Chairman’s Report - April 3, 2020

We hear daily from medical “experts” who disagree on not only the actual threat presented by the coronavirus, but also what steps governments at all levels should take to combat it.  Regardless of what government actions are or aren’t taken, the fact remains almost all of the U.S. economy has been negatively affected, with some parts more than others.

Most small businesses and many large businesses don’t have the financial reserves necessary to continue paying their employees and to pay their bills for very long if they have to close.  This is due in large measure to the penalties on production and savings built into the income-payroll-tax-system.

Even “essential” businesses who remain open are generally operating with fewer employees, and many have been forced to cut the wages of those employees.  Many of these businesses are seeing greatly reduced revenue, and are having difficulty paying their bills.

This is creating a cascading problem for all of us.  If a business or individual’s income is cut significantly, then they probably can’t pay their rent or their mortgages.  Payments to suppliers and vendors aren’t made.  Neither are car payments and credit card payments.  And the list goes on…

Many items, like paper goods, have disappeared from store shelves.  Most roads are nearly empty because there are few places to go and people have been ordered to stay home.  Restaurants, schools, colleges, movie theaters, athletic events and other activities are closed or cancelled.

Many working mothers can’t go to their jobs, even if the job is still there, because their children can’t go to school.

All of these dire circumstances have created a demand for the federal government to step in and “save the people”.

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On 3/27/2020, the “Coronavirus Aid, Relief & Economy Security Act” became law.  The following is from a summary prepared by Foley & Lardner LLP, the lobbyist law firm who likely made millions lobbying for their clients:

 

• Creates a $349 Billion loan program for small businesses, including 501(c)(3) non-profits and medical and dental practices.  These loans can be forgiven through a process which incentivizes companies to retain employees  

 

• Allocates $500 Billion for assistance to businesses, states, and municipalities, with no more than $46 billion to support passenger air carriers, air cargo carriers, and businesses important to maintaining national security.  The remaining $454 billion may be used to support lending to eligible businesses, states, and municipalities

 

• Allocates $130 Billion in relief to the medical and hospital industries, including funds for medical supplies and drug and device shortages

 

• Expands telehealth services in Medicare, including services unrelated to COVID-19 treatments

 

• Provides payments of up to $1,200 each to Americans making $75,000 or less ($150,000 or less for couples who filed joint returns and $112,500 or less for head of household).  Plus, there is an additional payment of $500 for each child.  These payments are to be made “as rapidly as possible”

 

• Expands eligibility for unemployment insurance and provides people with an additional $600 per week on top of the unemployment amount determined by each state

 

• Expands the “Defense Production Act”, allowing for a period of 2 years when the government may correct any shortfall in resources without regard to the current expenditure limit of $50 million

• Provides the Treasury Secretary with the authority to make loans or loan guarantees to states, municipalities, and eligible businesses and loosens a variety of regulations imposed through “The Dodd-Frank Wall Street Reform & Consumer Protection Act”, “The Economic Stabilization Act of 2008”, and others.

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None of the 8 items listed above rely in any way on the present income-payroll-tax-system.  Yes, some of the provisions allow businesses to retain the employer share of payroll taxes to help offset the cost of paying employees, but this could be done more easily with a direct grant based on the number of employees.

Normally, the lobbyists and Congress like to bury “special benefits” for their friends deep within the tax-code where they are pretty well hidden from view.  Neither the Ruling Class nor anyone in Congress expects the rest of us to challenge the corrupt and incomprehensible income-payroll-tax-system.

However, if we were operating under The FAIRtax, we could all calculate on a napkin the amount it would cost each of us if “The CARES Act” payments were not merely added to the national debt but paid from current revenues.  The Ruling Class and Members of Congress know we could never calculate this cost under the corrupt and incomprehensible income-payroll-tax-system.

Who among us really believes the soon to be $25 trillion national debt will not have to be paid?  Who among us can calculate how much it will cost each of us to pay off the national debt over 20 years?

With The FAIRtax you can.  If you amortized a $25 trillion debt over 20 years at 4%, the annual payment would be $1.818 trillion.  Each percentage point of the current 23% FAIRtax rate will bring about $200 billion into the treasury.

This means to make the $1.8 trillion annual payment, The FAIRtax rate would have to increase by 9% to a rate of 32%.  Although not exact, if we wanted to keep the essentials excluded from The FAIRtax with the monthly prebate-tax-credit, we would need to add an additional 2%.  This 11% would be added to the current 23% making new rate 34%.

Most of us calculate the cost of The FAIRtax by adding it to the cost of new goods and retail services we buy.  This means to purchase a dollar item and pay The FAIRtax it would cost $1.30 because $0.30 is 23% of $1.30 (23% is the inclusive rate.  For each dollar paid, $0.23 is FAIRtax and $0.77 is for the product.  This is the same way income-tax rates are quoted, and we are making a direct comparison to the income-tax.  Confusing?  Yes, this is what the Ruling Class and Congress want).

Under a new 34% FAIRtax, we would pay approximately $1.50 to purchase a $1.00 item.  A fifty percent increase in the price?  Horrifying!  Yes, it is, but that is the reality of what it would cost us to pay our continuing federal expenses and retire the national debt.

This also explains why Congress and their Ruling Class bosses are so afraid of The FAIRtax.  The FAIRtax shows all of us what a terrible job they have done and will continue to do as long as they can hide behind the income-payroll-tax-system.