87] Tax publications by the Organisation for Economic Co-operation and Development (OECD), IMF, and Brookings Institution have suggested that the upper limit for a sales tax is about 10% before incentives for evasion become too great to control.[37] According to the GAO, 80% of state tax officials opposed a national sales tax as an intrusion on their tax base.[37]Opponents also raise concerns of legal tax avoidance by spending and consuming outside of the U.S. (imported goods would be subject to collection by the U.S. Customs and Border Protection).[92]

Economists from the University of Tennessee concluded that while there would be many desirable macroeconomic effects, adoption of a national retail sales tax would also have serious effects on state and local government finances.[93] Economist Bruce Bartlett stated that if the states did not conform to the FairTax, they would have massive confusion and complication as to what is taxed by the state and what is taxed by the federal government.[37] In addition, sales taxes have long exempted all but a few services because of the enormous difficulty in taxing intangibles—Bartlett suggests that the state may not have sufficient incentive to enforce the tax.[42] University of Michigan economist Joel Slemrod argues that states would face significant issues in enforcing the tax. “Even at an average rate of around five percent, state sales taxes are difficult to administer.”[94] University of Virginia School of Law professor George Yin states that the FairTax could have evasion issues with export and import transactions.[38] The President’s Advisory Panel for Federal Tax Reform reported that if the federal government were to cease taxing income, states might choose to shift their revenue-raising to income.[8] Absent the Internal Revenue Service, it would be more difficult for the states to maintain viable income tax systems.[8][93]

Underground economy

Opponents of the FairTax argue that imposing a national retail sales tax would drive transactions underground and create a vast underground economy.[4] Under a retail sales tax system, the purchase of intermediate goods and services that are factors of productionare not taxed, since those goods would produce a final retail good that would be taxed. Individuals and businesses may be able to manipulate the tax system by claiming that purchases are for intermediate goods, when in fact they are final purchases that should be taxed. Proponents point out that a business is required to have a registered seller’s certificate on file, and must keep complete records of all transactions for six years. Businesses must also record all taxable goods bought for seven years. They are required to report these sales every month (see Personal vs. business purchases).[40] The government could also stipulate that all retail sellers provide buyers with a written receipt, regardless of transaction type (cash, credit, etc.), which would create a paper trail for evasion with risk of having the buyer turn them in (the FairTax authorizes a reward for reporting tax cheats).[52]

While many economists and tax experts support a consumption tax, problems could arise with using a retail sales tax rather than a value added tax (VAT).[4][37] A VAT imposes a tax at every intermediate step of production, so the goods reach the final consumer with much of the tax already in the price. The retail seller has little incentive to conceal retail sales, since he has already paid much of the good’s tax. Retailers are unlikely to subsidize the consumer’s tax evasion by concealing sales. In contrast, a retailer has paid no tax on goods under a sales tax system. This provides an incentive for retailers to conceal sales and engage in “tax arbitrage” by sharing some of the illicit tax savings with the final consumer. Laurence Kotlikoff has stated that the government could compel firms to report, via 1099-type forms, their sales to other firms, which would provide the same records that arise under a VAT.[52] In the United States, a general sales tax is imposed in 45 states plus the District of Columbia (accounting for over 97% of both population and economic output), which proponents argue provides a large infrastructure for taxing sales that many countries do not have.

Personal versus business purchases

Businesses would be required to submit monthly or quarterly reports (depending on sales volume) of taxable sales and sales tax collected on their monthly sales tax return. During audits, the business would have to produce invoices for the “business purchases” that they did not pay sales tax on, and would have to be able to show that they were genuine business expenses.[40] Advocates state the significant 86% reduction in collection points would greatly increase the likelihood of business audits, making tax evasion behavior much more risky.[52] Additionally, the FairTax legislation has several fines and penalties for non-compliance, and authorizes a mechanism for reporting tax cheats to obtain a reward.[40] To prevent businesses from purchasing everything for their employees, in a family business for example, goods and services bought by the business for the employees that are not strictly for business use would be taxable.[40] Health insurance or medical expenses would be an example where the business would have to pay the FairTax on these purchases. Taxable property and services purchased by a qualified non-profit or religious organization “for business purposes” would not be taxable.[95]

FairTax movement

A FairTax rally in Orlando, Florida on July 28, 2006.

The creation of the FairTax began with a group of businessmen from Houston, Texas, who initially financed what has become the political advocacy group Americans For Fair Taxation (AFFT), which has grown into a large tax reform movement.[3][28] This organization, founded in 1994, claims to have spent over $20 million in research, marketing, lobbying, and organizing efforts over a ten-year period and is seeking to raise over $100 million more to promote the plan.[96] AFFT includes a staff in Houston and a large group of volunteers who are working to get the FairTax enacted. Bruce Bartlett has charged that the FairTax was devised by the Church of Scientology in the early 1990s.[42] Representative John Linder told the Atlanta Journal-Constitution that Bartlett confused the FairTax movement with the Scientology-affiliated Citizens for an Alternative Tax System,[97] which also seeks to abolish the federal income tax and replace it with a national retail sales tax. Leo Linbeck, AFFT Chairman and CEO, stated “As a founder of Americans For Fair Taxation, I can state categorically, however, that Scientology played no role in the founding, research or crafting of the legislation giving expression to the FairTax.”[96]

Much support has been achieved by talk radio personality Neal Boortz.[98] Boortz’s book (co-authored by Georgia Congressman John Linder) entitled The FairTax Book, explains the proposal and spent time atop the New York Times Best Seller list. Boortz stated that he donates his share of the proceeds to charity to promote the book.[98] In addition, Boortz and Linder have organized several FairTax rallies to publicize support for the plan. Other media personalities have also assisted in growing grassroots support including former radio and TV talk show host Larry Elder, radio host and former candidate for the 2012 GOP Presidential Nomination Herman Cain, Fox News and radio host Sean Hannity, and Fox Business Host John Stossel.[99] The FairTax received additional visibility as one of the issues in the 2008 presidential election. At a debate on June 30, 2007, several Republican candidateswere asked about their position on the FairTax and many responded that they would sign the bill into law if elected.[29] The most vocal promoters of the FairTax during the 2008 primary elections were Republican candidate Mike Huckabee and Democratic candidate Mike Gravel. Since 2008, the tax has been popular at Tea Party protests.[100] The Internet, blogosphere, and electronic mailing lists have contributed to promoting, organizing, and gaining support for the FairTax. In the 2012 Republican presidential primary, and his ensuing Libertarian Party presidential run, former Governor of New Mexico and businessman Gary Johnson actively campaigned for the FairTax.[101] Former CEO of Godfather’s Pizza Herman Cain has been promoting the FairTax as a final step in a multiple-phase tax reform.[102] Outside of the United States, the Christian Heritage Party of Canada adopted a FairTax proposal as part of their 2011 election platform[103] but won no seats in that election.

See also

Notes

  1. Jump up to:a b c d e Fair Tax Act, 2009, Chapter 3
  2. Jump up to:a b c d e f g h Kotlikoff, 2005
  3. Jump up to:a b Linbeck statement, 2005
  4. Jump up to:a b c d e f g h i j k l m n o p q Regnier, 2005
  5. Jump up to:a b Fair Tax Act, 2009, Chapter 1
  6. Jump up to:a b c d e Gale, 1998
  7. Jump up to:a b c Tuerk et al., 2007
  8. Jump up to:a b c d e f g h i j k Tax Reform Panel Report, Ch. 9
  9. Jump up to:a b c Kotlikoff and Rapson, 2006
  10. Jump up to:a b c Kotlikoff and Jokisch, 2007
  11. Jump up to:a b c d e f g h i j The FairTax Book
  12. Jump up to:a b c Open Letter to the President
  13. Jump up to:a b c d Auerbach, 2005
  14. Jump up to:a b Sipos, 2007
  15. Jump up to:a b Gale, 2005
  16. Jump up to:a b c d Fair Tax Act, 2009, Title III
  17. Jump up to:a b H.R.25 108th Cosponsors
  18. Jump up to:a b S.1493 108th Cosponsors
  19. Jump up to:a b H.R.25 109th Cosponsors
  20. Jump up to:a b S.25 109th Cosponsors
  21. Jump up to:a b c H.R.25 110th Cosponsors
  22. Jump up^ S.1025 110th Cosponsors
  23. Jump up^ H.R.25 111th Cosponsors
  24. Jump up^ S.296 111th Cosponsors
  25. Jump up^ H.R.25 112th Cosponsors
  26. Jump up^ S.13 112th Cosponsors
  27. Jump up^ Bender, 2005
  28. Jump up to:a b c d e f g Boortz and Linder, 2008
  29. Jump up to:a b Davis, 2007
  30. Jump up^ CBS News, 2007
  31. Jump up^ Rasmussen Reports, 2009
  32. Jump up^ Obama, 2008
  33. Jump up to:a b c Walby, 2005
  34. Jump up^ 2012 prebate
  35. Jump up to:a b c d e Rebuttal to Tax Panel Report, 2006
  36. Jump up^ Bartlett, 2007
  37. Jump up to:a b c d e f g h i j k Bartlett, 2007, Tax Notes
  38. Jump up to:a b c d Yin, 2006, Fla. L. Rev.
  39. Jump up^ Linder and Boortz, 2007
  40. Jump up to:a b c d e Fair Tax Act, 2009, Chapter 5
  41. Jump up to:a b Miller, 2007
  42. Jump up to:a b c d Bartlett, 2007, Wall Street Journal
  43. Jump up^ Gingrich and Ferrara, 2005
  44. Jump up to:a b c d e f g h i j k Bachman et al., 2006
  45. Jump up to:a b Burton and Mastromarco, 1998
  46. Jump up^ Burton and Mastromarco, 1998a
  47. Jump up to:a b c d Arduin, Laffer & Moore Econometrics, 2006
  48. Jump up^ Altig et al., 2001
  49. Jump up to:a b c Tuerk et al., 2007
  50. Jump up^ Esenwein, 2005
  51. Jump up to:a b c Diamond and Zodrow, 2008
  52. Jump up to:a b c d e f Kotlikoff, 2008
  53. Jump up to:a b Fair Tax Act, 2009
  54. Jump up^ Tamny, 2009
  55. Jump up to:a b c Taranto, 2007
  56. Jump up^ Kotlikoff and Rapson, 2006
  57. Jump up^ Tuerk et al., 2007
  58. Jump up^ Zodrow and McClure, 2006
  59. Jump up^ Giuliani, 2007
  60. Jump up to:a b Vance, 2005
  61. Jump up to:a b Golob, 1995
  62. Jump up^ Tuerk et al., 2007
  63. Jump up^ Gaver, 2006
  64. Jump up^ Hodge and Atkins, 2005
  65. Jump up^ Linbeck, 2006a
  66. Jump up^ Linbeck, 2007
  67. Jump up^ Vargas, 2005
  68. Jump up to:a b c Buckley, 2008
  69. Jump up^ IRS Labor Force, 2005
  70. Jump up^ Household Debt, 2006
  71. Jump up to:a b c d Taranto, 2007a
  72. Jump up^ Fair Tax Act, 2009, Chapter 8
  73. Jump up^ Tuerck et al., 2007
  74. Jump up^ Types of Bonds
  75. Jump up to:a b c Gravel, 2007
  76. Jump up^ Edwards, 2002
  77. Jump up^ Fair Tax Act, 2009, Title IV
  78. Jump up to:a b Landsburg, 1998
  79. Jump up^ Forbes, 2007
  80. Jump up^ Jorgenson, 1998
  81. Jump up^ Boortz, 2005
  82. Jump up to:a b c Tuerck, 2008
  83. Jump up to:a b Fair Tax Act, 2009, Chapter 2
  84. Jump up^ McTague, 2005
  85. Jump up^ Schlosser, 2004
  86. Jump up to:a b c Taranto, 2007
  87. Jump up to:a b c d American Enterprise Institute, 2007
  88. Jump up^ Moffatt, 2006
  89. Jump up to:a b c Tuerck at el, 2007
  90. Jump up to:a b Fair Tax Act, 2009, Chapter 4
  91. Jump up^ California Legislative Analyst’s Office
  92. Jump up^ Karvounis, 2007
  93. Jump up to:a b Fox and Murray, 2005
  94. Jump up^ Slemrod, 2005
  95. Jump up^ Fair Tax Act, 2009, Chapter 7
  96. Jump up to:a b Linbeck, 2007
  97. Jump up^ Galloway, 2007
  98. Jump up to:a b Boortz, 2005
  99. Jump up^ Boortz, 2006
  100. Jump up^ Politico, 2010
  101. Jump up^ Gary Johnson 2012 Campaign Site, 2011
  102. Jump up^ RedState, 2011
  103. Jump up^ Christian Heritage, 2011

References

Further reading[edit]

External links[edit]

 

 http://en.wikipedia.org/wiki/FairTax

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What is the FairTax legislation?

Why is the FairTax better than a flat income tax?

What is the impact of the FairTax on business?

How does the “prebate” work?

people bring home their whole paychecks how can prices fall?

Will the FairTax lead to a massive underground economy?

Is the FairTax rate really 23%?

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Ron Paul needs to come out with his own comprehensive tax reform plan. I recommend the FairTax as a starting point with some significant changes.

The FairTax is a national retail sales consumption tax that would replace the following federal taxes:

  • Personal income tax
  • Payroll taxes for Social Security and Medicare
  • Capital gains tax
  • Alternative Minimum Tax
  • Self-employment tax
  • Corporate income tax
  • Gift taxes
  • Estate taxes

When you buy goods or services, income and payroll taxes are included or embedded in the price. When these taxes are eliminated, the price of the goods or services would decline.

Thus when the FairTax replaces these taxes, the price of the good or service with the new FairTax included should result in the price of the good or service remaining about the same.

The proposed FairTax rate is 23 percent when the tax is included in the unit price of the good or service. For example, a loaf of bread with a selling price of $1 would include 23 cents for the FairTax.

Since Paul wants to significantly limit the size and scope of the federal government, I propose he reduce the FairTax rate to 20 percent for 2013 with a tax prebate of $250 per individual to refund in advance the taxes paid on the necessities of life. A family of four would received a monthly prebate of $1,000 per month.

The $250 per individual monthly rebate per individual would be increased by $10 each year to keep up with inflation. This would make the FairTax Less very progressive for those at or below the poverty line.

The FairTax Less rate would be reduced by 1 percent a year for the next four years so that by 2017 the rate would be 16 percent.

A declining FairTax Less rate combined with a declining balanced budget will force a reduction of government spending outlays.

It should take four to eight years before the 16th Amendment (income tax) is repealed and the balanced budget amendment passes.

Therefore, I would like to see the repeal of the 16th Amendment and the passage of a balanced budget Amendment be immediately initiated in the House of Representatives and Senate.

If this is done, by 2017 the American people will never again want to go back to the complex and time-consuming income tax.

Instead, the American people will be demanding smaller government and an even lower FairTax Less rate.

Also, Paul needs to advocate a FairTax Less plan to complement his Plan to Restore America to a peace and prosperity economy by cutting government spending by $1 trillion in his first year as president and balance the budget in his third year.

The advantage is that a single FairTax Less rate of 20 percent would beat Herman Cain’s 9-9-9 plan. Cain’s plan would have a flat 9 percent business tax, a flat 9 percent personal income tax and a 9 percent national retail sales tax. The total tax rate paid would be 27 percent under Cain’s plan.

A single FairTax Less rate of 20 percent would easily defeat Perry’s optional flat tax of 20 percent personal income tax and a 15.3 percent payroll tax for Social Security or Medicare for a total of 30.3 percent. This does not include the 20 percent corporate income tax that would bring the total taxes paid to over 50 percent.

Only when the American people consume or spend their money on new goods and services would they pay the FairTax Less rate of 20 percent.

The American people would have a strong economic incentive to work, save and invest their money.

More savings would lead to more investment and in turn more jobs as businesses grow and prosper.

It’s time for Ron Paul to announce his support for a FairTax Less plan.

The dynamic combination of Paul’s Plan to Restore America and the FairTax Less plan would result in a peace and prosperity economy.

The U.S. would be the only nation on earth with no taxes on capital and labor!

The FairTax Less plan would attract trillions of dollars of new investment into the U.S. from around the world.

Growth rates and employment would significantly increase as businesses expand their operation and new business are started.

Government spending would be capped at 80 percent of the previous years FairTax Less collections.

The remaining 20 percent would be used to pay down the national debt and unfunded liabilities.

Until the Tea Party elects fiscally responsible Representatives and Senators, the FairTax Less will not happen.

It will take several election cycles to achieve the goal of limited government spending.

The FairTax Less is completely transparent.

You pay the tax when you purchase a new good or service.

Everyone get a rebate and everyone pays to same rate.

Those who spend or consume more pay more taxes.

The FairTax Less is fair to all Americans.

RESTORE AMERICA NOW! Ron Paul 2012 – Plan!

The FairTax: It’s Time

[Raymond Thomas Pronk is host of the Pronk Pops Show on KDUX web radio from 3-5 p.m. Wednesdays and author of the companion blog www.pronkpops.wordpress.com]

Background Articles and Videos

“…What is the FairTax plan?

The FairTax plan is a comprehensive proposal that replaces all federal income and payroll based taxes with an integrated approach including a progressive national retail sales tax, a prebate to ensure no American pays federal taxes on spending up to the poverty level, dollar-for-dollar federal revenue neutrality, and, through companion legislation, the repeal of the 16th Amendment.

The FairTax Act (HR 25, S 13) is nonpartisan legislation. It abolishes all federal personal and corporate income taxes, gift, estate, capital gains, alternative minimum, Social Security, Medicare, and self-employment taxes and replaces them with one simple, visible, federal retail sales tax administered primarily by existing state sales tax authorities.

The FairTax taxes us only on what we choose to spend on new goods or services, not on what we earn. The FairTax is a fair, efficient, transparent, and intelligent solution to the frustration and inequity of our current tax system.

The FairTax:

  • Enables workers to keep their entire paychecks
  • Enables retirees to keep their entire pensions
  • Refunds in advance the tax on purchases of basic necessities
  • Allows American products to compete fairly
  • Brings transparency and accountability to tax policy
  • Ensures Social Security and Medicare funding
  • Closes all loopholes and brings fairness to taxation
  • Abolishes the IRS

We offer a library of information throughout this Web site about the features and benefits of the FairTax plan. Please explore! …”

http://www.fairtax.org/site/PageServer?pagename=about_main

Tom Wright on the FairTax part 1

Tom Wright on the FairTax part 2

Tom Wright on the FairTax part 3

Tom Wright on the FairTax part 4

Tom Wright on the FairTax part 5

Tom Wright on the FairTax part 6

Tom Wright on the FairTax part 7

Why is the FairTax better than a flat income tax?

Congressman Steve King FairTax Special Order – 11/18/2011

Dan Mitchell explains the fair tax

Q&A on the FAIRTAX pt.1

Q&A on the FAIRTAX pt.2

Time to help small businesses and institute the Fair Tax!

Rep. King hosts FairTax Special Order

Americans For Fair Taxation

“…Americans For Fair Taxation (AFFT), also known as FairTax.org, states it is the United States’ largest, single-issue grassroots organization and taxpayers union dedicated to fundamental tax code replacement.[1] The Houston, Texas-based non-partisan political advocacy group is made up of volunteers who are working to get the Fair Tax Act (H.R. 25/S. 1025) enacted in the United States; a plan to replace all federal payroll and income taxes (both corporate and personal) with a national retail sales tax and monthly tax “prebate” to households of citizens and legal resident aliens. Americans for Fair Taxation state they subscribe to the ideals of simplicity, fairness, and freedom which they believe are embodied in the FairTax.[2][3] The organization claims to have signed up over 800,000 supporters.[4]

AFFT was founded in 1994 by three Houston businessmen, Jack Trotter, Bob McNair, and Leo Linbeck, who each pledged $1.5 million as seed money to hire tax experts to identify what they perceived as faults with the current tax system, to determine what American citizens would like to see in tax reform, and then to design the best system of taxation.[2] The three went on to raise an additional $17 million to fund focus groups with citizens around the country and tax policy studies.[2]

Some of the experts funded include:
  • Professors David Burton and Dan Mastromarco, University of Maryland and The Argus Group
  • Laurence Kotlikoff, Boston University
  • Stephen Moore, The Cato Institute
  • Professor Dale Jorgenson, Harvard University
  • Bill Beach (economist), the Heritage Foundation
  • Jim Poterba, The National Bureau of Economic Research
  • Professor George Zodrow, Rice University and the Baker Institute for Public Policy
  • Professor Joseph Kahn, Massachusetts Institute of Technology

http://en.wikipedia.org/wiki/Americans_For_Fair_Taxation

FairTax.org

http://www.fairtax.org/site/PageServer

Federal Insurance Contributions Act tax

Federal Insurance Contributions Act (FICA) tax (play /ˈfaɪkə/) is a United States payroll (or employment) tax[1] imposed by the federal government on both employees and employers to fund Social Security and Medicare[2] —federal programs that provide benefits for retirees, the disabled, and children of deceased workers. Social Security benefits include old-age, survivors, and disability insurance (OASDI); Medicare provides hospital insurance benefits. The amount that one pays in payroll taxes throughout one’s working career is indirectly tied to the social security benefits annuity that one receives as a retiree.[citation needed] This has led some to claim that the payroll tax is not a tax because its collection is tied to a benefit.[3] The United States Supreme Court decided in Flemming v. Nestor (1960) that no one has an accrued property right to benefits from Social Security.

The Federal Insurance Contributions Act is currently codified at Title 26, Subtitle C, Chapter 21 of the United States Code.[4]

Overview

The Center on Budget and Policy Priorities states that three-quarters of taxpayers pay more in payroll taxes than they do in income taxes.[5] The FICA tax is considered a regressive tax on income (with no standard deduction or personal exemption deduction) and is imposed (for the years 2009 and 2010) only on the first $106,800 of gross wages. The tax is not imposed on investment income (such as interest and dividends).

“Regular” employees (most wage-earners)

For 2008, the employee’s share of the Social Security portion of the tax is 6.2%[6] of gross compensation up to a limit of $102,000 of compensation (resulting in a maximum of $6,324.00 in tax). For 2009 and 2010, the employee’s share is 6.2% of gross compensation up to a limit of $106,800 of compensation (resulting in a maximum Social Security tax of $6,621.60).[7] This limit, known as the Social Security Wage Base, goes up each year based on average national wages and, in general, at a faster rate than the Consumer Price Index (CPI-U). For the calendar year 2011, the employee’s share has been temporarily reduced to 4.2% of gross compensation, with a limit of $106,800.[8] The employee’s share of the Medicare portion is 1.45% of wages, with no limit on the amount of wage subject to the Medicare tax.[6]

The employer is also liable for 6.2% Social Security and 1.45% Medicare taxes,[9] making the total Social Security tax 12.4% of wages, and the total Medicare tax 2.9%. (Self-employed people are responsible for the entire FICA percentage of 15.3% (= 12.4% + 2.9%), since they are in a sense both the employer and the employed; however, see the section on self-employed people for more details.)

If a worker starts a new job halfway through the year and has already earned the wage base limit with the old employer for Social Security purposes, the new employer is not allowed to stop withholding until the wage base limit has been earned with the new employer without regard to the wage base limit earned under the old employer. There are some limited cases, such as a successor-predecessor transfer, in which the payments that have already been withheld can be counted toward the year-to-date total.

If a worker has overpaid toward Social Security by having more than one job or by having switched jobs during the year, that worker can file a request to have that overpayment counted as tax paid when he or she files a Federal income tax return. If the taxpayer is due a refund, then the FICA overpayment is refunded.

Self-employed people

A tax similar to the FICA tax is imposed on the earnings of self-employed individuals, such as independent contractors and members of a partnership. This tax is imposed not by the Federal Insurance Contributions Act but instead by the Self-Employment Contributions Act of 1954, which is codified as Chapter 2 of Subtitle A of the Internal Revenue Code, 26 U.S.C. § 1401 through 26 U.S.C. § 1403 (the “SE Tax Act”). Under the SE Tax Act, self-employed people are responsible for the entire percentage of 15.3% (= 12.4% [Soc. Sec.] + 2.9% [Medicare]); however, the 15.3% multiplier is applied to 92.35% of the business’s net earnings from self-employment, rather than 100% of the gross earnings; the difference, 7.65%, is half of the 15.3%, and makes the calculation fair in comparison to that of regular (non-self-employed) employees. It does this by adjusting for the fact that employees’ 7.65% share of their SE tax is multiplied against a number (their gross income) that does not include the putative “employer’s half” of the self-employment tax. In other words, it makes the calculation fair because employees don’t get taxed on their employers’ contribution of the second half of FICA, therefore self-employed people shouldn’t get taxed on the second half of the self-employment tax. Similarly, self-employed people also deduct half of their self-employment tax (schedule SE) from their gross income on the way to arriving at their adjusted gross income (AGI). This levels the amount paid by self-employed persons in comparison to regular employees, who don’t pay general income tax on their employers’ contribution of the second half of FICA, just as they didn’t pay FICA tax on it either.[10][11]

These calculations are made on Schedule SE: Self-Employment Tax, although that is not readily apparent to novice self-employed taxpayers, owing to the schedule’s rather opaque name, which makes it sound like it is part of the general federal income tax. Some taxpayers have complained that Schedule SE’s title should be changed to something such as “Self-Employment FICA Tax”, so that its separateness from the general income tax is apparent,[12] perhaps not realizing that the SE tax is not imposed by the Federal Insurance Contributions Act (FICA) at all, and that neither SE taxes nor FICA taxes are “income taxes” imposed under Chapter 1 of the Internal Revenue Code.

Exemption for certain full-time students

A special case in FICA regulations includes exemptions for student workers. Students enrolled at least half-time in a university and working part-time for the same university are exempted from FICA payroll taxes, so long as their relationship with the university is primarily an educational one.[13] Medical residents working full-time are not considered students and are not exempt from FICA payroll taxes, according to a US Supreme Court ruling in 2011.[14] In order to be exempt from FICA payroll taxes, a student’s work must be “incident to” pursuit of a course of study, which is rarely the case with full-time employment.[14]

History

Prior to the Great Depression, the following presented difficulties for working-class Americans: [15]

  • The U.S. had no federal-government-mandated retirement savings; consequently, for those people who had not voluntarily saved money throughout their working lives, the end of their work careers was the end of all income.
  • Similarly, the U.S. had no federal-government-mandated disability income insurance to provide for citizens disabled by injuries (of any kind—non-work-related); consequently, for most people, a disabling injury meant no more income (since most people have little to no income except earned income from work).
  • In addition, there was no federal-government-mandated disability income insurance to provide for people unable to ever work during their lives, such as anyone born with severe mental retardation.
  • Further, the U.S. had no federal-government-mandated health insurance for the elderly; consequently, for many people, the end of their work careers was the end of their ability to pay for medical care.
  • Finally, the U.S. had no federal-government-mandated health insurance for all those who are not elderly; consequently, many people, especially those with pre-existing conditions, have no ability to pay for medical care.

In the 1930s, the New Deal introduced Social Security to rectify the first three problems (retirement, injury-induced disability, or congenital disability). It introduced the FICA tax as the means to pay for Social Security.

In the 1960s, Medicare was introduced to rectify the fourth problem (health care for the elderly). The FICA tax was increased in order to pay for this expense.

Criticism

Social Security regressivity debate

The Social Security component of the FICA tax is regressive, meaning the effective tax rate regresses (decreases) as income increases.[16] The Social Security component is actually a flat tax for wage levels under the Social Security Wage Base (see “Regular” employees above). But since no tax is owed on wages above the Wage Base limit, the total tax rate declines as wages increase beyond that limit. In other words, for wage levels above the limit, the absolute dollar amount of tax owed remains constant; since this number (the numerator) remains constant while the wage level (the denominator) increases, the effective tax rate steadily decreases as wage levels increase beyond the Wage Base limit.

FICA is also not collected on unearned income, including interest on savings deposits, stock dividends, and capital gains such as profits from the sale of stock or real estate. The proportion of total income which is exempt from FICA as “unearned income” tends to rise with higher income brackets.

Some argue that since Social Security taxes are eventually returned to taxpayers, with interest, in the form of Social Security benefits, the regressiveness of the tax is effectively negated.[citation needed] That is, the taxpayer gets back what he or she put into the Social Security system. Others, including the Congressional Budget Office, point out that the Social Security system as a whole is progressive; individuals with lower lifetime average wages receive a larger benefit (as a percentage of their lifetime average wage income) than do individuals with higher lifetime average wages.[17][18]

http://en.wikipedia.org/wiki/Federal_Insurance_Contributions_Act_tax

Related Posts On Pronk Palisades

Ron Paul’s Economic Plan for Restoring America to Peace and Prosperity–Videos

The FairTax (National Consumption Sales Tax) vs. The Flat Tax (One Rate Federal Income Tax)–Who Pays The Most Federal Individual Income

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Pronk Pops Show 70, April 20, 2012, Segment 0: Eat The Rich–Obama’s Big Distraction And Big Lie: The Buffett Rule Tax and The Rich Do Not Pay Their Fair Share–Class Warfare Progressive Propaganda–Videos

Pronk Pops Show 70, April 20, 2012: Segment 1: Tom A. Coburn–The Debt Bomb: A Bold Plan To Stop Washington From Bankrupting America–Videos

Pronk Pops Show 70, April 20, 2012: Segment 2: Arthur Brooks–The Battle: How the Fight Between Free Enterprise and Big Government will Shape America’s Future–VideosTax? Videos

Pronk Pops Show 71, April 25, 2012: Segment: 1: Obama’s Campaign Strategy Switches From Romney The Progressive Flip Flopper To Romney The Severe Conservative Right-Wing Extremist–Why?–Romney Is Beating Obama In Internal Polls With Independent Voters–Why? Obama’s Record of Failure–High Unemployment Rates and Gas Prices and Massive Government Deficits–$5 Trillion–Videos

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Pronk Pops Show 70, April 23, 2012: Segment 3: A Ron Paul Tax Reform Plan: No Income Taxes Or I.R.S.–FairTax Less: 2013: 20%, 2014: 19%, 2015: 18%, 2016: 17%, 2017: 16%–Income Tax 16th Amendment Repealed And Balance Budget Amendment Passed!–”When The Impossible Became The Inevitable!”

Posted on April 17, 2012. Filed under: American History, Books, Budgetary Policy, Business, Communications, Economics, Employment, Energy, Federal Government, Fiscal Policy, Foreign Policy, Government, Government Spending, Health Care, Health Care Insurance, History, Housing, Illegal Immigration, Immigration, Investments, Labor Economics, Law, Monetary Policy, Philosophy, Politics, Polls, Pro Life, Regulation, Science, Security, Social Science, Success, Tax Policy, Videos, Violence, War, Wisdom | Tags: , , , , , |

Pronk Pops Show 70: April 23, 2012 

Pronk Pops Show 69: April 11, 2012

Pronk Pops Show 68: April 4, 2012

Pronk Pops Show 67: April 2, 2012

Pronk Pops Show 66: March 26, 2012

Pronk Pops Show 65: March 9, 2012

Listen To Pronk Pops Podcast or Download Shows 68-70

Listen To Pronk Pops Podcast or Download Shows 65-67

Listen To Pronk Pops Podcast or Download Shows 62-64

Listen To Pronk Pops Podcast or Download Shows 58-61

Listen To Pronk Pops Podcast or Download Shows 55-57

Listen To Pronk Pops Podcast or Download Shows 52-54

Listen To Pronk Pops Podcast or Download Shows 49-51

Listen To Pronk Pops Podcast or Download Shows 45-48

Listen To Pronk Pops Podcast or Download Shows 41-44

Listen To Pronk Pops Podcast or Download Shows 38-40

Listen To Pronk Pops Podcast or Download Shows 34-37

Listen To Pronk Pops Podcast or Download Shows 30-33

Listen To Pronk Pops Podcast or Download Shows 27-29

Listen To Pronk Pops Podcast or Download Shows 22-26

Listen To Pronk Pops Podcast or Download Shows 16-22

Listen To Pronk Pops Podcast or Download Shows 10-15

Listen To Pronk Pops Podcast or Download Shows 1-9

Segment 3: A Ron Paul Tax Reform Plan: No Income Taxes Or I.R.S.–FairTax Less: 2013: 20%, 2014: 19%, 2015: 18%, 2016: 17%, 2017: 16%–Income Tax 16th Amendment Repealed And Balance Budget Amendment Passed!–”When The Impossible Became The Inevitable!”

April 17 FairTax Press Conference Full Video

When The Impossible Became The Inevitable

Ron Paul on Taxes

Ron Paul – Repeal The 16th Amendment

The Fair Tax

Taxes and the Republican Party by the Southern Avenger

Tax Code Roulette | THE PLAIN TRUTH by Judge Napolitano 10/25/11

Flat, Fair, VAT, or Gone? What Should be done with the Federal Income Tax- CPAC 2011 Pt.1

The FairTax… For a better America

Lugar Cosponsors the FairTax

The FairTax Versus the Obama ‘Jobs Plan’

Rob Woodall Floor Speech: The FairTax will bring jobs back to America

Pence on the Fair Tax

Tom Wright on the FairTax part 1

What is the FairTax legislation?

Why is the FairTax better than a flat income tax?

What is the impact of the FairTax on business?

How does the “prebate” work?

people bring home their whole paychecks how can prices fall?

Will the FairTax lead to a massive underground economy?

Is the FairTax rate really 23%?

How will used goods be taxed?

FairTax

Herman Cain on Fixing Deficit/Jobs/Fair Tax: “Replace Income and Payroll Tax”

Herman Cain Explains the Fair Tax

Johnson: What makes you a better Libertarian choice than Ron Paul?

Reagan on Taxes

Reagan; Taxes and Budget Deficit: Revenue 19% of GDP; Spending is 23%; Revenue is sufficient

Reagan on Balanced Budget

Ronald Reagan – Tax Reform Act Remarks

Reagan supported fair tax policies

Murray N. Rothbard: Libertarianism

Ron Paul needs to come out with his own comprehensive tax reform plan. I recommend the FairTax as a starting point with some significant changes.

The FairTax is a national retail sales consumption tax that would replace the following federal taxes:

  • Personal income tax
  • Payroll taxes for Social Security and Medicare
  • Capital gains tax
  • Alternative Minimum Tax
  • Self-employment tax
  • Corporate income tax
  • Gift taxes
  • Estate taxes

When you buy goods or services, income and payroll taxes are included or embedded in the price. When these taxes are eliminated, the price of the goods or services would decline.

Thus when the FairTax replaces these taxes, the price of the good or service with the new FairTax included should result in the price of the good or service remaining about the same.

The proposed FairTax rate is 23 percent when the tax is included in the unit price of the good or service. For example, a loaf of bread with a selling price of $1 would include 23 cents for the FairTax.

Since Paul wants to significantly limit the size and scope of the federal government, I propose he reduce the FairTax rate to 20 percent for 2013 with a tax prebate of $250 per individual to refund in advance the taxes paid on the necessities of life. A family of four would received a monthly prebate of $1,000 per month.

The $250 per individual monthly rebate per individual would be increased by $10 each year to keep up with inflation. This would make the FairTax Less very progressive for those at or below the poverty line.

The FairTax Less rate would be reduced by 1 percent a year for the next four years so that by 2017 the rate would be 16 percent.

A declining FairTax Less rate combined with a declining balanced budget will force a reduction of government spending outlays.

It should take four to eight years before the 16th Amendment (income tax) is repealed and the balanced budget amendment passes.

Therefore, I would like to see the repeal of the 16th Amendment and the passage of a balanced budget Amendment be immediately initiated in the House of Representatives and Senate.

If this is done, by 2017 the American people will never again want to go back to the complex and time-consuming income tax.

Instead, the American people will be demanding smaller government and an even lower FairTax Less rate.

Also, Paul needs to advocate a FairTax Less plan to complement his Plan to Restore America to a peace and prosperity economy by cutting government spending by $1 trillion in his first year as president and balance the budget in his third year.

The advantage is that a single FairTax Less rate of 20 percent would beat Herman Cain’s 9-9-9 plan. Cain’s plan would have a flat 9 percent business tax, a flat 9 percent personal income tax and a 9 percent national retail sales tax. The total tax rate paid would be 27 percent under Cain’s plan.

A single FairTax Less rate of 20 percent would easily defeat Perry’s optional flat tax of 20 percent personal income tax and a 15.3 percent payroll tax for Social Security or Medicare for a total of 30.3 percent. This does not include the 20 percent corporate income tax that would bring the total taxes paid to over 50 percent.

Only when the American people consume or spend their money on new goods and services would they pay the FairTax Less rate of 20 percent.

The American people would have a strong economic incentive to work, save and invest their money.

More savings would lead to more investment and in turn more jobs as businesses grow and prosper.

It’s time for Ron Paul to announce his support for a FairTax Less plan.

The dynamic combination of Paul’s Plan to Restore America and the FairTax Less plan would result in a peace and prosperity economy.

The U.S. would be the only nation on earth with no taxes on capital and labor!

The FairTax Less plan would attract trillions of dollars of new investment into the U.S. from around the world.

Growth rates and employment would significantly increase as businesses expand their operation and new business are started.

Government spending would be capped at 80 percent of the previous years FairTax Less collections.

The remaining 20 percent would be used to pay down the national debt and unfunded liabilities.

Until the Tea Party elects fiscally responsible Representatives and Senators, the FairTax Less will not happen.

It will take several election cycles to achieve the goal of limited government spending.

The FairTax Less is completely transparent.

You pay the tax when you purchase a new good or service.

Everyone get a rebate and everyone pays to same rate.

Those who spend or consume more pay more taxes.

The FairTax Less is fair to all Americans.

RESTORE AMERICA NOW! Ron Paul 2012 – Plan!

The FairTax: It’s Time

[Raymond Thomas Pronk is host of the Pronk Pops Show on KDUX web radio from 3-5 p.m. Wednesdays and author of the companion blog www.pronkpops.wordpress.com]

Background Articles and Videos

“…What is the FairTax plan?

The FairTax plan is a comprehensive proposal that replaces all federal income and payroll based taxes with an integrated approach including a progressive national retail sales tax, a prebate to ensure no American pays federal taxes on spending up to the poverty level, dollar-for-dollar federal revenue neutrality, and, through companion legislation, the repeal of the 16th Amendment.

The FairTax Act (HR 25, S 13) is nonpartisan legislation. It abolishes all federal personal and corporate income taxes, gift, estate, capital gains, alternative minimum, Social Security, Medicare, and self-employment taxes and replaces them with one simple, visible, federal retail sales tax administered primarily by existing state sales tax authorities.

The FairTax taxes us only on what we choose to spend on new goods or services, not on what we earn. The FairTax is a fair, efficient, transparent, and intelligent solution to the frustration and inequity of our current tax system.

The FairTax:

  • Enables workers to keep their entire paychecks
  • Enables retirees to keep their entire pensions
  • Refunds in advance the tax on purchases of basic necessities
  • Allows American products to compete fairly
  • Brings transparency and accountability to tax policy
  • Ensures Social Security and Medicare funding
  • Closes all loopholes and brings fairness to taxation
  • Abolishes the IRS

We offer a library of information throughout this Web site about the features and benefits of the FairTax plan. Please explore! …”

http://www.fairtax.org/site/PageServer?pagename=about_main

Tom Wright on the FairTax part 1

Tom Wright on the FairTax part 2

Tom Wright on the FairTax part 3

Tom Wright on the FairTax part 4

Tom Wright on the FairTax part 5

Tom Wright on the FairTax part 6

Tom Wright on the FairTax part 7

Why is the FairTax better than a flat income tax?

Congressman Steve King FairTax Special Order – 11/18/2011

Dan Mitchell explains the fair tax

Q&A on the FAIRTAX pt.1

Q&A on the FAIRTAX pt.2

Time to help small businesses and institute the Fair Tax!

Rep. King hosts FairTax Special Order

Americans For Fair Taxation

“…Americans For Fair Taxation (AFFT), also known as FairTax.org, states it is the United States’ largest, single-issue grassroots organization and taxpayers union dedicated to fundamental tax code replacement.[1] The Houston, Texas-based non-partisan political advocacy group is made up of volunteers who are working to get the Fair Tax Act (H.R. 25/S. 1025) enacted in the United States; a plan to replace all federal payroll and income taxes (both corporate and personal) with a national retail sales tax and monthly tax “prebate” to households of citizens and legal resident aliens. Americans for Fair Taxation state they subscribe to the ideals of simplicity, fairness, and freedom which they believe are embodied in the FairTax.[2][3] The organization claims to have signed up over 800,000 supporters.[4]

AFFT was founded in 1994 by three Houston businessmen, Jack Trotter, Bob McNair, and Leo Linbeck, who each pledged $1.5 million as seed money to hire tax experts to identify what they perceived as faults with the current tax system, to determine what American citizens would like to see in tax reform, and then to design the best system of taxation.[2] The three went on to raise an additional $17 million to fund focus groups with citizens around the country and tax policy studies.[2]

Some of the experts funded include:
  • Professors David Burton and Dan Mastromarco, University of Maryland and The Argus Group
  • Laurence Kotlikoff, Boston University
  • Stephen Moore, The Cato Institute
  • Professor Dale Jorgenson, Harvard University
  • Bill Beach (economist), the Heritage Foundation
  • Jim Poterba, The National Bureau of Economic Research
  • Professor George Zodrow, Rice University and the Baker Institute for Public Policy
  • Professor Joseph Kahn, Massachusetts Institute of Technology

http://en.wikipedia.org/wiki/Americans_For_Fair_Taxation

FairTax.org

http://www.fairtax.org/site/PageServer

Federal Insurance Contributions Act tax

Federal Insurance Contributions Act (FICA) tax (play /ˈfaɪkə/) is a United States payroll (or employment) tax[1] imposed by the federal government on both employees and employers to fund Social Security and Medicare[2] —federal programs that provide benefits for retirees, the disabled, and children of deceased workers. Social Security benefits include old-age, survivors, and disability insurance (OASDI); Medicare provides hospital insurance benefits. The amount that one pays in payroll taxes throughout one’s working career is indirectly tied to the social security benefits annuity that one receives as a retiree.[citation needed] This has led some to claim that the payroll tax is not a tax because its collection is tied to a benefit.[3] The United States Supreme Court decided in Flemming v. Nestor (1960) that no one has an accrued property right to benefits from Social Security.

The Federal Insurance Contributions Act is currently codified at Title 26, Subtitle C, Chapter 21 of the United States Code.[4]

Overview

The Center on Budget and Policy Priorities states that three-quarters of taxpayers pay more in payroll taxes than they do in income taxes.[5] The FICA tax is considered a regressive tax on income (with no standard deduction or personal exemption deduction) and is imposed (for the years 2009 and 2010) only on the first $106,800 of gross wages. The tax is not imposed on investment income (such as interest and dividends).

“Regular” employees (most wage-earners)

For 2008, the employee’s share of the Social Security portion of the tax is 6.2%[6] of gross compensation up to a limit of $102,000 of compensation (resulting in a maximum of $6,324.00 in tax). For 2009 and 2010, the employee’s share is 6.2% of gross compensation up to a limit of $106,800 of compensation (resulting in a maximum Social Security tax of $6,621.60).[7] This limit, known as the Social Security Wage Base, goes up each year based on average national wages and, in general, at a faster rate than the Consumer Price Index (CPI-U). For the calendar year 2011, the employee’s share has been temporarily reduced to 4.2% of gross compensation, with a limit of $106,800.[8] The employee’s share of the Medicare portion is 1.45% of wages, with no limit on the amount of wage subject to the Medicare tax.[6]

The employer is also liable for 6.2% Social Security and 1.45% Medicare taxes,[9] making the total Social Security tax 12.4% of wages, and the total Medicare tax 2.9%. (Self-employed people are responsible for the entire FICA percentage of 15.3% (= 12.4% + 2.9%), since they are in a sense both the employer and the employed; however, see the section on self-employed people for more details.)

If a worker starts a new job halfway through the year and has already earned the wage base limit with the old employer for Social Security purposes, the new employer is not allowed to stop withholding until the wage base limit has been earned with the new employer without regard to the wage base limit earned under the old employer. There are some limited cases, such as a successor-predecessor transfer, in which the payments that have already been withheld can be counted toward the year-to-date total.

If a worker has overpaid toward Social Security by having more than one job or by having switched jobs during the year, that worker can file a request to have that overpayment counted as tax paid when he or she files a Federal income tax return. If the taxpayer is due a refund, then the FICA overpayment is refunded.

Self-employed people

A tax similar to the FICA tax is imposed on the earnings of self-employed individuals, such as independent contractors and members of a partnership. This tax is imposed not by the Federal Insurance Contributions Act but instead by the Self-Employment Contributions Act of 1954, which is codified as Chapter 2 of Subtitle A of the Internal Revenue Code, 26 U.S.C. § 1401 through 26 U.S.C. § 1403 (the “SE Tax Act”). Under the SE Tax Act, self-employed people are responsible for the entire percentage of 15.3% (= 12.4% [Soc. Sec.] + 2.9% [Medicare]); however, the 15.3% multiplier is applied to 92.35% of the business’s net earnings from self-employment, rather than 100% of the gross earnings; the difference, 7.65%, is half of the 15.3%, and makes the calculation fair in comparison to that of regular (non-self-employed) employees. It does this by adjusting for the fact that employees’ 7.65% share of their SE tax is multiplied against a number (their gross income) that does not include the putative “employer’s half” of the self-employment tax. In other words, it makes the calculation fair because employees don’t get taxed on their employers’ contribution of the second half of FICA, therefore self-employed people shouldn’t get taxed on the second half of the self-employment tax. Similarly, self-employed people also deduct half of their self-employment tax (schedule SE) from their gross income on the way to arriving at their adjusted gross income (AGI). This levels the amount paid by self-employed persons in comparison to regular employees, who don’t pay general income tax on their employers’ contribution of the second half of FICA, just as they didn’t pay FICA tax on it either.[10][11]

These calculations are made on Schedule SE: Self-Employment Tax, although that is not readily apparent to novice self-employed taxpayers, owing to the schedule’s rather opaque name, which makes it sound like it is part of the general federal income tax. Some taxpayers have complained that Schedule SE’s title should be changed to something such as “Self-Employment FICA Tax”, so that its separateness from the general income tax is apparent,[12] perhaps not realizing that the SE tax is not imposed by the Federal Insurance Contributions Act (FICA) at all, and that neither SE taxes nor FICA taxes are “income taxes” imposed under Chapter 1 of the Internal Revenue Code.

Exemption for certain full-time students

A special case in FICA regulations includes exemptions for student workers. Students enrolled at least half-time in a university and working part-time for the same university are exempted from FICA payroll taxes, so long as their relationship with the university is primarily an educational one.[13] Medical residents working full-time are not considered students and are not exempt from FICA payroll taxes, according to a US Supreme Court ruling in 2011.[14] In order to be exempt from FICA payroll taxes, a student’s work must be “incident to” pursuit of a course of study, which is rarely the case with full-time employment.[14]

History

Prior to the Great Depression, the following presented difficulties for working-class Americans: [15]

  • The U.S. had no federal-government-mandated retirement savings; consequently, for those people who had not voluntarily saved money throughout their working lives, the end of their work careers was the end of all income.
  • Similarly, the U.S. had no federal-government-mandated disability income insurance to provide for citizens disabled by injuries (of any kind—non-work-related); consequently, for most people, a disabling injury meant no more income (since most people have little to no income except earned income from work).
  • In addition, there was no federal-government-mandated disability income insurance to provide for people unable to ever work during their lives, such as anyone born with severe mental retardation.
  • Further, the U.S. had no federal-government-mandated health insurance for the elderly; consequently, for many people, the end of their work careers was the end of their ability to pay for medical care.
  • Finally, the U.S. had no federal-government-mandated health insurance for all those who are not elderly; consequently, many people, especially those with pre-existing conditions, have no ability to pay for medical care.

In the 1930s, the New Deal introduced Social Security to rectify the first three problems (retirement, injury-induced disability, or congenital disability). It introduced the FICA tax as the means to pay for Social Security.

In the 1960s, Medicare was introduced to rectify the fourth problem (health care for the elderly). The FICA tax was increased in order to pay for this expense.

Criticism

Social Security regressivity debate

The Social Security component of the FICA tax is regressive, meaning the effective tax rate regresses (decreases) as income increases.[16] The Social Security component is actually a flat tax for wage levels under the Social Security Wage Base (see “Regular” employees above). But since no tax is owed on wages above the Wage Base limit, the total tax rate declines as wages increase beyond that limit. In other words, for wage levels above the limit, the absolute dollar amount of tax owed remains constant; since this number (the numerator) remains constant while the wage level (the denominator) increases, the effective tax rate steadily decreases as wage levels increase beyond the Wage Base limit.

FICA is also not collected on unearned income, including interest on savings deposits, stock dividends, and capital gains such as profits from the sale of stock or real estate. The proportion of total income which is exempt from FICA as “unearned income” tends to rise with higher income brackets.

Some argue that since Social Security taxes are eventually returned to taxpayers, with interest, in the form of Social Security benefits, the regressiveness of the tax is effectively negated.[citation needed] That is, the taxpayer gets back what he or she put into the Social Security system. Others, including the Congressional Budget Office, point out that the Social Security system as a whole is progressive; individuals with lower lifetime average wages receive a larger benefit (as a percentage of their lifetime average wage income) than do individuals with higher lifetime average wages.[17][18]

http://en.wikipedia.org/wiki/Federal_Insurance_Contributions_Act_tax

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Pronk Pops Show 51, October 26, 2011: Segment 1: A Ron Paul tax reform plan: no income taxes or IRS — FairTax Less!–“When The Impossible BecameThe Inevitable”–Videos

Posted on October 26, 2011. Filed under: American History, Budgetary Policy, Business, Economics, Employment, Energy, Federal Government, Fiscal Policy, Foreign Policy, Government, Government Spending, Health Care Insurance, History, Housing, Illegal Immigration, Immigration, Labor Economics, Monetary Policy, Philosophy, Politics, Public Sector Unions, Radio, Regulation, Security, Success, Tax Policy, Unions, Videos, Violence, War, Wisdom | Tags: , , , , , |

Pronk Pops Show 51:October 26, 2011

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When The Impossible Became The Inevitable

Ron Paul on Taxes

Ron Paul – Repeal The 16th Amndment

The Fair Tax

Taxes and the Republican Party by the Southern Avenger

Tax Code Roulette | THE PLAIN TRUTH by Judge Napolitano 10/25/11

Flat, Fair, VAT, or Gone? What Should be done with the Federal Income Tax- CPAC 2011 Pt.1

The FairTax… For a better America

Lugar Cosponsors the FairTax

The FairTax Versus the Obama ‘Jobs Plan’

Rob Woodall Floor Speech: The FairTax will bring jobs back to America

Pence on the Fair Tax

Tom Wright on the FairTax part 1

What is the FairTax legislation?

Why is the FairTax better than a flat income tax?

What is the impact of the FairTax on business?

How does the “prebate” work?

people bring home their whole paychecks how can prices fall?

Will the FairTax lead to a massive underground economy?

Is the FairTax rate really 23%?

How will used goods be taxed?

FairTax

Herman Cain on Fixing Deficit/Jobs/Fair Tax: “Replace Income and Payroll Tax”

Herman Cain Explains the Fair Tax

Johnson: What makes you a better Libertarian choice than Ron Paul?

Reagan on Taxes

Reagan; Taxes and Budget Deficit: Revenue 19% of GDP; Spending is 23%; Revenue is sufficient

Reagan on Balanced Budget

Ronald Reagan – Tax Reform Act Remarks

Ron Paul needs to come out with his own comprehensive tax reform plan. I recommend the FairTax as a starting point with some significant changes.

The FairTax is a national retail sales consumption tax that would replace the following federal taxes:

  • Personal income tax
  • Payroll taxes for Social Security and Medicare
  • Capital gains tax
  • Alternative Minimum Tax
  • Self-employment tax
  • Corporate income tax
  • Gift taxes
  • Estate taxes

When you buy goods or services, income and payroll taxes are included or embedded in the price. When these taxes are eliminated, the price of the goods or services would decline.

Thus when the FairTax replaces these taxes, the price of the good or service with the new FairTax included should result in the price of the good or service remaining about the same.

The proposed FairTax rate is 23 percent when the tax is included in the unit price of the good or service. For example, a loaf of bread with a selling price of $1 would include 23 cents for the FairTax.

Since Paul wants to significantly limit the size and scope of the federal government, I propose he reduce the FairTax rate to 20 percent for 2013.

The FairTax Less rate would be reduced by 1 percent a year for the next four years so that by 2017 the rate would be 16 percent.

A declining FairTax Less rate combined with a declining balanced budget will force a reduction of government spending outlays.

It should take four to eight years before the 16th Amendment (income tax) is repealed and the balanced budget amendment passes.

Therefore, I would like to see the repeal of the 16th Amendment and the passage of a balanced budget Amendment be immediately initiated in the House of Representatives and Senate.

If this is done, by 2017 the American people will never again want to go back to the complex and time-consuming income tax.

Instead, the American people will be demanding smaller government and an even lower FairTax Less rate.

Also, Paul needs to advocate a FairTax Less plan to complement his Plan to Restore America to a peace and prosperity economy by cutting government spending by $1 trillion in his first year as president and balance the budget in his third year.

The advantage is that a single FairTax Less rate of 20 percent would beat Herman Cain’s 9-9-9 plan. Cain’s plan would have a flat 9 percent business tax, a flat 9 percent personal income tax and a 9 percent national retail sales tax. The total tax rate paid would be 27 percent under Cain’s plan.

A single FairTax Less rate of 20 percent would easily defeat Perry’s optional flat tax of 20 percent personal income tax and a 15.3 percent payroll tax for Social Security or Medicare for a total of 30.3 percent. This does not include the 20 percent corporate income tax that would bring the total taxes paid to over 50 percent.

Only when the American people consume or spend their money on new goods and services would they pay the FairTax Less rate of 20 percent.

The American people would have a strong economic incentive to work, save and invest their money.

More savings would lead to more investment and in turn more jobs as businesses grow and prosper.

It’s time for Ron Paul to announce his support for a FairTax Less plan.

The dynamic combination of Paul’s Plan to Restore America and the FairTax Less plan would result in a peace and prosperity economy.

The U.S. would be the only nation on earth with no taxes on capital and labor!

The FairTax Less plan would attract trillions of dollars of new investment into the U.S. from around the world.

RESTORE AMERICA NOW! Ron Paul 2012 – Plan!

The FairTax: It’s Time

[Raymond Thomas Pronk is host of the Pronk Pops Show on KDUX web radio from 3-5 p.m. Wednesdays and author of the companion blog www.pronkpops.wordpress.com]

Background Articles and Videos

“…What is the FairTax plan?

The FairTax plan is a comprehensive proposal that replaces all federal income and payroll based taxes with an integrated approach including a progressive national retail sales tax, a prebate to ensure no American pays federal taxes on spending up to the poverty level, dollar-for-dollar federal revenue neutrality, and, through companion legislation, the repeal of the 16th Amendment.

The FairTax Act (HR 25, S 13) is nonpartisan legislation. It abolishes all federal personal and corporate income taxes, gift, estate, capital gains, alternative minimum, Social Security, Medicare, and self-employment taxes and replaces them with one simple, visible, federal retail sales tax administered primarily by existing state sales tax authorities.

The FairTax taxes us only on what we choose to spend on new goods or services, not on what we earn. The FairTax is a fair, efficient, transparent, and intelligent solution to the frustration and inequity of our current tax system.

The FairTax:

  • Enables workers to keep their entire paychecks
  • Enables retirees to keep their entire pensions
  • Refunds in advance the tax on purchases of basic necessities
  • Allows American products to compete fairly
  • Brings transparency and accountability to tax policy
  • Ensures Social Security and Medicare funding
  • Closes all loopholes and brings fairness to taxation
  • Abolishes the IRS

We offer a library of information throughout this Web site about the features and benefits of the FairTax plan. Please explore! …”

http://www.fairtax.org/site/PageServer?pagename=about_main

Tom Wright on the FairTax part 1

Tom Wright on the FairTax part 2

Tom Wright on the FairTax part 3

Tom Wright on the FairTax part 4

Tom Wright on the FairTax part 5

Tom Wright on the FairTax part 6

Tom Wright on the FairTax part 7

Why is the FairTax better than a flat income tax?

Dan Mitchell explains the fair tax

Q&A on the FAIRTAX pt.1

Q&A on the FAIRTAX pt.2

Americans For Fair Taxation

“…Americans For Fair Taxation (AFFT), also known as FairTax.org, states it is the United States’ largest, single-issue grassroots organization and taxpayers union dedicated to fundamental tax code replacement.[1] The Houston, Texas-based non-partisan political advocacy group is made up of volunteers who are working to get the Fair Tax Act (H.R. 25/S. 1025) enacted in the United States; a plan to replace all federal payroll and income taxes (both corporate and personal) with a national retail sales tax and monthly tax “prebate” to households of citizens and legal resident aliens. Americans for Fair Taxation state they subscribe to the ideals of simplicity, fairness, and freedom which they believe are embodied in the FairTax.[2][3] The organization claims to have signed up over 800,000 supporters.[4]

AFFT was founded in 1994 by three Houston businessmen, Jack Trotter, Bob McNair, and Leo Linbeck, who each pledged $1.5 million as seed money to hire tax experts to identify what they perceived as faults with the current tax system, to determine what American citizens would like to see in tax reform, and then to design the best system of taxation.[2] The three went on to raise an additional $17 million to fund focus groups with citizens around the country and tax policy studies.[2]

Some of the experts funded include:
  • Professors David Burton and Dan Mastromarco, University of Maryland and The Argus Group
  • Laurence Kotlikoff, Boston University
  • Stephen Moore, The Cato Institute
  • Professor Dale Jorgenson, Harvard University
  • Bill Beach (economist), the Heritage Foundation
  • Jim Poterba, The National Bureau of Economic Research
  • Professor George Zodrow, Rice University and the Baker Institute for Public Policy
  • Professor Joseph Kahn, Massachusetts Institute of Technology

http://en.wikipedia.org/wiki/Americans_For_Fair_Taxation

FairTax.org

http://www.fairtax.org/site/PageServer

Federal Insurance Contributions Act tax

Federal Insurance Contributions Act (FICA) tax (play /ˈfaɪkə/) is a United States payroll (or employment) tax[1] imposed by the federal government on both employees and employers to fund Social Security and Medicare[2] —federal programs that provide benefits for retirees, the disabled, and children of deceased workers. Social Security benefits include old-age, survivors, and disability insurance (OASDI); Medicare provides hospital insurance benefits. The amount that one pays in payroll taxes throughout one’s working career is indirectly tied to the social security benefits annuity that one receives as a retiree.[citation needed] This has led some to claim that the payroll tax is not a tax because its collection is tied to a benefit.[3] The United States Supreme Court decided in Flemming v. Nestor (1960) that no one has an accrued property right to benefits from Social Security.

The Federal Insurance Contributions Act is currently codified at Title 26, Subtitle C, Chapter 21 of the United States Code.[4]

Overview

The Center on Budget and Policy Priorities states that three-quarters of taxpayers pay more in payroll taxes than they do in income taxes.[5] The FICA tax is considered a regressive tax on income (with no standard deduction or personal exemption deduction) and is imposed (for the years 2009 and 2010) only on the first $106,800 of gross wages. The tax is not imposed on investment income (such as interest and dividends).

“Regular” employees (most wage-earners)

For 2008, the employee’s share of the Social Security portion of the tax is 6.2%[6] of gross compensation up to a limit of $102,000 of compensation (resulting in a maximum of $6,324.00 in tax). For 2009 and 2010, the employee’s share is 6.2% of gross compensation up to a limit of $106,800 of compensation (resulting in a maximum Social Security tax of $6,621.60).[7] This limit, known as the Social Security Wage Base, goes up each year based on average national wages and, in general, at a faster rate than the Consumer Price Index (CPI-U). For the calendar year 2011, the employee’s share has been temporarily reduced to 4.2% of gross compensation, with a limit of $106,800.[8] The employee’s share of the Medicare portion is 1.45% of wages, with no limit on the amount of wage subject to the Medicare tax.[6]

The employer is also liable for 6.2% Social Security and 1.45% Medicare taxes,[9] making the total Social Security tax 12.4% of wages, and the total Medicare tax 2.9%. (Self-employed people are responsible for the entire FICA percentage of 15.3% (= 12.4% + 2.9%), since they are in a sense both the employer and the employed; however, see the section on self-employed people for more details.)

If a worker starts a new job halfway through the year and has already earned the wage base limit with the old employer for Social Security purposes, the new employer is not allowed to stop withholding until the wage base limit has been earned with the new employer without regard to the wage base limit earned under the old employer. There are some limited cases, such as a successor-predecessor transfer, in which the payments that have already been withheld can be counted toward the year-to-date total.

If a worker has overpaid toward Social Security by having more than one job or by having switched jobs during the year, that worker can file a request to have that overpayment counted as tax paid when he or she files a Federal income tax return. If the taxpayer is due a refund, then the FICA overpayment is refunded.

Self-employed people

A tax similar to the FICA tax is imposed on the earnings of self-employed individuals, such as independent contractors and members of a partnership. This tax is imposed not by the Federal Insurance Contributions Act but instead by the Self-Employment Contributions Act of 1954, which is codified as Chapter 2 of Subtitle A of the Internal Revenue Code, 26 U.S.C. § 1401 through 26 U.S.C. § 1403 (the “SE Tax Act”). Under the SE Tax Act, self-employed people are responsible for the entire percentage of 15.3% (= 12.4% [Soc. Sec.] + 2.9% [Medicare]); however, the 15.3% multiplier is applied to 92.35% of the business’s net earnings from self-employment, rather than 100% of the gross earnings; the difference, 7.65%, is half of the 15.3%, and makes the calculation fair in comparison to that of regular (non-self-employed) employees. It does this by adjusting for the fact that employees’ 7.65% share of their SE tax is multiplied against a number (their gross income) that does not include the putative “employer’s half” of the self-employment tax. In other words, it makes the calculation fair because employees don’t get taxed on their employers’ contribution of the second half of FICA, therefore self-employed people shouldn’t get taxed on the second half of the self-employment tax. Similarly, self-employed people also deduct half of their self-employment tax (schedule SE) from their gross income on the way to arriving at their adjusted gross income (AGI). This levels the amount paid by self-employed persons in comparison to regular employees, who don’t pay general income tax on their employers’ contribution of the second half of FICA, just as they didn’t pay FICA tax on it either.[10][11]

These calculations are made on Schedule SE: Self-Employment Tax, although that is not readily apparent to novice self-employed taxpayers, owing to the schedule’s rather opaque name, which makes it sound like it is part of the general federal income tax. Some taxpayers have complained that Schedule SE’s title should be changed to something such as “Self-Employment FICA Tax”, so that its separateness from the general income tax is apparent,[12] perhaps not realizing that the SE tax is not imposed by the Federal Insurance Contributions Act (FICA) at all, and that neither SE taxes nor FICA taxes are “income taxes” imposed under Chapter 1 of the Internal Revenue Code.

Exemption for certain full-time students

A special case in FICA regulations includes exemptions for student workers. Students enrolled at least half-time in a university and working part-time for the same university are exempted from FICA payroll taxes, so long as their relationship with the university is primarily an educational one.[13] Medical residents working full-time are not considered students and are not exempt from FICA payroll taxes, according to a US Supreme Court ruling in 2011.[14] In order to be exempt from FICA payroll taxes, a student’s work must be “incident to” pursuit of a course of study, which is rarely the case with full-time employment.[14]

History

Prior to the Great Depression, the following presented difficulties for working-class Americans: [15]

  • The U.S. had no federal-government-mandated retirement savings; consequently, for those people who had not voluntarily saved money throughout their working lives, the end of their work careers was the end of all income.
  • Similarly, the U.S. had no federal-government-mandated disability income insurance to provide for citizens disabled by injuries (of any kind—non-work-related); consequently, for most people, a disabling injury meant no more income (since most people have little to no income except earned income from work).
  • In addition, there was no federal-government-mandated disability income insurance to provide for people unable to ever work during their lives, such as anyone born with severe mental retardation.
  • Further, the U.S. had no federal-government-mandated health insurance for the elderly; consequently, for many people, the end of their work careers was the end of their ability to pay for medical care.
  • Finally, the U.S. had no federal-government-mandated health insurance for all those who are not elderly; consequently, many people, especially those with pre-existing conditions, have no ability to pay for medical care.

In the 1930s, the New Deal introduced Social Security to rectify the first three problems (retirement, injury-induced disability, or congenital disability). It introduced the FICA tax as the means to pay for Social Security.

In the 1960s, Medicare was introduced to rectify the fourth problem (health care for the elderly). The FICA tax was increased in order to pay for this expense.

Criticism

Social Security regressivity debate

The Social Security component of the FICA tax is regressive, meaning the effective tax rate regresses (decreases) as income increases.[16] The Social Security component is actually a flat tax for wage levels under the Social Security Wage Base (see “Regular” employees above). But since no tax is owed on wages above the Wage Base limit, the total tax rate declines as wages increase beyond that limit. In other words, for wage levels above the limit, the absolute dollar amount of tax owed remains constant; since this number (the numerator) remains constant while the wage level (the denominator) increases, the effective tax rate steadily decreases as wage levels increase beyond the Wage Base limit.

FICA is also not collected on unearned income, including interest on savings deposits, stock dividends, and capital gains such as profits from the sale of stock or real estate. The proportion of total income which is exempt from FICA as “unearned income” tends to rise with higher income brackets.

Some argue that since Social Security taxes are eventually returned to taxpayers, with interest, in the form of Social Security benefits, the regressiveness of the tax is effectively negated.[citation needed] That is, the taxpayer gets back what he or she put into the Social Security system. Others, including the Congressional Budget Office, point out that the Social Security system as a whole is progressive; individuals with lower lifetime average wages receive a larger benefit (as a percentage of their lifetime average wage income) than do individuals with higher lifetime average wages.[17][18]

http://en.wikipedia.org/wiki/Federal_Insurance_Contributions_Act_tax

Related Posts On Pronk Palisades

Ron Paul’s Economic Plan for Restoring America to Peace and Prosperity–Videos

The FairTax (National Consumption Sales Tax) vs. The Flat Tax (One Rate Federal Income Tax)–Who Pays The Most Federal Individual Income Tax? Videos

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