Buying Power With a National Sales Tax

Take a look at this quote from a research paper on automobile purchases from FairTax.org:


"First, look at the current system. Today, a worker must earn $43,537 to be able to pay for the average new vehicle sold in 2003 (according to NADA) because in order to do so, he first had to give the federal government $11,442 in payroll taxes and income taxes. This leaves $4,545 to pay the interest on the loan and $25,550 for the price of the car. Under the FairTax, our buyer only has to earn $100 to spend $100. The total cost of purchasing the car is $27,550 plus the FairTax of $8,265, or $39,160. This is 10 percent less than today, even after the sales tax is added on! The cost savings increase to 14.9 percent if the car buyer is self-employed and pays 15.3 percent payroll taxes instead of 7.65 percent.

"A major cost component of an automobile for a consumer is interest. The FairTax results in interest cost savings on the purchase of a new car in two ways. First, under the FairTax interest rates will decline from their level under an income tax. Interest rates will fall 25 to 35 percent under a consumption tax like the FairTax.1 Rates will drop immediately and quickly toward the current tax-exempt rate. Investors will no longer need to receive a tax premium to achieve a particular after-tax rate of return. The impact of eliminating this "tax wedge" or tax premium on interest can be seen every day in The Wall Street Journal. Tax-exempt municipal bonds tend to yield about 30 percent less than taxable corporate bonds of similar term and risk.

"Second, the taxpayer can use his or her complete earnings to pay for the interest. Using pre-tax earnings to pay for the interest on a new vehicle is analogous to the home mortgage deduction where home purchasers can deduct interest paid. Deducting interest paid on home purchases is the tax code’s attempt to allow interest to be paid with pre-income tax dollars. Since interest payments are not taxed first under the FairTax, the FairTax extends what is essentially the treatment of home mortgage interest to car buying. But it takes it one step further, granting what would be the equivalent today of a sort of supercharged interest deduction. That is because the mortgage interest deduction does not allow a deduction of such interest against payroll taxes (which three-quarters of Americans pay more of than income taxes). The FairTax allows interest for a new car to be paid before any tax, payroll or income tax, further reducing the costs of buying a car. "

In layman's terms, this means under the Fair Tax we as buyers will have more buying power with our money. This means American car makers will be more competitive.

Just think, in order for American car makers to compete with the subsidized foreign auto producers, American vehicles have to be equipped with parts that just meet industry standards. This is not because auto makers want to produce cheap products. They want to be able to compete with foreign producers who do not have to pay the same rate of tax that an American company has to pay.

Why did Chrysler move its headquarters to Germany? Because they get a better tax rate as a foreign company than they do as an American company. Our tax code is driving American businesses outside the United States. The Fair Tax will be a dream come true for American businesses.

Auto workers will also benefit. Unions fight hard to help the auto worker earn a high income just so the worker can afford the taxes they pay. This places a heavier burden on the auto maker because they have to pay out higher income, Social Security, and Medicare expenses. This means the consumer (you and me) has to pay more in the end because of the amount of money that it takes to generate one vehicle. Remember, corporations do not pay taxes - we do. Corporations just embed the taxes in the final price.

Auto Workers will benefit in a number of ways. First, they will get to keep all of their paycheck (no more withholding, except for maybe insurance and Union dues). They will have the right to determine how their money is spent. Second, auto makers will be able to produce above standard cars at great prices which in turn is passed on to consumers who buy more cars. More cars means the industry grows which means auto workers keep their jobs and do not have to worry about layoffs.

The consumer benefits because they can afford American products and get their money's worth. They will no longer pay embedded taxes. There will just be a flat rate. Read the auto research paper to find out more.

Giving and the Fair Tax

The fear many pastors and church leaders have about the fair tax is its affect on giving. Let me quote one of the white papers from FairTax.org.

"Americans who regularly attend church services contribute 2.2% of their income, a much higher average than non-church-goers who average 1.4%."

For the most part, giving is more a Christian discipline than a stat to be recorded. It is a faith issue. People give according to how they interpret the Bible. I could give you Scripture and verse about how each of us should be giving 10% and not 2.2.% but that is a theological debate that no one wins.

I can, however, relate to how the FairTax can bring relief to those who want to give more but are afraid because they do not know if the money will hold out.

The FairTax allows every wage earner to keep their entire paycheck. That means we each get to choose how our money is spent and where we get to contribute it. When we purchase goods and services, we will be paying taxes. When we give to the church, we give 100% of our gift because it is not taxable! The money that had been taken out of the pay check now becomes available for spending as we desire.

2 Corinthians 9:7 - So let each one give as he purposes in his heart, not grudgingly or of necessity; for God loves a cheerful giver. (NKJV)

This version of the Bible speaks of giving "not grudgingly". Another version says not "reluctantly". I honestly believe people feel more reluctant to give when they work very hard only to see the government subtract large amounts of their income from their check. Then they worry and try to figure out how to pay the bills and bills become primary on their giving chart.

Again, this is not a theological debate and I believe that people in this situation should rely more on faith in God. But if we could help alleviate that reluctance and fear and worry, we should think long and hard about supporting the FairTax bill.

I am not advocating this so churches can get more money. I really feel bad when I myself cannot do more and I look at over $900 a month going out (unwillingly) to pay taxes. I am not against paying taxes either. I enjoy the relative amount of freedom we have here in the United States. But there are a lot of people who feel burdened by the current tax code.

I honestly believe giving will increase not only in the church but also for charitable organizations. Some people believe that giving will decrease because people will not get a tax credit. We have to look at it in a different light. Because taxes would no longer be taken out of our paychecks, the tax break will already have been instituted. Besides, who gives to get a tax credit? It doesn't hurt, but that is not the reason people give.

People have hearts. We do care about needs. If people can help, they will give. Just think of the work that goes into producing donation reports by non-profits. How many man hours do they have to put into each year just to report "charitable giving"? Just think about how much more time they can devote to what they do and how much less money they have to spend on sending out reports.

I will end with this last quote from one of the FairTax white papers:

"It first should be noted that the tax-exempt status of houses of worship is a tradition dating to the earliest recorded history on this planet. Most know the Rosetta Stone led to the deciphering of hieroglyphics, but few know the subject of its text. It is a tax treaty between pharaoh and the priests, assuring the tax-exempt status of the temples. It may also be one of the earliest examples of the necessity of carving such treaties in stone (in three languages!) to ensure government's continued compliance. Any other treatment of religion and its practice is a violation of religion's traditional status from our earliest history.

"Second, our Founding Fathers insisted that all citizens be taxed uniformly, to ensure that the tax code could not be used to reward the friends and punish the enemies of government. Where has the Johnson Amendment taken us? It has ensured that some religious organizations are carefully scrutinized (and punished) for supposedly steering too close to political dialog with their parishioners. While other organizations skate by unphased. Who makes such arbitrary enforcement decisions? The very government our Founders sought to remove from this equation with the Constitution’s uniformity demands.

"Finally, it is the height of folly that the Internal Revenue Service now stands as the final arbiter of what is and is not a religion through its control over what is and what is not deductible. Can there be any travesty more threatening to the long-term independence of religious organizations and freedom of religious speech in this nation? Is there any action more at odds with the original intention of the Constitution? The FairTax ends this serious infringement for all religious organizations, regardless of denomination, and likewise for all charities."

Further Links to investigate:

FairTax.org

FairTax Research Papers

Church and State

The problem with the current income tax system in the United States is the way it is used to manipulate the free speech of churches. Because of the Johnson plan (1954 by Lyndon B. Johnson) which places non-profit and church organizations in a tax exempt status, the government willingly attempts to put its nose into the running of church organizations.

The separation of church and state (a lie within itself) has been a way of pushing morality out of politics. By placing the silence amendment (tax exempt status) in the income tax code, government has made it clear that a church body cannot have a political opinion nor does it have the right to Free Speech as protected for them in the First Amendment.

If there is any tax reform incentive that all churches and church members should be championing, it should be the FairTax. I have been studying the various papers and books presented by the FairTax organization, and I have found that the FairTax is very favorable to the church and other non-profits.

First, the church will still maintain its tax exempt status (except when it sells items such as Bibles - it will have to charge tax). This means that the church can purchase items for "business" purposes such as computers for offices and get tax exemption. Or it can purchase goods for use in a soup kitchen, or other outreach programs, tax free.

Second, the church is given its freedom of speech back. That means a pastor could speak out about a political subject and not fear the IRS rebuke and pulling of tax exempt status.

As a Christian leader and minister, I believe this is vital for the church.

• This means that church would no longer have to collect income taxes on its employees who get to keep their entire checks. This enables them to have more spending power.
• The church will no longer be handcuffed in speaking about moral issues in fear of political backlash.
• The church would not have to report anything to the federal government unless it has charged something for a service (bookstore, cafe, or restaurant).
• The church benefits because all interest earning endowments will be tax exempt (assets, funds, and property donated to the church as a source of income).

I know there is a lot of fear about what would happen to giving. But to be honest, I do not give in order to get a tax break. I give because God has commanded me to give. Anyway, who gives $1000 just to get a $300 break?

Read the "white" papers the FairTax organization has. Do not let others lie to you about the dangers of this exciting initiative. If you are a church member or a pastor, then you owe it to yourself to really discover for yourself if this is good for your ministry or not.

Here is a link to the Charitable Giving Papers.

My Fair Tax

To be honest there really is not anything that can be called a fair tax. But when we consider all that we try to support and fund in the United States, then I believe there is a necessary reason for taxation. Our current system is not fair nor is it beneficial. I hope to help support the fair tax with this blog and to answer legitimate questions about it.

I am also going to come at this from a Christian point of view because there is a lot of real fear about what would happen to churches and non-profit organizations once the fair tax is implemented. I believe the Fair Tax is the best possible answer to our current tax code. It is, in my opinion, the best possible taxation that any and all political sides can agree on.


The Fair Tax, as it has come to be called, is revolutionary and needed. So whether you agree with it or not, I will do my best to spread truth. You can research more about the Fair Tax here.