I don’t know why you are having such a problem understanding that the Trustees report is talking about the current $2.5 trillion surplus that has built up over the years due to the baby boomer wave. When the Trust Fund surplus is gone in 2037 or whenever, SS will still be getting over $1 trillion annually in FICA payments. That amount will fund 80% of the benefits owed, and there are numerous ways to make up that shortfall. Implementing the Fairtax isn’t one of them! Have you forgotten that the Fairtax is revenue neutral and would do nothing to make up the 20% shortfall in Social Security?

Hank, let me be the first to break the news to *you don’t know one when it comes along*

Directly from the horse’s mouth (ssa.gov): Footnote b says “Estimates for later years are not shown because the combined OASI and DI Trust Funds are estimated to become exhausted in 2037 under the intermediate assumptions and in 2029 under the high cost assumptions.” ~ United States Social Security Administration, Office of the Chief Actuary. Last reviewed or modified August 5, 2010. http://www.ssa.gov/OACT/TR/2010/lr6f7.html

Also from JustFacts.com: “* The assets of the Social Security program include all of the money it has loaned to the federal government.[103] [104] Even if this money is repaid with interest, it is projected that the Social Security Trust Fund will become exhausted in 2037,[105] and the program will have deficits every year thereafter into the foreseeable future.[106]”

Again I say: The FairTax will be the most efficient way of ensuring SS is fully funded for the remainder of its program lifetime.

“As it stands under our current tax system, SS will be completely bankrupt by 2037. So without the FairTax, those of us who have paid into SS for the past 10, 20, 30+ years will not get a single penny of what we put into it.”

Robert, if that isn’t a misstatement, I don’t know one when it comes along. In 2037, SS will still be taking in somewhere around $1 trillion annually, and will only be able to pay 80% of benefits. There are many ways to make up that shortfall as I have described. The writings on your blog, which I am prevented from commenting on, make the same mistakes. It is irresponsible to claim that SS will be bankrupt. Just not true, and the shortfall will be easily corrected. You will get yours, my friend and all the weeping and wailing to the contrary does you no credit!

If I died, -I- would no longer be using the system and all of my benefits would have been paid out. It is a completely different scenario when you have someone else collecting your money. Do you currently collect your wife’s SS benefits?

“I think you have missed the point. Due to the prebate, millions of workers would pay no net federal tax, yet would still collect SS benefits.”

I think -you- have missed the point, Hank. Because if you do not make the earnings to pay into the system, then you do not reap the benefits. Simple as that. Your gross earnings at the end of each period are still reported. The only difference is now, more than 160 million other (currently untaxed) people living in America will pay into a system that they will not be able to benefit from.

“No moochers allowed!” – Except the 20 Million Illegal Immigrants, 58 Million Tourists, and 88 Million people in the underground economy, right, Hank? That -is- what you mean, right? You don’t want a few hard working LEGAL American Citizens to possibly skate by and get a few benefits that they may or may not have paid for. But it’s certainly OK for 160,000,000 people (and growing) to rape and steal everything we have. That IS what you’re saying, right, Hank? Again, I think you need to re-evaluate. Look at what you’re trying to derail, Hank.

-You- are that one who is promoting a “nanny state”, Hank. By allowing this current tax system to continually punish productivity, promote illegal immigration, allow 47% of American’s to not pay taxes, and prevent the poor/lower-class from getting out of poverty, it is you who are at fault here. Go ahead, refute it. Say I’m wrong. But you know deep down, that I’m right. And regardless of whether or not Mr Russell actually does put a halt to the conversation, I think it’s he deserves a little more respect than to have a couple of old guys bickering on his blog. Later, Hank!

You wrote: “As it stands under our current tax system, SS will be completely bankrupt by 2037. So without the FairTax, those of us who have paid into SS for the past 10, 20, 30+ years will not get a single penny of what we put into it.”

Robert, I certainly hope you don’t believe all that nonsense about Social Security. If Congress does absolutely nothing, Social Security will still be able to pay you 80% of your expected benefits. And, it can be fixed by simply changing the retirement age, removing the cap on earnings, using the chained method of calculating COLA’s, or raising the rate 1%. What on earth is your purpose in bashing SS with all those misstatements? You are needlessly scaring the hell out of any younger readers of this blog.

“If you’re going to keep using a system, should you not continue to contribute to that system? ”

Are you kidding me? If you had a life insurance policy that you paid premiums on for 45 years or so, and you died, what do you think your wife would say if the insurance agent came around and told her the following: “Sorry about your loss, Mrs Williams. We will pay the benefits, but you will have to keep on paying those monthly premiums.” Her next call better be to her lawyer. There is no difference between what was heaped on Mrs Williams and what the Fairtax proposes to do to all retirees. You want to improve HR25, you better start thinking seriously about a two tier tax system. There are 50 million seniors and they tend to vote!

“It sounds to me like you’re making a gross assumption that anyone who has not paid into SS will all of the sudden be able to collect it.”

I think you have missed the point. Due to the prebate, millions of workers would pay no net federal tax, yet would still collect SS benefits. The question isn’t whether or not low income workers paid into the Trust Funds with their sales tax dollars, but if someone pays no net federal tax, should they still receive retirement benefits. We complain today that 47% of Americans pay no income tax. But, all workers pay FICA. And, Fairtaxers are quick to point out that under the Fairtax, everyone will pay the tax. But if the government returns all of those tax payments and the worker effectively pays no net federal tax, is that a good thing? I just don’t think so! Everyone should pay something towards the cost of the federal government! No moochers allowed!

And, by the way, I’ll wait for Mr Russell to call a halt to these discussions. As he writes his paper, he might want to hear a dissenting view or two?

// And I tend to agree with you that we need to consider the whole picture before offering our support for the Fairtax.// So, let me get this straight, Guilty before proven innocent, it is. Sorry, that’s not how I work. Because the FairTax is so much more than the current income tax system could ever aspire to be, I would prefer to have the FairTax in place now, then worry about any possible shortcomings later.

// But in the meanwhile, don’t you agree that HR25 could be improved on? // Of course I do, nobody has ever claimed the FairTax to be perfect. But wouldn’t you agree that any possible shortcomings HR-25 has don’t even come close to stacking up against the oversights in the current XX,000 pages of the IRC?

I have two points to make about your (1) & (3) then I will leave it at that for now. I feel this is taking up too much of this man’s article and I don’t think that is what he intended it for.

// (1) The Fairtax proposes to force all retirees to resume paying for their SS benefits with their sales tax dollars. 8% of the 23% goes to the Trust Funds. Retirees have paid in to the Trust Funds for 45 years or so, and counted on getting those benefits without making any more premium payments. Wouldn’t it be more fair to simply go to a two tier tax system–15% for retirees and 23% for everyone else. Easily administered and much fairer!//

The FairTax rate is partially based on the Social Security rate. What that means is that the FairTax ensures Social Security will continue to get funded for the life of the program. If the SS rate goes up, so does the FairTax. Conversely, should the SS rate drop, so will the FairTax rate. As it stands under our current tax system, SS will be completely bankrupt by 2037. So without the FairTax, those of us who have paid into SS for the past 10, 20, 30+ years will not get a single penny of what we put into it. I feel that if you were to help pay a little more into it, you would continue to get something out of it; primarily future generations of retirees who aren’t sucking the file out of welfare because you didn’t want to pay into a system that you felt you were done with. If you’re going to keep using a system, should you not continue to contribute to that system? And I’m sorry to say this, but there are things I count on every day that I don’t get. Suck it up and deal with it. You were in the Army, adapt and overcome – oh wait, that was the Marines, but you get my point.

// (3) Due to the prebate, millions of workers may pay no net federal tax, yet all would receive their SS retirement benefits. That isn’t the kind of “nanny state” I would want to be part of. I would strongly urge that the payroll taxes remain in place so that at least everyone is paying for their retirement benefits. //

It sounds to me like you’re making a gross assumption that anyone who has not paid into SS will all of the sudden be able to collect it. Every quarter, I get my Social Security statement in the mail that clearly shows “My Earnings Record” (ie how much I have Paid into the SS program) and my benefits if I retire at various ages. The FairTax will not change who gets paid or how much. The FairTax will not change that. What the FairTax will change, as previously noted, is how SS if funded. Under the FairTax 160,000,000 more people will be paying into the SS program. And at least 20 Million of them will never be able to collect benefits because of their illegal status here.

Besides that, the payroll taxes are the most regressive part of the Income Tax system. Wasn’t one of your complaints about the FairTax that sales taxes are regressive? Let’s get rid of the regressiveness altogether and do this right the first time.

O.K., good post. And I tend to agree with you that we need to consider the whole picture before offering our support for the Fairtax. But in the meanwhile, don’t you agree that HR25 could be improved on? That legislation has been introduced six or seven times without any substantial change. Here are my suggestions for making it less objectionable.

(1) The Fairtax proposes to force all retirees to resume paying for their SS benefits with their sales tax dollars. 8% of the 23% goes to the Trust Funds. Retirees have paid in to the Trust Funds for 45 years or so, and counted on getting those benefits without making any more premium payments. Wouldn’t it be more fair to simply go to a two tier tax system–15% for retirees and 23% for everyone else. Easily administered and much fairer!

(2) The “cold turkey”, overnight implementation of the Fairtax is a very risky plan. No other country has ever successfully used such a broad based national sales tax to fund the central government. Six countries have tried and all failed. Why not introduce the Fairtax over a period of five years or so. That way, the risk of trashing our whole economy is reduced.

(3) Due to the prebate, millions of workers may pay no net federal tax, yet all would receive their SS retirement benefits. That isn’t the kind of “nanny state” I would want to be part of. I would strongly urge that the payroll taxes remain in place so that at least everyone is paying for their retirement benefits.

(4) As I have discussed, taxing governments is not only unconstitutional but unnecessary. The reason used by AFFT for proposing federal taxation of State and Local government consumption was to head off any government competition with the private sector. But HR25 already addresses that issue in Section 704. That section says that any government agency that sells goods or services on the private market of $2500 or more per quarter would be classified as a government enterprise, and would have to collect and remit the sales tax. The playing field was already level!

(5) Provided that the Fairtax is introduced over a five year period, then the inventory tax credit should be eliminated. This will save approximately $350 billion in the federal budget.

(6) The Family Consumption Allowance (FCA) will cost $600 billion annually, and will be scored by CBO as an entitlement. One thing we don’t need is more entitlement spending in the federal budget. Where is it written that no one should pay tax on spending on necessities? The prebate should be targeted at the really needy at a cost of only 10% of the Fairtax prebate.

There are undoubtedly more changes we could discuss, but these six are a start. Don’t hesitate to disagree, and I’m sure you won’t.

By my calculations (using $400 Billion), that would have actually been a 14¢ increase (1.00 x .876 x 1.30 = 1.14) but that is still only from the business end. As far as personal taxes go, most of us would also get anywhere from 17.65% to 42.65% of our pay back in income taxes. So if prices increase by 14¢ and I get an extra 22.65% (15% tax bracket + 7.65% payroll taxes), then I have 8.65% more purchasing power. And that is without calculating in the prebate.

Look, even if your numbers are (presumably) correct, you’re still ignoring the many other factors that nearly level everything out; like legal US citizens no longer having the federal government in their pockets; paying taxes when we truly want to pay taxes; illegal immigrants, tourists, and the underground economy finally paying their fair share of taxes around here; and the fact that our Social Security program will be fully funded by the time I’m ready to retire; and well past.

Fairness, a smaller more efficient government, and equality amongst citizens. Those are the true reasons I’m fighting for the FairTax, Hank. Not because it is “23% or 30%”. Not because taxing the government may or may not be constitutional. But because the FairTax stands for something that you and I both spend many years of our lives fighting for, Hank – FREEDOM! That is something our current tax system will never give us and will never give our kids and grand-kids. I’m sorry Hank, but possibly “paying a little more now” is not a deal breaker. I will gladly pay a little more, knowing that every illegal immigrant and every income tax evader in this country is also paying what I’m paying.

No, I don’t think everyone on this blog is a fool, but I’m not too sure about you? The only equation I offered was 1.00 x .9 x 1.30 = 1.17. For anyone that still doesn’t get it, that equation simply says that if something costs a dollar today, then under the Fairtax, costs can be reduced by 10% and after adding the 30% sales tax that one dollar good would cost one dollar and seventeen cents.
And, if you had read my post, you would understand that I did include business compliance costs in my 10%. According to the Tax Foundation, the business compliance costs were actually $147 billion, not $160 billion in 2007. That is an insignificant change in my overall message that costs can be reduced almost 10%. If you want to quibble, go ahead.

What I’d really like you to do is explain to this MIT alumnus just what I have overlooked in my retail price estimate. What key ingredients are missing? With all your qualifications, it should be a no brainer. I eagerly await your input.

Your “facts” are correct, but your math still sucks! You still don’t seem to understand that retail merchants have to add 30% to their costs in order to arrive at a 23% tax inclusive price. That isn’t apples and oranges, but simple math.

My estimate for retail price increases is based on the clear understanding that business can’t reduce costs any more than they paid in tax related costs. In 2007, businesses paid $290 billion in income taxes against $9 trillion in retail sales, or 3.2% of sales. Businesses paid $435 billion in payroll contributions or 4.8% of sales. And businesses paid $160 billion in compliance costs or 1.8% of sales. Add them up and business tax related costs came to just under 10% in 2007. Add the 30% sales tax and retail prices have to rise by 17%. (1.00 x .9 x 1.30 = 1.17)

If you are retired, the Fairtax calculator doesn’t work for you. I’ve told AFFT repeatedly that there is a problem, but they either aren’t interested in accuracy or they are too broke to fix it?

Name one such instance and we can discuss it. Both you and Steve just don’t get it and you banned me from your blog as a result. Put an issue on the table and we can let others see who is correct. To do otherwise is just plain wimpy!

Don’t get confused. If you and your employer (a local government entity) pay FICA, it simply means your local government opted to join the federal payroll tax system. Many local governments did not, and set up their own social insurance plan. Show me where the Fairtax is optional for governments?

Your paying another State sales tax on a purchase is perfectly O.K. Nothing unconstitutional about that.