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Chairman's Report - May 11, 2018

ANOTHER REASON TO MOVE TO THE FAIRTAX—ELEMINATE THE MORTGAGE INTEREST DEDUCTION

People in the real estate industry have long championed the Mortgage Interest Deduction (MID).   The MID allows a taxpayer to reduce the amount of income subject to the federal income tax by the amount paid in interest on their home mortgage.  Since for most home buyers this is a large percentage of their mortgage payments in the early years, this allows a home buyer to receive a direct subsidy from the government that allows them to acquire a more expensive home than would otherwise have been possible.   (It is important to remember that all of these income tax deductions do not reduce the amount of Social Security tax owed.)

However, in order to make use of the MID, taxpayers must file a Schedule A, which lists their deductions, with their 1040 tax return.  According to the Tax Policy Center’s latest analysis, the number of U.S. taxpayers likely to itemize their deductions on their 1040 income tax return will decrease from 46.5 million,  roughly one third of the total 1040’s filed, to 19.3 million in 2018—a 60% reduction.

 

WHY HAVE A MID?  

 

The chief advocate of the MID has become the real estate industry.  Homebuilders and real estate agents lobby extensively for the MID. Their propaganda makes three points:

  • Home ownership is very important to the well-being of the U.S.;
  • The MID increases home ownership for all citizens;
  • Elimination of the MID will lead to existing homeowners seeing their home value reduce between 10% and 20%.

 

THE FACTS

 

Sometimes you feel sorry for people who are forced to make arguments that they can’t possibly believe. Here are some facts:

  • The Zillow Research Group calculated that before the increase in the standard deduction, 44 percent of U.S. homes were worth enough for it to make sense for a homeowner to itemize their deductions and take advantage of the MID, but because of the increased standard deduction only 14.4 percent of U.S. homes are now worth enough for it to make sense to use the MID.
  • In 1990, the United States ranked 10th of 18 of our trading partners, solidly in the middle of the group and, with a 63.9 percent homeownership rate, just above the average. By 2015, however, the US was the fifth lowest, with a rate of 63.7 percent, well below the 69.6 percent average.  
  • If elimination of the MID means that homes will decline in value by between 10% and 20%, the reverse is true—home values are inflated by between 10% and 20% so that purchasers of 85.5% of U.S. homes are paying higher prices for their homes.
  • A 2017 study  found that the MID does nothing to promote homeownership but encourages people to buy bigger homes and more expensive homes – but it doesn’t change that fundamental decision about whether to buy in the first place.

 

HOME OWNERSHIP UNDER THE FAIRTAX

 

Instead of providing a “subsidy” only to our wealthiest citizens, the FAIRtax will provide all of us the opportunity to purchase a home—if we decide to purchase a home.  It will also not penalize Americans who decide to rent a home.

Here are some facts:

  • Everyone will receive their full pay check—no federal deductions for income or Social Security tax.
  • The MID does not reduce the Social Security tax, the largest federal tax paid by most Americans.
  • The key determinant for obtaining financing for a home purchase is the amount of income which will be much higher under the FAIRtax.
  • If the real estate industry is correct, the prices of homes will between 10% and 20% cheaper than now and probably even more when income/payroll taxes are removed from the cost of new homes.

 

CONCLUSION

 

To find out why the Swamp and Members of Congress ignored the obvious facts about the MID, all you have to do is see that the National Association of Realtors spent $22.2 million for lobbying expenses between October 1, 2017 and December 31, 2017.

The FAIRtax is better for everyone except the Swamp and their friends in Congress.  This doesn’t mean that, after the passage of the FAIRtax, the Swamp will drain. It does mean that instead of trying to “hide” special benefits in the Internal Revenue Code, they will have to get bills enacted that provide benefits to their clients.  This means they will be under much more scrutiny and all of us will more easily see when Congress is rewarding its friends with our money.

Here is a statement from the National Bureau of Economic Research entitled, Do People Respond to the Mortgage Interest Deduction? Quasi-Experimental Evidence from Denmark by

Jonathan Gruber, Amalie Jensen, Henrik Kleven:

“Over multiple time periods, and considering multiple empirical strategies, we find no effect of the tax policy change on whether households own or rent…”

“Doubling the standard deduction doesn’t get rid of the distortion,” Mr. Gruber said. “It just sort of means that the mortgage interest deduction is valuable if you’re a rich guy with a big house.”

It is time to PASS THE FAIRTAX!

The truth is the truth.  Remember, if we don't continue to tell the truth and demand a change, then this quote from George Orwell's 1984 may foretell our children's future:

“If you want a picture of the future, imagine a boot stamping on a human face—forever.”

WHAT CAN EACH OF US DO


Call up the local or D.C. offices of your House Member and two Senators and you can use the following script:
  • I am sure that Representative ____ or Senator ____ is in favor of everyone obeying the income tax laws.
  • After they assure you that their boss is not in favor of anyone breaking the law, ask if they are aware of the Cebula study showing $9 trillion of evaded income/payroll taxes over the next ten years.
  • Since most will say they don’t believe their boss has seen the study, either drop off a copy or get an email address and send a copy to them for their boss.
  • Say you are going to call back in a week and ask what the Representative or Senator is going to do to stop this evasion.
  • In a week, call back and ask specifically what the Representative or Senator is going to do to enforce the law.
  • They probably will say their boss believes that simplifying the income tax will handle the problem.
  • Explain that when people evade income taxes, they are also evading the 15.3% payroll/Medicare tax and state income tax.  So it is unlikely that they are going to pay 30% or 40% when they were paying 0% because they have already decided it is okay to cheat.
  • Say that the only way to reduce evasion is to increase by tens or hundreds of thousands the number of comprehensive IRS audits done each year.
  • Point out that Evaders do not self-identify by putting an “E” on their income tax return.
  • 80% of the people likely to be audited are trying to comply, but they will be forced to endure these IRS audits as well.
  • Ask if the Member is in favor of this?
  • If they say no, then ask again how the Member proposes to stop people breaking the income tax laws.
  • Then explain that the way to handle evasion without unleashing the IRS audits is the FAIRtax.  


If you can see your Member or attend a town hall and ask these questions, you can be even more effective.
 

FAIRTAX POWER RADIO #107

TAX EXTENDERS - TO INFINITY AND BEYOND! 

You have probably heard about “Phase 2” of tax reform from the President and some members of Congress. Although we were hoping that Phase 2 would be the FAIRtax, it turns out that “tax extenders” are what they are talking about.  In other words, more Congressional tinkering with an already broken system.  The FAIRtax Guys explain what they mean by “tax extenders” and why the FAIRtax would make all this Congressional tinkering a thing of the past.  Listen to FAIRtax Power Radio to keep up with the constant changes Congress is trusting upon the American people and invite everyone you know to become tax reform knowledgable like you; invite them to listen to FAIRtax Power Radio.

LAST WEEK’S EPISODE   We can’t stop extolling the virtues of the FAIRtax.  There are so, so many advantages of the FAIRtax over the current income tax that it required three episodes of FAIRtax Power Radio to discuss them all.  In Part 3 of this very positive discussion, The FAIRtax Guys listed more important features of the FAIRtax that will improve life in America.  Hard to believe that one simple tax bill can do so much, but it’s true. We hope you enjoyed that podcast. If not, remember - it’s a podcast.  It’ll be there as long as you need it.  After you listen,  use this information to convince others to study the FAIRtax.

PLEASE HELP US SPREAD THE WORD ABOUT THE FAIRTAX!

Telling your friends and relatives about our free weekly podcasts is a great way to help us garner more support.  It is the American people who must demand REAL tax reform in Congress.  We must inform America about the FAIRtax!  Please help us.  


Telling your friends and relatives about our free weekly podcasts is a great way to help us garner more support.  It is the American people who must demand REAL tax reform in Congress.  We must inform America about the FAIRtax!  Please help us.


You can listen to FTPR on any platform - Mac or PC, iPhone or Android. And it’s 100% free. 


Listen on Spreaker.com (http://bit.ly/2oesbk7), iTunes (http://apple.co/1Te8VdF) or iHeart Radio (http://bit.ly/2eqEG7y) on your computer or smartphone.  The easiest way to listen to FTPR on your smartphone is by downloading the free FTPR app.  Just search for “FAIRtax Power Radio” in your app store, download the app and start listening.  


We post a new episode every Friday morning.  Please listen and tell everyone you know about the FAIRtax Power Radio.  


The FAIRtax: Once You Understand It, You’ll Demand It!


THE ELECTRONIC INTRODUCTION TO THE FAIRTAX - AMERICA’S BIG SOLUTION


America’s Big Solution is a basic introduction to the FAIRtax and is meant for people of any age.  And you can download it to your tablet or smartphone right now.


Do you know someone who would like an introduction to the FAIRtax and would prefer to read about it rather than search online for Tweets, Posts and Shares?  If so, America’s Big Solution is their best choice.


America’s Big Solution is an introduction to the FAIRtax written by Terry Tibbetts, author of A Spartan Game: The Life and Loss of Don Holleder, with help from Ron Maiellaro, President of the Florida FAIRtax Educational Association.  


You can buy an electronic version of ABS as follows:  AMERICA’S BIG SOLUTION is available for only $2.99 for the Amazon Kindle (http://amzn.to/1WIRHry), the Barnes & Noble Nook (http://bit.ly/1XeG8bH) and Apple iOS (http://apple.co/1tnqK0P).  


You can purchase a print copy at the same Amazon link above for $9.25.  Regardless of whether you choose the electronic format or the print format, you’ll find AMERICA’S BIG SOLUTION will give someone the boost they need to begin their study of the FAIRtax and the suggested resources to learn more. Buy AMERICA’S BIG SOLUTION now!


LINKS TO MORE INFORMATION


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