Where we go from here
Message from AFFT:
There is much to say in this, “the morning after,” email so I’ll be brief as I share a few thoughts about the FairTax in the days ahead.
FairTax.org is non-partisan, but I know the same cannot be said for many of our supporters. And, as such, I suspect yesterday’s results came as a disappointment for some. For me, I look at things through many lenses–as a father, as a taxpayer, as an American, as National Communications Director for FairTax.org. For my FairTax.org role in particular, I see both challenges and incredible opportunities in the days ahead for our great cause.
Let me explain.
In the past year, the FairTax has achieved historical support in Congress mostly via Republican backing in the House and Senate. With yesterday’s returns, GOP ranks–including FairTax supporters–were thinned both by retirement decisions and the ballot box, meaning come January we’ll be rebuilding our co-sponsorship levels. Yet, that challenge is a welcome one for it affords us the opportunity to remind grassroots supporters, as well as national political figures, that the FairTax is not a Republican issue. Nor is it Democrat. It’s an American one and in this, one of our darkest financial hours in decades, it’s the solution we need to save the American economy.
So for Republicans or Democrats (or any other political stripe for that matter) with their retirement or college savings plans being decimated by a falling stock market, the FairTax is the solution. For Republicans or Democrats trying to make their mortgage payments and keep a roof over their heads, the FairTax is the solution (after all, most banks don’t bother asking your political party when foreclosing). For Republicans or Democrats whose jobs were shipped overseas for cheaper production costs and favorable taxation, the FairTax is the solution. And for a way to jumpstart the American economy with a $10 trillion dollar stimulus program funded with private investments, the FairTax is the solution.
You know, we heard a lot about change this election and we couldn’t agree more. Let’s us focus on real change: Bringing power back to people, not just powerful Washington insiders. Don’t think for a second that “our enemy” is either Democrats or Republicans. Indeed, the tax code is manipulated by both parties in Congress alike with reckless abandon to punish enemies and reward supporters at the hands of well-heeled lobbyists and their privileged access to Congressional tax-writing committees. Ending that practice is the kind of change we seek.
So what happens now?
In short: We press on. We’ll be working hard to forge new relationships in Washington, while continuing to grow our base at the grassroots level online and via new offline activities, including our new FairTax Advanced Tactics “camp.” State leaders are forging ahead with new strategies to help each other and expand the base outside our centers of strength. We’ve seen several FairTax “distorters” turned back at the polls. We’ve made incredible progress in the past year, and we plan to continue that momentum. Our campaign has always been the people of America–of all political beliefs–versus the entrenched interests that surround the income tax system. In this, nothing has changed. We need now to work harder than ever to tell union members how the FairTax will keep jobs here in America, and explain to political leaders how the FairTax can unburden the poor, give small business the needed tax freedom to form and prosper and unlock the genius of American productivity and investment.
Furthermore, FairTax.org leadership is continuing to work to bring in new high-profile advocates, including some key Democrat leadership figures. We’re also thrilled to announce a closer relationship with Governor Mike Huckabee, the former GOP presidential candidate and major FairTax supporter. As you know, Huck helped gain national attention for the FairTax during his run for the White House. Look for promotion of the FairTax on his new Fox show “Huckabee,” on radio and in print with his new book, Do the Right Thing, in the coming days.
As you can see, the days ahead hold incredible opportunity for the FairTax cause. Let’s go!
Sincerely,
Ken Hoagland
National Communications Director
That’s some pretty incredible spin. As a practical matter, the FairTax is dead. The only question now is when does the AFFT’s money dry up.
Fred,
A very cursory check indicates that the number of Fairtax House Cosponsors fell from 70 to 62. Anyone with a better count might want to check in? Two members died, (Davis and Norwood), aand six were defeated, (Feeney, Goode,Drake, Young, Walberg, and Keller).
I think it still remains to be seen if Martin can eliminate Chambliss in the Georgia Senate race? Calling Martin a liar may have been a very bad Fairtax strategy?
Fred,
“The reports of my death are greatly exaggerated.” - Mark Twain
Hank,
By my count we were at 70 (including Linder) after losing Davis and Norwood at the beginning of this congress. If we start at 64 with the coming congress, that’s almost as many as we had at the end of the previous congress. I seem to recall that at the beginning of this congress four to six co-sponsors either did not seek re-election or were defeated, and we still ended up with a historic number of co-sponsors. In effect we picked up about 15 new people this time around. With a little luck, I still can tack on one more co-sponsor from New Jersey at the end of this congress, and he’s coming back. We may just beat our old record.
~Jim
Jim,
I really don’t see much difference between death and life support? I’ve got a ten spot that says that the number of cosponsors peaked this year at 72 House members including Linder, and that number won’t be seen again. Two reasons. I don’t expect any more D’s to come onboard and risk NP’s wrath. And, there are too many lies and half truths espoused by supporters including Linder and Boortz. The emperor lacks clothes!
On a related subject, I may be the only one who doesn’t understand grass roots strategies, but after 10/12 years of effort, there is still only one cosponsor out of 13 members on the Revenue subcommittee where HR25 currently resides, and only two on the whole 41 member W&M Committee. It seems to me that it might be more productive to concentrate the effort on those committee members because, frankly, it doesn’t make any difference how many other members sign on, the legislation will still stay bottled up in committee. So, if I was Ken Hoagland for a day, I’d send well connected folks in to see NP and get her onboard, take the restrictions off the D’s, and focus on the committee that holds the keys to the kingdom. Anything else is just wasted time and effort–and money.
Hank,
I’m for all of the above!
~Jim
Jim,
Does that include the $10.00 wager?
Seriously, Hoagie is a reasonable guy, but I’ve worn out my welcome with him. Would anyone care to suggest this new strategy to him and see what kind of response you get? Maybe he’s tired of pushing a wet noodle uphill? Once the W&M Committee assignments are made for the next Congress, you should be able to focus the effort?
Surprised to see me back? Don’t worry, I’m not staying.
Good luck to AFFT in getting Democrats to support the FairTax. Most Dems (I’m one) favor progressive taxation, and I stand by my argument that the FairTax is regressive to the extreme.
President-Elect Obama (I love saying that) is pushing forward with plans to cut taxes on the middle class and allowing the Bush tax cuts for the wealthy to expire.
If FairTaxers’ theories are correct, this will doom the American economy. But I’m predicting the economy will recover and expand over the next four years (unless the voters hand Congress back to the Republicans in 2010).
Bill,
Have you read the book, “FairTax: The Truth: Answering the Critics”?
If so you’ll recall that they asked (almost pleaded for) anyone to respond with any specific reasons why The Faitrtax won’t work. If you have a reasonable and valid point, the folks who worked out the plan WANT to know!
You can start by responding here, I think.
Hersey - With all due respect, many, many people (including me) have pointed out valid critism of the FairTax to both of the authors of the book you reference. We have provided them with written reports and analyses of the FairTax done by respected economists and government agencies. We have also challenged them to put some of the criticism up on their respective websites so people could examine the critisim thereselves. (You can finds some of these studies by clicking on the “FairTax-related Research” tab at the top right corner of this FairTaxBlog website.)
The authors of the FairTax books simply refuse to do so and instead repeat their claims that they’ve never seen any valid critism of the FairTax. So, they are not at all interested in responding to specific critism of the FairTax.
As long as there are FairTax supporters who are single-issue voters, there will be politicians who claim they are for the FairTax because they know they can pick up a few thousand votes and not have to do anything for them. They know the FairTax is going nowhere - what do they have to lose?
I think it’s interesting that the FairTax bill gained Republican cosponsors when the Republicans lost power in the House. Just when they couldn’t do anything to get the FairTax passed, the cosponsors jumped up.
Fred,
I agree, and I’d go one step further. As long as Linder is the only cosponsor on the 13 member W&M Revenue subcommittee, and there are only two cosponsors on the 41 member full committee, becoming a cosponsor by non Committee members carries absolutely no risk of ever having to vote for this plan. Doesn’t anyone else wonder why Linder wasn’t able to bring fellow Republican Sub-Committee members English-Pa, Reynolds-NY, Ryan-Wi, and Cantor-Va into the fold? The Fairtax grassroots effort is sadly misdirected.
In a follow up to the fluff piece that is the subject of this thread, “Hoagie” has now sent out an email begging for funds. Understandable since he is one of a very few paid employees?
With scant hopes that Ken will read and respond to this blog, I want to point out two outright lies he continues to promote!
(1) His claim that take home pay will increase is correct. But, even after adding in the prebate, purchasing power will likely remain about the same due to the huge rise in retail prices. There won’t be any extra cash to make “good paper” out of “bad paper”.
(2) The Fairtax myth about that $10 -$15 trillion in offshore assets just won’t die despite very clear facts to the contrary.
As you know, I support a limited version of the Fairtax, but if the AFFT leadership continues to tell whoppers such as these, their credibility will be zero. Is it too much to ask that they get their heads out the sand, face facts, and tell the truth? I think I know the answer!
Hank, with #2 you mentioned clear facts to the contrary. I don’t remember seeing research or evidence on either side that such funds exist or don’t exist. Ken states that “economists predict” so there should be something out there. Could you provide us with the clear facts you are describing? Does anyone know the research or economists referenced that predict the repatriated funds back to U.S. banks? Linder also makes this statement so perhaps we could contact his office.
Morphh,
I base my position on the Tax Justice Network 2005 White Paper entitled: “The Price of Offshore“. Perhaps you could add this document to your excellent list of Research data?
I have no idea how AFFT and Greenspan concluded that these offshore assets would, under the Fairtax, “come home within months”? I also don’t know why on page 104 of the first Fairtax book, Boortz writes that “about $11 trillion in American wealth is sitting in banks and accounts.....offshore.” The TJN paper clearly shows that those offshore assets are not owned primarily by US citizens. Only about $700 billion of the $1.6 trillion owned by North Americans can be traced to US owners. The remainder of the $10-$15 trillion in the AFFT email is foreign owned, primarily by Asians. Which leads to a question about just why foreign companies or individuals would move these assets to the US, particularly in view of Section 905 of HR25.
Why move from a tax friendly, sheltered, secret, environment to the US where there will be a 23% tax-or whatever treaties allow? And it also should be noted that many of these assets are fixed, and don’t lend themselves to relocation?
Hope this helps. I think this issue needs a lot of airing out.
I’m not sure that study supports your conclusion or perhaps it does.. I can’t tell. I see the chart to which you are referring but it is vague and not sufficiently explained. How about the conclusion that states “This provides the basis for our estimate that the value of assets held offshore lies in the range of $11 - $12 trillion. We consider this to be a conservative estimate.” This study doesn’t show anything regarding what would or would not be brought into U.S. banks under a change in tax structure that untaxes both business and personal income. Boortz and Linder mention in their 2nd book that they referenced research in their first book. I don’t have the first book any longer to see what studies they references - perhaps someone could take a look.
Morphh,
Here is probably the source of the statements on page 97 of the first Boortz book. Just google “World Wealth Report” and look around for confirmation. I never found the 2000 report specifically, but the one third estimate for offshore assets closely aligns with the Tax Justice Network figures in their 2005 White paper:
“According to Merrill Lynch and Gemini Consulting’s “World Wealth Report” for 2000, one third of the wealth of the world’s “high net-worth individuals”-nearly $6 trillion out of $17.5 trillion-may now be held offshore. Some $3 trillion is in deposits in tax haven banks and the rest is in securities held by international business companies (IBCs) and trusts.”
Let me repeat my two concerns about offshore assets. First, all the studies appear to measure those assets in US dollars, and I suspect that Boortz misread the data and assumed the assets belonged to Americans. This is just not true. Second, the real issue is not the amount, but rather the question about whether or not the asset owners, foreign or domestic, would relocate their offshore accounts from a safe, secret location, and come to the US where a 23% tax would be imposed on foreign accounts-or whatever the trade treaties allow, (see section 905). I just don’t believe that there will be a mass influx of capital if the Fairtax became law, but I’d welcome any discussion?
This is what the plain text version states regarding 905.
Could you explain how you read section 905 and how it would apply to and tax such offshore assets if moved to U.S. banks?
For background, I’m trying to read through these threads as I have time “The Fair Tax Act, Part LX” and “Clarification from Dr. Walby on Section 905“. It seems this paragraph would have little effect for the primary countries we deal with, including the vast majority that have “high-net-worth” individuals, as they would be covered by an existing treaty. This also seems to cover income earned in the U.S. being moved to a foreign country.
Morphh,
I read Section 905 the same way I read it back in June 2007 when we blogged the bill. I think it’s unfortunate that 905 was put in HR25, and still believe that it would have been better to simply retain that portion of the IRC that deals with treaty nation taxes. Easily done, only four of the eleven Titles of the IRC were eliminated by HR25 And I don’t think Karen Walby’s claim that 905 is really a tariff, not a tax makes any difference, except to further confuse the issue.
No matter what it is, the issue is still a question about why wealthy individuals would move their assets from safe, secure, secret, tax free offshore locations back to the US? Just mention the word tax, and they won’t come. The 23% tax on dividends and interest (or whatever the treaty allows) is only one facet of the problem. There is also Section 801-806 which applies to both foreigners and US citizens. Any investment that produces regular interest returns will likely have to pay an implicit tax described in 801, depending on the spread between the investment rate and the appropriate Treasury rate. Again, what is the incentive to relocate those funds?
Finally, thanks to a closer reading of the “World Wealth Report” for 2007, I now understand that there are 3 million American millionaires, with an average net worth of $4 million. That means that there is $12 trillion in American wealth, and one third is estimated to reside offshore. $4 trillion sounds like a lot, but much of that wealth is in fixed real estate, collectibles, and other investments that wouldn’t be easily relocated.
Despite claims by Neal Boortz, there isn’t $13 trillion in US offshore assets, and I can’t find any real reason for that wealth to “come home”?
Y’all need to remember that the American Jobs Creation Act of 2004 allowed corporations a one time opportunity to repatriate foreign profits at a substantially reduced rate (5.25% vs. ~35%). So two points - first, any money that was going to be repatriated was probably done so then. Second, no where near what the Boortz is claiming was repatriated.
Hank & Fred,
I am guessing you guys have never established an offshore anonymous tax shelter account. So you don’t know how easy it is and how big of a problem this has become in the last decade. I’m not proud of it and I stopped doing this in 2004 but I have established accounts several times for several individuals to hide millions in assets. If the IRS estimates that $12 trillion to $15 trillion in American assets are being held in these offshore accounts, I would guess that this number is closer to half of the real figure. These account are fairly expensive to maintain because the account is tied to a shelf corporation that require lawyers and bankers to maintain the accounts. The funds are not readily available to the account holder. Most of these funds are not from US corporations that do business internationally, they mostly belong to individuals who want to hide income to avoid taxes. Do I think that trillions will come back onshore when the Fair Tax is enacted? No doubt about it.
RMForbes,
You are correct-I have never felt the need to establish an offshore account, nor have I ever had the money! My source for my comments was the “Tax Justice Network” March, 2005 briefing paper entitled “The Cost of Offshore”. At that time, their paper indicated that there was $11 trillion (?) in offshore accounts that was owned by high net worth individuals, presumably some of your clients?? Of the $11 trillion, only $1.6 trillion was owned by folks from North America, and there are 23 sovereign nations in NA. So, my estimate was that less than half of the $1.6 trillion could be owned by Americans. It also seems clear that a lot of those assets are invested in real property, and couldn’t be easily liquidated in order to “come home”!
Since you have some experience with this issue, I’d ask you to google the Tax Justice Network, read their mission statement, and find the 2005 briefing paper I described. (Sorry about no link, but I’m a Neanderthal when it comes to computers). Any comments you may have would be appreciated. But, I really believe that the Boortz statement on page 104 of his first book –”about $11 trillion in US wealth is sitting in banks etc. etc.” is incorrect by a wide margin.
You might also consider the impact of HR25, Sections 801-806, which lays an implicit tax on investments depending on the investment rate of return when compared to the appropriate Treasury rate. Both investment and debt instruments could be taxed significantly, contrary to popular belief that investments won’t be taxed. Will those offshore assets really come home?
I don’t think you read my post. The estimates we have (and they aren’t from the IRS, IFAIK) are based on numbers from before the American Jobs Creation Act of 2004. A lot of the money that people claim would come back is already here because of this repatriated money tax holiday - and it turns out, it wasn’t that much money.
RMForbes — Why am I somewhat skeptical of an internet poster who confesses to a crime (which, of course, setting up an offshore account knowing that the holder is hiding assets to escape income tax would be.)
But, let’s just say you’re right. That people put these trillions of dollars into offshore accounts to avoid U.S. income taxes. That means they are all criminals and have spent tens of thousands if not hundreds of thousands of dollars in order to avoid the U.S. Taxes that they lawfully owe.
Now, if the FairTax is enacted, is the US going to pass a law granting amnesty for all of these criminals? And, if not, isn’t the Dept. of Justice going to be quite suspicious when your former clients suddenly repatriate the billions they were hiding overseas?
Now, let’s pretend that they could, in fact, legally repatriate this money without penalty. Why would they? If they are not paying taxes now, why not just leave the money where it is? Why repatriate the money to the US. Are they going to spend it on US goods and services, which would now have the highest sales-tax rate in the world? Wouldn’t they be better off spending that money overseas where they get a better bang for the buck? After all, if they are billionaires, they can live and spend money anywhere in the world.
Would they invest that money in US based businesses? Why would they do that since US consumption is going to drop dramatically if the FairTax is enacted. Wouldn’t it make more sense to invest that money in the high growth countries of China, India and the like?
The simplistic notion that tax cheats are going to suddenly decide to become patriotic, tax-paying Americans just because we enact the FairTax is so ridiculous that it wouldn’t merit any serious discussion except for the fact that Boortz and Linder always resort to the “bogus claim of “We’ll bring back trillions into the U.S. economy!” when they can’t respond to the other arguments against the FairTax.
Hayden,
I’m not sure Mr. Forbes is a criminal. If Mr. Forbes set up a Cayman corporation for his client, income to the corporation is not income to his client until the corporation either pays a dividend or distributes a gain, or the client sells stock. I’m not aware that the IRS pierces such a veil.
~Jim
Hayden,
You asked the question “Now, let’s pretend that they could, in fact, legally repatriate this money without penalty. Why would they? If they are not paying taxes now, why not just leave the money where it is?” Previously, you stated “That means they are all criminals and have spent tens of thousands if not hundreds of thousands of dollars in order to avoid the U.S. Taxes that they lawfully owe.” Doesn’t the latter answer the former, i.e. why spend so much money to avoid a 0% tax?
Paying illegal taxes (legal being based on the constitution) has nothing to do with patriotism. Most taxes we pay to the Federal government are illegal based on how they are spent, i.e. beyond the constitutionally enumerated powers of the Federal government. From Wikipedia, the decision in US v. Butler stated: “The clause confers a power separate and distinct from those later enumerated [,] is not restricted in meaning by the grant of them, and Congress consequently has a substantive power to tax and to appropriate, limited only by the requirement that it shall be exercised to provide for the general welfare of the United States. … It results that the power of Congress to authorize expenditure of public moneys for public purposes is not limited by the direct grants of legislative power found in the Constitution.” Wrong. This was actually one of the reasons that anti-federalists fought especially against the general welfare clause (while it was meant to be limiting, they saw the possibilities). Here is what James Madison said in Federalist 41 “For what purpose could the enumeration of particular powers be inserted, if these and all others were meant to be included in the preceding general power?” Here is what Jefferson said “[O]ur tenet ever was, and, indeed, it is almost the only landmark which now divides the federalists from the republicans, that Congress has not unlimited powers to provide for the general welfare, but were to those specifically enumerated; and that, as it was never meant they should raise money for purposes which the enumeration did not place under their action; consequently, that the specification of powers is a limitation of the purposes for which they may raise money.” I pay my taxes in full because I am afraid of what the Federal government will illegally do in its collection effort, e.g. ruin me financially, put me in jail, etc.
US goods will be no more undesirable under the fairtax than they are under our current system in the US. All else equal, they should be slightly lower priced since imports will now consume some of the tax burden. And in a vacuum, placing a large tax on consumption should lower consumption. But, the increase in production (since you are removing its tax) should more than make up for the difference. In other words, people will produce more, get paid more, and therefore, spend more. Since I am assuming we all agree, current products already have a “hidden” tax, the price of consumption should basically stay the same.
Hyden, I am not a crook. I had an import/export business in the 90’s and became aware of Free Trade zones used for international commerce. The bank I used in Panama offered these sevices and they still do. I used other available import/export Free Trade services legally under all applicable laws of all the countries involved. I was never directly involved in setting up accounts or transfering any funds other than for my legal business transactions. I just forwarded publicly available information and contact information and never received any direct payment for the information. The only thing I received was business contacts and sales leads. Check it out for yourself at http://www.panama-offshore-services.com/ and see how inexpensive and easy it is to setup an anonymous offshore account.