the truet ax book2011.pdf - ruralsurvival.info truet ax book2011.pdf · join the fight to end the...

THE TRUE TAXA PLAN TO

END THE DEBT

Copyright © 2011 by Tea Party

All rights reserved.Published in the United States of America by

Tea Party Press PublicationsHouston, Texas

Authored by the Tea Party

Join the Fight to End The Debt www.truetax.ning.com

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“Government, the people said, is not our master it is ourservant. Its only power that which we the people allow itto have.” – Ronald Reagan

“I believe there are more instance of the abridgement ofthe freedom of the people by gradual and silentencroachment of those in power than by violent andsudden usurpations.” – James Madison

“We the people developed government to preserveFreedom as an instrument wielding truth and justice.Therefore, We the People must be leery of despots orspecial interest that would wield these instruments fortyranny and oppression.” – Tea Party

“…that the creation of debt should always beaccompanied with the means of extinguishment.” –Alexander Hamilton

“No generation has a right to bind the succeedinggeneration with vast public debts.” - Thomas Jefferson

“The wealth of a nation belongs to all the people not to itsgovernment.” – Tea Party

The True Tax will Restore America by:- Streamline/downsize Government- Eliminate the Debt- Eliminate the Personal Income Tax- Create Jobs and Restore Americans

http://www.truetax.ning.com


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Foreword

America, wake up! And soon! Otherwise, we aredoomed in our battle to sustain the Americandream. There are enemies within and they are onthe attack. They are attacking our morals, ourvision of the quality of life, and our time-honoredlove of life, liberty and the pursuit of happiness.And one of the weapons they are using and havebeen using for almost a century is that insidious,yet supposedly necessary fixture, the graduatedincome tax.

In the sixty-five years since World War II, thegraduated income tax has become the masterplank in the platform of the Liberals, Socialistsand Progressives, who desperately desire thetransformation of America into George Orwell’sworld of 1984. This insidious worm is now soimbedded in American consciousness, thatalmost no one even imagines they could ever get apaycheck without that inevitable Federal“withholding tax” deduction on it.

The graduated income tax is a perfect tool forSocialism in all its disguised forms. As a tool forre-distribution of wealth from the citizens to theState, along with an estate (death) tax, it reducesinitiative and restricts savings. Worst of all,personal and financial privacy, a basic tenet offreedom, is also restricted almost to the point ofinvisibility.



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We have endeavored to lay out a tax plan that willonce again set us back on the right course tofollow the American dream; a tax plan that willbroaden the tax base, lower the rate of tax andput the tax on a pay-as-you-spend basis, ratherthan the horrible mess we have today. The TrueTax is a tax for the twenty-first century, not acarryover from the late nineteenth or twentiethcentury. It is a tax easily understood and best ofall, it is not collected by force and there are noreturns to file. We give special thanks to theFounding Fathers and present day supportersand members of the Tea Party who desire toRestore America!

Signed,

The Tea Party

http://www.truetax.ning.com/


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Introduction

We want you to understand early on about ourTrue Tax plan, that it is NOT a political positionwe are taking with this system. In fact, quite theopposite, as we are convinced both theRepublican AND Democrat parties have failed theAmerican people by administering the necessity oftaxation of its citizens to the point of absoluteimbalance, corruption and misuse. From thebeginning of this movement, our principles havebeen Non-partisan, Constitutional ConservativeGovernment (Streamlined) and Free Enterprise.The following system addresses the long-overdueneed for unequivocal equality to every Americantaxpayer, regardless of race, social class, orPolitical affiliation even to include all thegrassroots ‘tea party’ movements. This system willbenefit each and every one of us INDIVIDUALLY,and should be given some serious thought, prayerand consideration before dismissal of it for the‘status quo’, or some other taxation idea.

Here we are in the supposedly enlightenedtwenty-first century and we are under anothercloud of dread. We are now besieged by aninternational terrorist threat that is raising itshead after many centuries of relative calm. Wethought Ronald Reagan ended the Cold Waralmost thirty years ago with a great victory overthe Communist threat and that put the end tothat. Wrong!



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The Communists only pulled in their horns anddecided to lie low for awhile. After all, they hadn’tactually lost the war, only a few skirmishes. Theystill had two time bombs welded into our freesociety, which they knew would eventually bringus down; the graduated income tax and the deathtax, commonly known as the estate tax. Thosetwo time bombs are certain to explode within thenext few years, unless we act.

You might think these are the yammerings ofsome old right-wing reactionaries, but all youhave to do is go to the internet or the library andread the Communist Manifesto, written by KarlMarx in 1848. It will be a chilling, grim reminderthat the Communists are not gone, they have‘cloaked’ themselves and are operating freelyunder a maze of names, such as Socialists,Progressives, Liberals, different “Labor” headings,Liberal Democrats and even some so-calledRepublicans. Actually, a Communist under anyother name is still a Communist. And, just asdeadly to our way of life.

On the websites of many presidential-hopefuls,you can find glowing descriptions of a Flat Taxplan or a number of other systems, which wouldsupposedly liberate us from the graduatedincome tax horror we are now living under (onethat is getting worse each year). There is also aplan around that is tabbed the “Fair Tax” plan,which is an almost silly plan that would consist ofa 23% retail sales tax with all kinds of rebates,



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exemptions, deductions and other complications.At least the Flat Tax would put all tax returns ona postcard sized return form.

It sounds strange that all these “plans” weresupposedly crafted by tax-wise panels of level-headed professionals, who could see the mistakesthat had been made in the past with ourgraduated income tax, and who would plan morecarefully for the future. Not so. The panels mustnot have had any long-practicing CPAs around.Anyone in the accounting profession could spot,in a heartbeat, many of the flaws in both theplans mentioned above.

The base requirements of a suitable tax plan isthat it be broad-based and with as low a rate aspossible. It should also be simple to understandand easy to collect. Neither of the plansmentioned have either of these attributes. Let’slook at them for a moment. The Flat Tax plan stilldepends on the definition of “income” and anyCPA will tell you in an instant that income cannotbe defined and placed on a postcard sized formwithout a gigantic IRS-type collection agency.Every postcard return would have to be audited.The postcard filing would be absolutelyimpossible to understand or control. Tax evasionwould be far worse than today and it would never‘fly’, once the debate really got started.

The Fair Tax plan is patently absurd. The backersof this plan were even introduced to the House ofRepresentatives by Speaker Hastert a few years


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ago. They claim to have the backing of some30,000 supporters (which is doubtful), but no onein his right mind could actually believe thatAmerican taxpayers would tolerate paying a 23%Federal retail sales tax. Would you? What a messof inflation we would have with that!

Neither of the plans deals with the problem ofcorporate and other business taxation. Shouldn’tthey? Certainly! A retail sales tax only covers avery, very small piece of the taxable base andputs almost all its pressure on the middle classworking man. It’s a very regressive tax plan. TheFlat tax is too complicated by still using incomeas a basis. All we would be doing would be tocomplicate and make the despicable U.S. TaxCode even worse than it is. It would be theultimate blow to our already down-troddentaxpayers.

In any of the other tax plans being proposed, noone has even mentioned a huge problem thatwould exist, that being the chaos any of theirplans would cause to the individual states. Not allof the states have an income tax, but most ofthem have a sales tax. Also, many of the stateshave added other little assessments and offsettingcredits to their income tax regulations usingFederal guidelines and any change in the basicFederal Tax Code could be a disaster to them. Noone seems to have addressed this problem.

In this book we introduce a new plan, the TrueTax plan (Transactional Tax to Restore America,


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applied Universally and Equally to everyone). Thisplan is the result of merging the best points of theUTT (Universal Transaction Tax) and the APT(Advanced Payment Tax) plans. These plans werethe only ones proposed that were trueconsumption tax systems and even though aconsumption tax has been favored by manyeconomists through the years, no palatable planshave ever been offered. This book endeavors tooutline a simple, transparent solution that ispalatable, and maybe even divinely guided.


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Table of Contents

Foreword 3Introduction 5Chapter 1 It’s Time To Kill The GraduatedIncome Tax 11Chapter 2 Tax Collection is Inadequate 16Chapter 3 The True Tax 22Chapter 4 Accounting and Auditing IRSStyle 26Chapter 5 Look at All That money! 31Chapter 6 Home, Sweet Home! 35Chapter 7 Finding the Lowest Possible Rate 42Chapter 8 Which Shell is the Pea Under? 48Chapter 9 Price Structuring and the TrueTax Plan 53Chapter 10 Taking Care of Business 58Chapter 11 An Easy Collection Process 66Chapter 12 Tax Should Be Transparent toPayers 71Chapter 13 Eliminate Class Conflict 74Chapter 14 Of Profit and Politics 77Chapter 15 Winners and Losers 81Chapter 16 One-Time Windfall 84Chapter 17 True Tax Plan Helpful to States 87Chapter 18 Failures of the IRS 92Chapter 19 Adoption of the True Tax Plan 97Chapter 20 Conclusion and OtherComments 102Chapter 21 Frequently Asked Questions(FAQs) 105Bibliography 113


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Chapter 1

It’s Time to Kill the Graduated Income Tax

Our tax system is broken beyond repair. We arefaced with a National Debt of more than 14trillion dollars and with deficits of over 150trillion dollars per year for at least the next tenyears. What have these political gangsters done tous?

The “graduated income tax” has deteriorated intosuch a mind-boggling mess it is ridiculous. Howdid we get into such a situation? If we don’textricate ourselves, and very soon, we face theloss of our birthright of freedom.

The graduated income tax is a tax of definition,made to order for the ‘taxing’ politicians andbureaucrats. Income can be one thing to oneperson or group and quite a different thing toanother group. We have added a great number ofwords and phrases to normal use; things like“adjusted gross income”, “capital gains”, “capitallosses”, and “depletion”. The Tax Code isapproaching seventy-thousand pages of smalltype and grows at a faster pace each year. Wetruly reached very close to the bottom of thebarrel when Congress came up with the“Alternative Minimum Tax”. At the same time, wehave tax cuts that pop up in some other area asdecreases in a prior tax credit. Really, don’t you


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just love the clarity and transparency of thissystem?

Nothing is new in the statements above. Writershave written substantially the same things foryears. Interest in any different base of taxationgrows yearly around April 15 as editors have to atleast put something in their publications whichthe taxpayers will read. However, on April 16, itseems to all be forgotten and taxpayers keep onpaying mindlessly. When will it stop?

Willie Sutton, the bank robber, once said whenasked why he kept robbing banks, “Well, that’swhere the money is.” In any taxing system thesame theory can be applied. Bernie Madoffjustified his own Ponzi scheme equating hisaction with that of the Federal Government andthe Social Security System. It does not requiremuch investigation to discover that manyprograms have had their coffers raided by theFederal Government to favor special interests andexpansion of government (Highway Trust Funds,Medicare, Social Security, U.S. Post Office, etc).What do we get from these charlatans? We getanother manufactured imposter, owned byspecial interests (foreign and domestic), all thewhile accelerating their agenda and burdeningfuture generations, eroding the opportunities andchances for our children to realize the Americandream of Freedom. We believe that over the pastsixty-or-so years, our taxing system hasdeteriorated to the extent that we are taxing the


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wrong area, i.e. income. Why not “go where themoney is?” And that heads us in the direction ofthe fairest and yet most liberal of all taxes, aconsumption tax of the most basic sort, a tax oncash flow.

In its early days, it is remembered there was afeeling the income tax system was fair, but only10% earned enough to have to pay. Then duringWorld War II, it was considered done for a goodcause and the majority of people now had to paythe tax to pay for the war. People worried aboutfiling on time, keeping current on their taxes andwere somewhat proud of being able to pay taxesin a free economy and enjoy the protection of theBill of Rights and the Constitution.

Over the long period of years, many of theseprotective devices have been eroded by onepressure group or the other, each trying to wormits way into just a tiny bit more, shouting “foul,inequality, or fair play”, all being done to gain anadvantage over others. Sadly, true AmericanPatriots have blindly marched behind the PiedPipers with the most intriguing messages orsongs, and as a result, our complacency hasallowed all parties the opportunity to squanderthe resources of this nation for personal gain.Even today, the political parties are refusing tostreamline government, so they can garner morevotes to remain in office. The True Tax may be thelast and only chance to restore America, fulfill the


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vision of American exceptionality, and apply thefoundation laid by our Founding Fathers.

Until about twenty years ago, we didn’t knowanyone who wasn’t filing income tax returns on aregular basis and it was real news, when the IRSpicked up someone for failure to file returns forseveral years. People seemed sure that the systemwas fair. Then the government started using theincome tax system for ‘social control’ and we sawthe age of pressure groups begin in earnest. Wehad tax incentives to “spur the economy”,“promote savings”, “protect minorities”, “put thecrooks out of business” and God only knows whatelse floated through the Regulations unnoticed aselected leaders passed Bill after Bill.

Today, corruption runs rampant in our taxsystem. Veteran legislators seem to ignore thevery tax regulations they impose upon the rest ofus. For example, the seemingly unrepentant ex-head of the House Ways and Means Committee,Charlie Rangel, ignored the obviously taxableincome from an apartment house he owned in aCentral American country. He helped write thevery tax laws he ignored. Also, Look at TimGeithner, who pocketed money that was given tohim from the Federal Reserve to pay his taxes.The list goes on and on. What arrogance! And, itstime for this to end, beginning with the institutionof the True Tax.


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We Americans have been sold a bill of goods ofthe “Me Mentality” and seem to be moreconcerned these days about our own agendas,instead of upholding the rule of law and theConstitution. We must stand united and demandthe laws be followed by the politicians the sameas the citizens must. Our authority resides withthe Declaration of Independence and We thePeople, are the sovereign, not the Federalgovernment.


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Chapter 2

Tax Collection is Inadequate

It is doubtful that anyone actually knows howmany hundreds of millions of dollars is owed thegovernment in back income taxes. It is such alarge sum the average person can hardly believeit. Often-seen estimates run from hundreds ofmillions to even hundreds of billions of dollars.This is what is owed according to filed returns orother determinations. This doesn’t include thegreat unknown figure of taxable income notreported in the first place. That figure would beeven more mind-boggling!

It sounds like such a small thing when the sidingcontractor, or the roofing contractor, or the lawnservice asks for cash because they need it forsome particular purpose. No one thinks much ofthis and they pay cash with no withholdingdeducted for income tax. Much of the time thesecash payments never find their way into theofficial receipts shown on the tax return of thebusiness at year’s end, and with that, the taxsystem just lost a few more dollars. This practicewas supposedly stopped, or at least stymied,when the IRS started the Form 1099 reportingsystem. It wasn’t, and only got worse. Individualsare not required to report on 1099s and a healthydiscount will encourage the homeowner, or otherindividual, to hire the contractor or handyman ina flash with cash. This practice is not restricted to


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homeowners, actually. It is a very pervasivepractice in almost all of our society; governmententities hire contractors, who hire subcontractors(1099 income) who hire the workers. This methodprovides a mechanism to pay workers ‘under thetable’, including undocumented workers (illegalaliens). It also promotes the human traffickingtrade and may be one reason for not securing ourborders. Just drive by any municipal work projectand check for yourself. Sadly, almost no area isexempt, especially in service businesses, wheremany millions of Americans and undocumentedillegal immigrants work under the table, and it isall legal from the government entity’s standpoint.It is a big secret the government entities do notwant Joe Public to know.

Then there is the problem of the outright taxdodger who just doesn’t file returns at all.Occasionally, the IRS makes an example ofsomeone who is especially bad, but literallythousands of people get a mere slap on the wristif they get caught, pay some negligence penaltyamount, and go right back to their old ways. Weknow of several cases which occurred in just thisway, and to our knowledge the culprits are stillnot paying Federal taxes.

The collection division of the IRS really has aterribly difficult assignment. Millions and millionsof dollars are just right there for the collecting,but much of these are such small dollar amountsthat the cost of collection is more than the


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balance due. The computer has eased thisproblem considerably by a formal IRS demandletter. Through the computer, the letter iscomposed, written and sent by registered mail,frightening most people enough that they willhastily send in the amount demanded; sometimesknowing it is not correct. Most people do not wantthe IRS looking over their shoulder, so they willpay tax and penalties up to a few hundred dollarsrather than face a real, live IRS auditor orcollector.

Many of the amounts owed the government areforgiven merely because the IRS doesn’t have thestaff or resources required to collect the backtaxes. An article in the Washington Post in March2004 revealed the government had forgiven morethan 2.2 million tax accounts totaling some 16.5billion dollars. This was blamed on having a shortstaff and a restricted operating budget (notice thesubliminal suggestion to expand the size of agovernment program; it sounds so innocent andnecessary). Many other such stories haveoccurred since then, and almost every year thegovernment admits to abandoning millions ofdollars in uncollectible accounts.

It is reported that over 51% of Americans do notpay taxes. It is clear to understand whyperpetrators of crime avoid filing; however theyrepresent only a small portion of this 51%. Webelieve most of these people have suffered acatastrophic event which they use as an ‘excuse’


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not to file a tax return, such as divorce, naturaldisasters, robbery, economic downturns,becoming jobless, homeless, or countless otherexamples, all of which make up the majority ofthis number. It is easy to champion actions bythe IRS to catch the criminal elements, however,our system of Tax collections is detached anduncaring, treating citizens only as a number, whomust be hounded by an ever growing governmentand complicated tax system. Recently, a man’shome was swarmed by an IRS SWAT team whichhad tailed and harassed him. Eventually, theybroke down the man’s door with guns drawn. Notsurprisingly, this man’s young children weretraumatized by the assault. Luckily the manwasn’t gunned down. What has gone wrong whenour government violates our privacy andintimidates its citizens? The IRS is relentless andeven many filers languish in fear of this calloussystem, which has the undisputed power to wipeout all their assets, take their homes and removeall assets from all their bank accounts and more.No wonder even honest people are driven into theblack market labor force (slave labor) by theirdisgust for these tactics.

In recent times, nation-wide firms spend millionson TV commercials, telling taxpayers that owemore than $10,000 in back taxes they can cutthat figure down to a pittance, so the taxpayercan walk away for very little. They don’t tell youin the commercial what they will charge for theservice. It is usually a percentage of the total


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amount and is likely to be more than the taxpayerexpects.

Notice the myriad of these Tax Specialists offeringsolutions to deal with the IRS. It is not hard tofind a myriad of their previous clients, claimingthese services as a scam. Most are sub-contracted agents (there’s that 1099 again) fromthe IRS. These agents reportedly receive a finder’sfee by presenting a slick infomercial towardvictimized people, who are overwhelmed with thecomplex requirements after suffering catastrophicevents. The victims languish for years worryingabout when the “Tax man cometh.” The IRS doesnot care why taxes weren’t paid, and will beginthe strong arm tactic of invasion of privacy andthreat of imprisonment. After all, it might bequicker and simpler (and less expensive) to justpay the erroneous bill, than to make waves byhiring a tax lawyer or CPA to fight the case. Youmight lose and have to pay your hired expertsand the IRS. It is downright extortion by anotherarm of an every growing Federal government. Canyou say tyranny?

One of the biggest problems found in thegraduated income tax is the social control builtinto the system. This was undoubtedly foreseenby Marx and has fostered a multitude of pressuregroups, lobbyists and media outlets.

We have often wondered why ACLU activistlawyers haven’t attacked the IRS on the grounds


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of invasion of privacy and economicdiscrimination. We have seen many of theirattacks on frivolous matters far less important inour way of thinking.

Compare all these problems with a low 1%transaction tax, collected by businesses just likea sales tax is collected in states which have asales tax. This True Tax has no returns to file, nodeductions, no exemptions, is easy tounderstand, is fair to all and eliminates invasionof privacy.


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Chapter 3

The True Tax

The True Tax is a consumption tax that isreasonable and simple for all taxpayers, a onepercent (1%) tax on the gross amount of allcommercial transactions made----no deductions,no exemptions, no massive regulatory definitiveprocess, no army of auditors and collectors. Thistax would affect every individual, everycorporation, and every organization in thecountry. It would also affect foreign entities ifthey effected transactions in this country.Charitable entities would not be exempt. The taxwould apply on all sales, wholesale and retail.Mere transfers of financial instruments would notbe affected, however.

This all sounds good and extremely desirable andhas been dreamed of before, but an army ofgovernment agents and media outlets wouldattempt to discredit it to prevent transforming ourgovernment back to a Constitutional Republic.Immediately, the machine would most predictablyconjure up a ‘message’ to convince most people todiscard this tax plan as being uncollectible andextremely cumbersome, considering all thereturns to be filed. The truth is, the True Tax hasno returns to file, and is so simple that it wouldseem unbelievable at first glance. Whilepromoting real change may make us skeptical, ifwe look a bit closer at the mechanics required for


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the True Tax, it becomes glaringly clear, thischange would be easy. We are, at present, hip-deep in regulatory forms and filings. We have todeposit withheld payroll taxes in a FederalReserve Bank almost as soon as they arewithheld. Why not require all collectors of taxes(which would include almost all entities) to have abank account.

When they made their bank deposit, they wouldalso make the deposit of the collected tax. This iswhat almost all business entities are doingalready.

When we showed this idea to one of our bankerfriends, he looked over the proposal andimmediately threw up his hands in horror andsaid, “No way! This will never work. We’d go broketaking care of the government’s money.” When itwas explained to him that the computers wouldtake care of most of the work and that the bankwould be paid a fee for every transaction recorded(they don’t get anything now), he brightenedconsiderably and said he thought it was a greatidea.

The True Tax could not have been even a remotepossibility twenty years ago. Computer technologyhas brought us to the point where we canconsider such a tax collection process. And thebeauty of the system is that the government gainsalmost a full year of time. Instead of having towait for over a year for some tax monies and


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having to refund over-payments, the governmentwould get their tax dollars within just a few daysand there would be no complex system of filing toworry about.

A Treasury windfall of monumental proportionswould occur in the first year of the adoption ofthe True Tax. All taxpayers would have to paytheir prior year’s taxes on their final April 15th

return, plus they would have been paying the 1%True Tax for 3½ months, beginning on January1st of that present (new) year. Fiscal year filers(mostly corporations) would have their normaltwo and one-half months to file and pay any taxesdue. Conceivably, it could happen that acorporation with a fiscal year ending November30th of the final tax year would pay their final taxon February 15th of year 2 of the True Tax.

It would seem conceivable this Treasury windfallcould be used to reduce the National Debt, orshore up the Social Security system, or beef uphealth care reserves. What a battle would ensue ifthis ever happened! More about this later. Wehave a plan!

One of the bright points of the True Tax is thatthe government would get out of the collectionbusiness and let the people of America andbusinesses pay their own taxes the easy way—atthe cash register! The IRS would still be required,but with far less than the many thousands ofemployees they now have, as their duties would


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be severely reduced with greatly fewer taxpayerconflicts.

We will immediately get a large negative responseabout the last statement, but we will explainlater. The IRS will not be completely gone, onlymuch, much smaller and with far less impact onpersonal taxpayers.


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Chapter 4

Accounting and Auditing IRS Style

There was a time before the income tax began tocontrol the economy that the Certified PublicAccountant title stood for integrity and trust.Audits were dependable instruments in extendingcredit and making investment decisions. Bankersmade loans based on financial statements thatreflected factual information vouched for by theaccountants issuing the reports.

The time came, however, that the authors of theInternal Revenue Code, namely our Congress,began to re-write all the old establishedaccounting rules and took away all the ability ofthe accounting professionals to use tried and truemethods of measuring the value of a business orprofessional enterprise.

The first major problem the income taxencountered in the early days was the problem ofdepreciation and depletion. So why the problem?Depreciation had always been a problem forauditors even before income tax, but solidifying itinto a taxing tool was a real problem. Thisresulted in thousands of tax audits and lawsuitsover many years. It also resulted in creating afeeling in the financial community thataccounting statements, which didn’t match upwith tax returns were possibly not good forlending purposes. How could a banker look at a


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farm’s balance sheet, see a minimal balance leftin depreciable equipment, and yet have thefarmer tell him that he had equipment actuallyworth thousands of dollars more than that? Whois the banker to believe?

In different sections of the country anotherproblem arose, but was stopped early on due tosome brainy hero of the resource extractionindustry (you spell that as OIL). This originallystarted, as we recall, in Texas. The oil barons ofthe day were making big bucks early in the waryears and their tax bills were distressing to saythe least. So, they finally came up with thededuction of ‘depletion’. We haven’t heard anyarguments or debates about depletion in manyyears now, but what it amounts to, simply, is adeduction out of thin air that supposedlyreimburses the taxpayer for the depletion of hiswasting asset, an oil lease, for example. Since thetaxpayer is also deducting all development costsand lease payments it almost looks like a real livetax dodge, doesn’t it?

So many tax credits and other ‘sweetheart’deductions have gone through the Tax Code thathave, in many instances, cancelled each other.Pressure groups and special interest grouplobbies have inserted little innocuous-soundingsentences into major legislation and have seentheir groups prosper from the tax savings whichresulted.


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One of the major concerns since the first days ofthe income tax was the double taxation involvedwhen a corporation distributed its profits toshareholders in the form of dividends. Remember,the corporation had already paid tax once on itsprofits so why should the shareholder pay again?The problem was finally fixed to a degree, at least,by creation of a legal creature called a Sub-chapter S corporation. This was a purely tax-generated entity that was neither fish nor fowl. Itallowed a qualified corporation to be treated fortax purposes, as though it were a partnership, sothat operating profits and losses would be passedthrough to the shareholders without the doubletaxation of a ‘C’ corporation.

The trouble with the ‘S’ corporation in the earlydays was, generally speaking, taxpayers didn’ttake it seriously. They were intrigued by theirrelease from personal liability, the lack of whichthey had when unincorporated, and the ability todeduct corporate losses on their personal taxreturns. What could be better? However, the ‘S’corporation rules didn’t seem to impress themenough to exercise the rules of discipline, such asdirector’s meetings, annual meetings, and carefulattention to keeping minutes and such. Thisresulted in a lot of additional revenue for the IRSin penalties and interest.

Many of the shareholders of small ‘S’ corporationshad a very blurred vision as far as personal use ofcompany vehicles, titling of property of all kinds,


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etc. “After all, it’s my car,” the owner would say, “Iown the corporation. I can drive it across the U.S.on my vacation if I want to. So, there!”

Today, incidents such as this and many more gotthe graduated income tax system to the presentstage and made the ‘S’ corporations a mess.Unbelievably stupendous amounts of tax moneygo unpaid because of confusing andmisunderstood rules and regulations. Mosttaxpayers won’t, or don’t want to, spend the manydollars that an accountant or other taxconsultant must charge in order to keep up withall the conflicting rules and regulations. The TrueTax would rid the individual taxpayer of almostall of these problems.

Under the True Tax, however, the largecorporations would still have an income tax, mostlikely a 10% rate for large U.S. corporations and a20% rate for all foreign corporations. We feel thistax should stay for large corporations for tworeasons. The primary one we will discuss later,and the other is that there is a need to maintainoversight of corporations. Otherwise, foreigncorporations can do business in the United Statesand have little, if any, oversight in competing withAmerican businesses. Our recent experience withforeign-controlled oil companies didn’t quite turnout in our favor.

The other reason we should keep the corporateincome tax in force is that we need to level the


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playing field and foster entrepreneurialism(necessary for a strong Free Enterprise system). Acorporation is very different from a soleproprietorship or partnership. There is no baseexemption for corporations, only businessdeductions, and a legal entity behaving much likea lifeless individual which cannot die, andwithout the human restriction of a limited time ofexistence, when properly managed. Lately, wehave seen, even if improperly managed, howcorporations can continue in perpetuity (forever),if elected officials are persuaded to put them onlife supporting bailouts paid by your and mytaxes. Too Big to Fail!? Are you still sleeping?


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Chapter 5

Look at all that money!

Over the past decade we have been awash withmoney in this country. The monetary policy in the90’s was so liberal that money was coming outour ears, in a manner of speaking. The budgetwas finally balanced (supposedly) by the oldmethod politicians usually balanced the budgets,print cheap dollars to pay the bills. This is anover-simplification of a much more complexproblem, but it boils down to the same basicsolution. Now, in the second decade of the 21st

century, we have reached the limit of QuantitativeEasing (printing money by the Federal Reserve),and inflation is fast approaching.

How our tax dollars get spread around the worldis amazing, especially to entities that would doharm to a weakened U.S. We spend trillions ofdollars to engage in conflicts to reward entitieswho often perpetuate these conflicts. Bales andtrunks of U.S. currency totaling in the hundredsof millions were found by U.S. troops in Iraq.Look at Mubarak walking away with $70 billion inU.S. taxpayer money. How much are we payingPakistan, Iraq, Afghanistan, etc. to remainambivalent to terrorism? How many dollars weretransferred to Arab and European governments ortheir financial institutions? Now in 2011, we areseeing those bales of currency found in raids ondrug lords in Mexico. How did it get there? Was it


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subjected to income tax the way U.S.citizen/taxpayers are? It had to represent incometo someone, didn’t it?

You know, and we know, that drug pushers don’tpay income tax. The advocates of the income taxare quick to tout the 1930’s conviction of AlCapone through use of income tax evasion laws.They played on that feat for many years. Itcreated good PR for the income tax (theydesperately needed it), but it did nothing to makethe tax fair or equitable, even from the beginning.

But, let’s get back to the talk of money. For thatmatter, calculating the expected amount of ‘nettaxable’ income must also be a problem in itself.

How do we calculate the amount of tax, if we taxtransactions instead of net income? To calculatethe True Tax figure expected, we have to refer tothe figure presented by Dr. Edgar Feige of theUniversity of Wisconsin. His estimate of totaltransactions in the U.S. today is in excess of onequadrillion (a thousand trillion) dollars at thepresent rate of consumption. Now, this figureexpands almost daily as the government printsmore and more unbacked dollars (monetizes thedebt). This highly qualified economist calculatesthat a 0.35% rate of tax would create sufficientmoney to cover even the expanded budgets of theObama years (0.35% of one quadrillion dollarsequals 3.5 trillion dollars into the FederalTreasury.). Instead, we have chosen to use a 1%


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figure for two reasons: (1) it would be a simplefigure to remember and calculate, and (2) wouldassure that we had more than enough to coverthe budget amount, and pay toward the NationalDebt.

Much discourse among our authors has occurredin regard to the percentage amounts desired inorder to cover the budget and remove the deficitfor the next several years. Next, we want to makesubstantial inroads in paying off the giganticNational Debt of 14.5 trillion dollars.

Of course, the largest single area for collecting thetransaction tax would be the securities andcommodities markets. Now, before we get a cry ofoutrage from stockbrokers and investors, let ussay this to them. “If you can stay away from allthe record keeping the income tax requires, andyou can escape the sometimes horrendous taxeffects of your profits, aren’t you far and awayahead of the ‘present game’ to pay a mere 1%?”Reason would most likely produce a ‘yes’ answer.However, planning and care must be taken beforethe True Tax Plan is finally approved andinstalled, but it is not difficult.

The securities and commodities markets arevolatile and unpredictable as to profits for theparticipants, but would on balance provide asteady flow of transactional tax funds and notharm the general economy. In fact, many believethis tax would act as a damper and minimize


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volatility; however, more volatility generates moretax revenues. Anyway, these markets would alsohelp create the windfall tax income discussed inanother chapter of this book. There might besome outcry from foreign interests, but theywould almost be forced to invest in our marketsbecause with the True Tax in force, our dollarwould almost certainly strengthen and increase invalue. We would regain the dominant position wehave almost lost with the economic strain thegraduated income tax has put on our economy.

As we said in a previous chapter, it will take amuch larger data base and a larger complementof personnel than we authors can muster tocompute the actual final percentage rate of theTrue Tax. From the research we have done andfrom what Dr. Feige and others have provided,the 1% figure will provide more than enoughfunds to cover whatever reasonable budget thecountry comes up with. (1% of one quadrilliondollars equals 10 trillion dollars into the FederalTreasury.)

Our preliminary figures are actually quiteconservative, but if wrong there is no possibleway the True Tax rate would be required toexceed more than 2%. Buy our calculations at 2%of 1 quadrillion dollars, we could pay off theentire National Debt in a single year with the $20trillion in revenues. And, in light of the 23%called for in the Fair Tax on retail sales taxproposal, a 2% True Tax looks like a real bargain!


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Chapter 6

Home, Sweet Home!

In the late 90’s, some taxpayers who had good taxconsultants found a way to make a lot of tax-freemoney. It was one of the best tax breaks to comealong in decades and was a preface to the Bushtax cut program. This was a bonanza waiting tohappen. The tax breaks not only made money fora lot of people, it led to a spurring of the economythat was hailed by almost all politicians, liberaland conservative. It helped greatly to relieve theso-called recession brought on mostly by theattack on September 11, 2001, during PresidentBush’s first term. Actually, the Bush tax cutswere “revenue neutral”, but the tax relief that wasmost effective was the one giving taxpayers theright to sell their principal residence, tax-free, ifthey had actually lived in the house for at leasttwo years. There was a lot of fine print also, butthat was the basic law.

With the population increase we had in theUnited States over the past twenty to thirty years,the price of existing homes had risen steadilysince the 50’s and 60’s. Urban sprawl had sentbare land prices higher by the year. Zoningordinances and Environmental Protection Agencyrules also forced prices higher in many cases. Thenew tax change came at just the right time. Theresidences that many retiring taxpayers hadbought near L.A., or San Jose, or Denver, or


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Boston back in 1962, or thereabouts, for maybe$60,000 was now worth $450,000. The problemover the years was that people would have to paynot only commissions and other selling costsupon a sale of the residence, but also heftyFederal and sometimes State income taxes on theprofit. Suddenly, they could sell and have no taxat all upon sales, only sales commissions.

So, they sold out and moved to a lesser marketarea, say the lake country in the Ozarks, orsomewhere they wanted to live, to retire. Theybought a home, probably as large as the one theyhad sold. They paid perhaps $125,000 for thisnew home, but they only put $15,000 down andfinanced the balance over, say, 30 years and areasonable rate of interest. They then had$435,000 in cash to retire with! With their SocialSecurity and possibly 401(k) distributions, lifewas great. Now, the kicker….after they have livedin this retirement home for two years, they findthey can get $200,000 for it. So perhaps they sellagain and pick up another profit of $50-60,000.They could do this every two years until they hadaccumulated $250,000 each in their lifetimes.(Ed. note: This changed in 2004. Now there is nolimit on accumulation of profits on sale of homesin a lifetime.)

All of these bonanza tax laws are patched into aflawed system that is completely out of date andis so cumbersome it is almost impossible forCongress to make appropriations that will do the


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jobs that need to be done, and stay withinwhatever budget that can be predicted andapproved.

Don’t get us wrong. Some of the tax breaks havebeen for very good causes and have promptedmany people to do good things for theircommunities, that they would never have donejust out of the goodness of their hearts. For one,the fairly generous credits for restoring andpreserving our older historic buildings have beena credit to our country. So, some good has comefrom the complex patchwork of conflicting laws tosomewhat counteract the bad, but not enoughgood.

By and large, home ownership is one thing thateveryone, almost without exception, trumpets asa paragon of good economics for all families. Thebuildup of equity in a home will, by monthlypayment after monthly payment, be a form ofsavings; one of the best there is, in fact. Homeownership is one thing that is typically Americanand one of the things that does not exist in largemeasure in much of the rest of the world.

All of these platitudes are well and good so longas you don’t get into trouble with the IRS. Yourhappy home life can be shattered if an IRScollector gets you in his sights and decides tomake your life miserable. He usually cannot kickyou out of your house, but he can make your lifemiserable. Your home is not your castle ever


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again until you “pay the piper.” In one case, theoffending taxpayer was “shadowed” by thecollector even when he drove his children toschool, or went to the grocery store, and wouldget in line at the grocery store to see how he paidfor the groceries. The IRS finally won and thetaxpayer lost his home. Actually, in this case, thetaxpayer was guilty of not paying the payrolltaxes assessed against his small business. So,this was somewhat different than non-payment ofincome tax. This was a greater no-no, that ofwithholding “trust funds” from the government,so the Taxpayer Bill of Rights could not help thistaxpayer.

We hardly think that a deduction for homemortgage interest should be the reason forkeeping a decrepit and bumbling system, but thatis always one of the biggest objections tochanging the tax system. Actually, in the case ofmost middle-class taxpayers, the deduction forhome loan interest would only save them $500 to$700 in actual tax. What would the tax be underthe True Tax, if a homeowner sold his/her homefor $150,000 cash, assuming the home was paidoff? Zero! This was a trick question. The tax of 1%would be $1,500, but paid at closing by the cashbuyer. Mortgage sale is a bit different. Rememberunder the True Tax, it is always the ‘buyer’ (atwholesale or retail), who pays the tax on thetransaction.


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If not a cash sale, the buyer would most likelyneed to come up with a down payment, typically10% plus closing costs and finance the rest. Seewww.zillow.com to vary the different values andmake your own calculations. The nice thing is,Zillow will list vendors/banks which you qualifyfor, regarding your loan. The example isillustrated below:

After you enter your info, then click on ‘Calculate’and the program will find lenders and terms asillustrated below:

Our test would unfold as two transactions for thishomebuyer, one at closing and the otheramortized over the life of the loan. This example


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is a 30 year loan for a low credit score and 10%down. Behold, we discover there is a lender readyto approve your loan with the given inputs. Whatwould your amortized tax be for a payment of$674/mo? It would be 1% of the payment, or$6.74. So, the house payment would be $680.74excluding property taxes and insurance. Theclosing costs, including fees, would average about$4,000 plus a $10,000 down payment, for a totalof $14,000. Again this is only a single transactionby the buyer and the True Tax would be 1%, or$140. So you would be required $14,140 atclosing.

A side note: The mortgage company is actually theentity buying the home, so it would also pay aTrue Tax of $1,400 on the balance of the sale priceat closing ($140,000).

Is this going to cause problems by making homeownership less desirable? We doubt it. We thinkit would cause some more competition amonglenders and cause interest rates to be morecompetitive, but we don’t believe that it woulddiscourage the “own your own home” desire thatis imbedded in the American psyche.

We urge you, the reader, to pay close attention tothis chapter. The information reflects the always-occurring truth, that when you lower the taxburden, you always spur economic growth (jobsand more transactions). When the politiciansstarted creating the furor of criticism of our


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country in 2006 and 2007, the constructionbusiness fell apart across the entire country,unemployment soared and it has not recovered.In spite of our present situation, there has beenmuch mention of disallowing mortgage interestdeductions along with many other economy-depressing proposals from left-wing politicians.


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Chapter 7

FINDING THE LOWEST POSSIBLE RATE…WHY ONLY 1%?

The rate of 1% that we have used throughout ourwritings about the True Tax plan is so low, thatmost people can’t believe we aren’t wild-eyeddreamers trying to foist off a fictitious plan ontothe taxpayers. This is far from the truth, as wewill demonstrate in the next few pages. The size ofthe potential tax base in our country isstupendous and mind-boggling. Pressure groupsand the tax-and-spend politicians of the lastcentury have either knowingly, or unknowingly,applied Marxist principles of class warfare. Whileactually crushing the middle class, they createthe illusion in the minds of taxpayers that weshould “soak the rich” by imposing tax rates thathave gone as high as 70% on some marginalsegments of income! But, at the same time, someprominent families of great historical wealth havemanaged to use loopholes in the laws, and sendwealth down several generations, all while a“soaking” of the middle class by the use ofcomplex tax laws is occurring.

When we first began our research and writingabout the theory of a “spending” tax rather thanthe un-definable “income” tax which we arecurrently inflicted with, we had a difficult timeoutlining the parameters of an effective tax base.Even after all these years, we still think of


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significant transactions that we have previouslyoverlooked. For example, the commoditiesmarkets are almost solely based on Futurescontracts, in which the actual amount of fundschanging hands is a very small amount inrelation to the total transaction, and which mayor may not occur in that ‘future’ period.

Similarly to a home purchase, another examplecan be applied to purchasing a car. There aremany calculators which can help you determineyour True Tax, but a convenient site to do yourcalculation is at www.carmax.com. Our scenariois a case of an auto buyer, who buys an auto for$20,000 with $2,000 down and a bank loan forthe balance. Under the strictest interpretation, wewould have two transactions, wouldn’t we?

After looking for a car that closely matched ourcriteria we found the following:

For calculation sake we will use the value of$20,000 and a $2,000 down payment. Just aswith the purchase of a home, there will be twotransactions with this purchase. We will ignore


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the incidental fees such as title and licensing andapply 1% True Tax to the deposit of $2,000 whichequals $20. After selecting and calculating for theauto loan, we get an estimate of monthly paymentbelow:

Our amortized True Tax would be 1% on monthlypayment of $373.65 or $3.74 for a total paymentof $377.39. The finance company would have topay 1% tax on the sale price balance of $18,000which would be a True Tax of $180. You caneasily see that our True Tax has a broader taxbase, treating every American and business thesame, creating far more revenue than we wouldsee at first glance, and is less burdensome toeveryone.

Many of the economic assumptions of our grouphave been derived from the studies of Dr. Edgar


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Feige of the University of Wisconsin. He has madean exhaustive study of the transaction figures ofthe United States and has concluded that a taxrate of 0.57% would have been sufficient for theyear 2005. He arrived at this by use of adjustedamounts from the Bank for InternationalSettlements and data from the Internal RevenueService. Current data can be seen on the BIS site,http://www.bis.org/list/cpss/tid_57/index.htm.Go to the most recent data by clicking on,http://www.bis.org/publ/cpss95.htm (Statisticson payment and settlement systems in the CPSScountries - Figures for 2009). Click on Excel file,http://www.bis.org/publ/cpss/ctrytbls_09_final.xls (Country tables), then on ‘US’ country tab atthe bottom of the spreadsheet, then scroll downto Table 21 for the U.S. and it shows over $1quadrillion dollars in transactions (actually$1,209,590 billion, or $1.2 quadrillion) for 2009.This amount does not include non-reportinginstitutions, such as private banks, and privatecash transactions which go unreported. Thefollowing table shows the reported transactionfigures: (Please see full report on links above:This translation is not an official BIStranslation.)


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Currently, Dr. Feige conservatively estimated thatthe total transaction base is $1 quadrillion (that’s1,000 trillion, or a million billion, dollars, folks!).He states the factor of 0.35% would be sufficientto cover even the almost unbelievable amount ofour present proposed fiscal budget from theAdministration.

Our group is not only determined to “cut thedeficit”, but we also want to start cutting theNational Debt, that monstrous amount which thepoliticians won’t even discuss. So, we have settledon a figure of 1% for two reasons; first, it is a veryunderstandable figure for all, which will providean amount that will be certain to attain our goalof not only covering the budget and deficit, butsecond, will also provide a sizeable amount toapply against the National Debt.

In any case, it is quite apparent that the True Taxplan would provide more than enough tax


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revenue to let us get away from all kinds of littlenuisance taxes, including the death tax, manynuisance excise taxes, along with the monster ofall taxes, the graduated income tax and its step-child the AMT (Alternative Minimum Tax).Abolishing all these will undoubtedly irritatepressure groups and malcontents to an extremedegree, but as we will explain in later chapters,there will be a first-year windfall of tax revenue,which should allay any fears of shortfalls inavailable funds to meet almost any call.


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Chapter 8

Which Shell is the Pea Under?

Remember that con? The old shell game is stillbeing operated by a lot of our politicians. Many ofthem use different or ‘fuzzy math’ figures to tryproving a point during their speeches, and someeven remind us of the old time hucksters’singsong chants. The reason for these conflictingstatistics is the government has different methodsof accounting in use for different purposes. Theyquote different figures on the same item fordifferent reasons. There is a set of figures forbudgetary purposes and another for annualreporting figures. One is on the accrual basis andanother is on the cash basis. The budgetary yearis on a fiscal year basis, and taxes are estimatedon a calendar year basis, most likely. Actually, wedoubt if either of these figures are really correctunder strict accounting rules.

The budgetary figures are fiscal year estimatesand these figures are the ones the politiciansargue over so fitfully. When the usual deficitamount is announced, there is always the eternalargument about tax budget cuts and pork barrelexpenditures and all the time they are talkingabout tremendous amounts of money which areonly estimations. Later in the year, figures comeout that are announced (presumably on the cashbasis) which alter the original estimates up ordown. These are greeted with glee by the


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prevailing administration and usually ignored bythe opposition party. Loads of fun for all, right?

We have never been able to settle on a sense oftiming with all these enormous figures. If thebudget is on a fiscal year and our income taxesare on a mostly calendar year (except for type Ccorporations, of course), where does our taxpayment on April 15, 2012 apply? If I had awindfall profit in 2011 and pay the tax in 2012 byuse of extensions, etc., does the Treasury keepamending their figures for the 2011 budget? Howcan estimates even begin to be believable that areten years in the future, especially when we can’teven ‘get it right’ for one year in advance?

In the mid-‘90s, Congress was putting enormouspressure on President Clinton to ‘balance thebudget’. For several years they hounded himunmercifully. He and his advisors repeatedly saidit couldn’t be done before 2000 or later. Finally,through a number of financial maneuvers, it didhappen over a rather short period of time.President Clinton was hailed as the financialgenius of the decade by his supporters and lifewent on. But it has always seemed to us to beonly a matter of confidence in the taxpayers’minds, whether the budget was actually balancedor not. We, like most taxpayers, were too busytrying to pay our ever-increasing tax bills to worryabout that very much. Did his budgets actuallybalance? We don’t know whether they did or not.This question is typical of the questions taxpayers


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have been asking for many years. We need moretransparency regarding our fiscal policies inWashington. We need the True Tax, as abeginning of real transparency.

While talking of shell games, we must visit themost famous of all, the Social Security TrustFund. This is the supposed ‘lock-box’ full ofmoney that has been paid in by workers overscores of years and ‘invested’ for theirretirements. Wrong! This is a file cabinet, or abattery of them, full of government bonds. A safeinvestment? Certainly, the best in the world. But,part of the ‘National Debt’? You bet! So, here wehave a real paradox; an item that is both an assetand a liability at the same time. However, as oneardent supporter said once, “What’s thedifference? It’s our money.” Really? We thought itwas owned by the American people and ourpublic officials/servants and elected officials wereentrusted to manage it. Go figure!

Social Security was not originally set up as a ‘tax’.The name of the Act was (and still is) the FederalInsurance Contributions Act and was thebrainchild of the New Deal era. It was envisionedas a forced savings plan for taxpayers. This planwas followed until upset by the Johnsonadministration in their futile attempt to build theGreat Society (more Socialism). Someone had thegreat idea of using the funds generated from theFICA withholding for current expenses andputting long-term government bonds in its place.


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And the FICA plan quickly turned into the cashcow for big government. Still, it took a lot of yearsfor it to become a ‘payroll tax’. This really didn’thappen until the Obama administration let thecat out of the bag, so to speak.

A change of taxing methods from the graduatedincome tax to the True Tax would broaden the taxbase to the ultimate limit, and yet keep the taxrate at very acceptable levels. The present levelsof ‘payroll tax’ could be kept in force for a fewyears in order to build the reserves thatreportedly are needed in 2018. The only thingthat is needed to ‘fix’ Social Security is money, wethink, and the True Tax would cover that problemadmirably. Some concessions could even be madeto build larger reserves. Also, it has beensuggested by several that some life insurancecould be included in the program.

A similar situation exists in the Highway TrustFund, we believe. This fund was established in1956 for maintenance of public roads with 18.4cents per gallon of gasoline, and 24.4 cents pergallon of diesel sold. The scope of the fund hassince been expanded to support additionalprograms like Mass Transit. Congress hasdiverted funds to these other programs and hasdiscussed raising the gasoline tax to over 40cents per gallon. In 2008, the fund was depletedand required an $8 billion transfer from theGeneral Fund. It is likely that the Highway TrustFund is a file cabinet, which is also stuffed with


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asset/liabilities securities (IOUs), too. Are youpaying close attention? Which shell is the peaunder now?

Actually, the earlier statement is true, that thegovernment securities are the safest investmentaround. But, on the other hand, it brings up thememory that way down deep, all politicians like amoderate bit of inflation over the years. Inflationcreates cheap dollars to pay off government wastesomeday far down the road of time, and long afterthe politician is gone. (“Kick the can down theroad” policies.)

The True Tax is immediate and simple. Under it,Government is mandated to streamline itsoperation. Natural resource royalties/fees (oil,gas, coal, timber, etc.) and excess funds are givenback to the taxpayer, not to a slush fund to bepilfered by misguided politicians withquestionable agendas. This True Tax methodwould force transparency in government. It iseasy to understand and logical in its application.And, there is no question as to which shell thepea is under. It’s under all the shells.


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Chapter 9

Price Structuring and the True Tax Plan

The True Tax incorporates mechanics of both theValue Added Tax system (VAT) and the typicalnational retail sales tax. Both these tax strategieshave been pushed by different Congressionalreformers of the out-dated and generallycondemned graduated income tax. Both have alsobeen castigated by most American tax studentsas impractical, and without a general increase inthe tax base, far too costly to sell to thevoters/taxpayers.

The VAT adds to the retail price incrementally.For example, a manufacturer of widgets wouldpay out, say, $300 to complete a product. Hewould pay (for simplicity in our example) a 10%VAT tax when he bought the materials and laborfor the completed product, so he now has $330invested. He then sells the product to awholesaler for $770, which includes another $70of VAT tax. The wholesaler then sells the productto a retailer for $1,100 which includes $100 ofVAT tax. The retailer then sells the product to abuyer for $1,650 which includes another $150 ofVAT tax. As you can see even at this low VATrate, since the businesses must pass along theVAT tax, the $1,650 price of the end product inthis example is jacked up by $350 or nearly 22%versus no VAT added. At this point in oureconomic woes, we cannot stand such price


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increases in the day to day products we mustconsume. Business profits are also severelyeroded in this process.

The VAT tax is imposed all the way up the salesladder with the tax added in at each level. Thiscascade effect ultimately adds to prices, but ismore-or-less hidden from the ultimate consumerof products. It would have fewer incrementallevels as far as service businesses are concerned.Not having dealt with the VAT tax directly, wecannot profess to be any authority on any of theintricate rules in the system, but we have beentold by people who have dealt with it, that thepaperwork trail is a horrendous chore forbusiness to cope with. The tax is only imposed onbusinesses and professionals, so evidently theultimate taxpaying consumer shrugs and pays it.We do know that many countries of the worldhave adopted this complex and very oneroussystem, and it never stays at the original 12-14%,but rather quickly jumps to as much as 28-30%,and in some smaller countries is in addition to anincome tax. (A VAT on top of our present incometax was recently discussed by some analysts forpossible U.S. implementation.)

State sales taxes in the United States are somessy and vary so much in their sometimessenseless deductions and exemptions that wecertainly would not recommend a Federal retailsales tax system. What a clash of paperwork wewould have if we superimposed a 23% Federal


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retail sales tax onto an already-staggering 6-10%State sales tax! Different exemptions anddeductions, different sales requirements such asout-of-State sales, internet sales, etc. What ahorrible mess that would be for small businessesand also the State governments themselves.

When considering price structures and a majortax system change, we are obligated to protect theeconomy, as well as producing tax revenues. Oflate we have been exposed to too much publicityabout changing the tax system to a national retailsales tax. The rates of tax mentioned are from 17-23%. Now, let’s use a bit of reality. Theautomobile business is of paramount importancein the country and auto sales are vital to oureconomy, whether we approve or not. Let’s saythat we adopt a national sales tax of 23%. You godowntown to the auto dealer to buy a new car. Sothe salesperson says, “Yep, got this little honeyright here. Just what you want, it will only costyou $20,000 today. Well, actually, there is salestax on it. That will be $4,600 for Federal tax andanother $1,200 for State tax. Lovely car youbought!”

That conversation might cool your ardor forbuying a new car. How many conversations ofthis sort would it take before the economy wentflat? For that reason alone, we must take greatcare in changing our outmoded tax system.


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It is hard to say whether the True Tax systemwould lower prices. The market place wouldundoubtedly automatically adjust somewhat to alower built-in tax rate, but lessening the profitrestraint on business by ridding ourselves of thegraduated income tax might not lower prices, onlykeep profits at a bit higher level. Conversely, ifthe graduated income tax were gone, perhapsmany business managers would slash prices, inorder to achieve a larger customer base and moredollar volume.


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Note: Above figures are for illustration of the TrueTax type figures only. They have no basis in factas to prices or margins of profit in those actualindustries.

The ‘Tax Paid’ figures we have shown make itdifficult to predict how businesses will price theirwares due to the extremely low rate of tax. Wecannot predict whether the fast-foodestablishment would add three cents inadvertising a $3 hamburger. Most likely, theywould just absorb the few cents in their overhead.But, on the other hand, they would not be payingsome 30% or more of their profits in income tax.Go figure! It still looks as though the True Tax isfar and away a better way to go!


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Chapter 10

Taking Care of Business

We think it is true to say that multi-nationalcorporations are probably some of the worsttransgressors we have when income taxes areconcerned. They can afford the best tax lawyersand accountants (also lobbyists) and can hidemoney in the best tax havens known to mankind.They can essentially pay off third-worldgovernments for business favors, and then takecredit for ‘supposed foreign taxes’ against theirU.S. taxes, i.e. General Electric (GE). Thankfully,this not a common practice. Many of our mostrespected multi-nationals observe the letter of thelaw, but there are some that work exactly as wementioned above. Payoffs are very common inthird-world countries (in all the countries,actually) and American taxpayers can wind upfooting the bill for many of these pay-offs in theform of fraudulent overseas tax credits. Thispractice has been documented many times overin recent years, even as recent as the reportedUnited Nations Oil for Food Program payoffs.

Our main concern, however, is with smallbusiness. Most economic writers are notconcerned with business taxes. They talk in validterms about taxing people, about taxing the rich,not taxing savings and many other facets of thetaxation question. However, they don’t bring upthe fact that big business handles most of the


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cash flow of the United States, and yet most ofthe Tax Code manipulation deals with smallbusiness and individual tax issues.

Some years ago, it was a beautiful tax dodge for aprofitable corporation to find another corporationwith a huge tax loss carry-forward, conduct areverse merger (merging the profitable corporationinto the loss corporation as though the losscorporation had purchased it), then change thename of the revitalized entity back to a name orlogo the same or similar to the first corporation.This went on for many years and cost thetaxpaying public many billions of dollars. Wehaven’t heard of much of this in the last fewyears, but we suppose it still goes on in one formor another even today. We must say that a host ofregulations have been issued attempting to stopthis practice, but believe me where there is aregulation; there is usually an escape routesomewhere. Now, what a crazy thing! Basically,they are again turning a liability (a tax loss) into asaleable asset. And, the taxpayer is footing thebill through lost tax revenues!

The small business has no room to maneuverunder the present income tax laws. Big businesscan, in most cases, raise prices or buy profits inadvance by leaning heavily on suppliers, but thesmall business cannot do that. The smallbusiness has little bargaining power onpurchases. In addition, it is much easier for alarge corporation to negotiate favorable discounts


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from suppliers because of the larger orders andpossibly easier delivery conditions, or otherbenefits not available to small business.

We once knew an older man, operating as a smallbusiness consultant (and doing a wonderful job,by the way). He had worked for many years ascomptroller of a regional department store chain.His credo was “Son, always remember, it’s a sighteasier to buy a profit than it is to sell one.” Thesuppliers’ reps that came to see him hated theman, but his clients certainly loved him.

The small businessman is penalized in manyother ways, also. Since he is self-employed, hehas to pay the matching portion of his SocialSecurity tax and the matching portion of hisMedicare payment. This is all based on his profitshown on Schedule C. It is very regressive and,depending on his age, can boost his effective taxrate to as much as 60% on the top portion of hisincome. Sometimes it is better to work for lessmoney, as long as you are working for someoneelse.

Interestingly enough, though, sometimes the taxlaws benefit some of the small businessmen,especially when they also benefit big business.Some years ago, life insurance companies werenot able to help their agents be covered byretirement plans, because the agents were alwaystreated as self-employed people, so they didn’tqualify for company pension plans or 401(k)


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plans. So, some bright legislator created a newkind of employee tax status called the ‘statutoryemployee’. At the employers’ option, all that wasrequired was a simple check mark on the salesperson’s W-2 form and that person would be ableto use a Schedule C to report his income andexpenses, rather than the old Form 2106, whichwas a favorite audit signal for the IRS. Also, eventhough filing a Schedule C, the statutoryemployee could also be covered under a companypension or 401k.

This neat little arrangement helped the insurancecompanies do a tremendously good thing for theirsales personnel, who were being treated as smallbusiness operators. In this way, the agents couldhave the best of both worlds.

After the establishment of the ‘statutoryemployee’ designation for basically life insurancesales people, many other outside sales peoplequalified for the designation. This is one instancewhere the small businessman scored a smallvictory over the stifling bonds of the income taxlaws.

The almost overpowering burden of the record-keeping required of the small businessman takesan inordinate amount of the businessperson’stime and energy, to say nothing of the financialcost. And, even if every effort is made to be withinthe rules, one never is altogether certain that theIRS won’t come knocking on the door.


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Another sometimes frustrating problem for smallbusiness comes more under the heading ofpayroll tax than income tax, and that isWorkman’s Compensation Insurance. Thisobligation can result in rather harshconsequences if the records are not properlyhandled and the audits are, like in Use taxaudits, very detailed and the auditors are morethan usually picky. The rates of tax (orpremiums) are staggering in some categories ofemployment and, as in the income tax field: weget into a definition problem. What you see isn’tnecessarily what you get.

The True Tax probably would not be applicable tothe Workman’s Comp Insurance, since this is aconstantly changing ‘tax’ subject due to changesin medical costs and other factors such ascompensatory damage claims and legal liabilityclaims.

In summary, the True Tax would be a blessing forsmall business, not only in the reduction of taxpaid, but relief from the ever-present dread ofthat odious letter from the IRS, “Dear Taxpayer,”.

In 2005, President Bush stated that the presentTax Code’s complexity was costing the nation over$300 billion each year just to keep records, filereturns, etc. This figure is far worse now. If wetook this burden off our business world,


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especially the small-business portion, think abouthow nice it would be.

If you add to the $300 billion record keepingexpense, the estimated $350 billion that peopledo not pay, ignore, or avoid, it comes to verynearly three quarters of a trillion dollars! Theproposed budget this year is near 4 trilliondollars, so with the True Tax deleting these, itwould reduce the Federal budget by over 16%.

As earlier mentioned, we have finally come to theconclusion that we should keep the income tax inplace for large corporations. We should reducethe rate to perhaps 10% for large U.S.Corporations and 20% for all foreigncorporations, but keep the present regulations inforce for these entities. We feel that we needoversight for corporations and that the SEC maynot completely deal with this problem.

There is also another reason for keeping theincome tax in force for corporations and that is apolitical reason. The current tax system hasfavored one group over another. It is imperativethat foreign corporations are not favored, giventheir advantage of low cost of production. Also,the large corporations have an advantage over theentrepreneur or small business owner, due toeconomies of scale and the advantages mentionedearly. To level the playing field requires oversightand a mechanism to foster entrepreneurialismand create a robust Free Enterprise System.


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Therefore, in order to gain approval for convertingto the True Tax, we will need all the political forcewe can muster. The True Tax is the only systemthat levels the political playing field and we couldgain tremendous support regardless of politicalaffiliation for this action.

It should also be noted that the corporate incometax revenues are not included in the 10 trilliondollar transition-type True Tax annual revenuesat the 1% rate, so with only a $4 trillion budget,this is obviously not money the Federalgovernment needs. We must be very careful not toprovide more than enough money into Federalcoffers, as that can breed big trouble andcorruption of our government. Additionally,opponents would argue these corporate taxburdens would be simply passed on to the endproduct consumers, so this may be aconsideration for future system adjustments.

Assuming the True Tax is $10 Trillion, werecommend that 10% of this amount is held tofund programs to streamline the Government, soit runs more efficiently. If any funds are left overby the end of the period, whether annually,quarterly or monthly, they are used to pay downlegitimate debts, or unfunded liabilities. Theremaining 90% is initially divided into thefollowing three categories:

40% – To cover the Annual Budget, includingrecapitalization of legitimate programs (i.e. Social


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Security, Highway Trust Fund, Medicare, etc.)with $4 trillion per year (the present AnnualBudget is near $3.5 trillion).

30% – To pay down the National Debt withapproximately $3 trillion per year.

20% – Initially distributed to provide a vital shotin the arm for the economy with $2 trillion in thefirst year. As a year-end rebate to each American,18 yrs. and older, this amount would equate to$10,000 per person, given a population of200,000,000 adults. This means a married couplewould receive, at a minimum, a $20,000 rebateper year, but not forever. As the economyrecovers and the debt is paid down, thispercentage of rebate from collected revenues willdiminish from year to year until it eventuallyreaches zero.

At some future point in time, when theGovernment has been streamlined, the NationalDebt has been paid off, and the economy isflourishing, the initial 1% rate of the True Taxmust be reduced as necessary to prevent hugeFederal coffers of excess tax revenues. Thedeterminations as to when these prescribed levelsare met will have to be decided by the Congress inan annually examined manner.


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Chapter 11

AN EASY COLLECTION PROCESS

Now we get to one of the most likeable parts ofthe True Tax plan. We get the government out ofthe tax collection business. Since we will be on apurely cash basis, the government will not havebillions of tax dollars on the books as taxreceivables, nor will it be writing off billions ofdollars of un-collectible taxes. It will not have tohire private collection agencies to collect taxes,and will not have to pry into private affairs oftaxpayers.

It would work in the following way. Every simpletransaction that ends with delivery of product toa buyer without financing or carrying of a note ofwhatever size dollar value would impose the 1%True Tax on the “buyer”. The buyer would be theentity paying the money in whatever transactionsoccur. The collecting party in most cases wouldthen deposit the money into the government’saccount via the seller/collector’s bank, along withtheir bank regular deposit. Complex transactionswill be treated as discussed earlier in chapter 7for large purchases such as buying home or car.The banks’ computers would segregate themonies and accumulate the tax until the end ofthe day, then transfer all the tax monies collectedinto the U.S. Treasury account.


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Since there is already a system in place to collectState sales taxes, there is no need for a largecollection agency, such as the present InternalRevenue Service bureaucracy. Reducing the IRSwill save up to 300 billion taxpayer dollarsannually. The government then has its taxmoney, the taxpayer owes no debt, and best of all,there is no need for a complex return that probesinto a taxpayer’s right to privacy in his personalaffairs. Additionally, the True Tax would requireany excess revenues (taxes) received by theFederal Government to be refunded back equallyto Americans. It would be great to be an Americanagain!

There will be a number of cases where the“collector” of the tax will not actually collect thefunds and will not be liable for the deposit to abank. For example, employers (the ‘buyers’ oftheir employee’s time/efforts) will pay theemployees’ share of any payroll tax incurreddirectly to the bank, so the employee (the ‘seller’of time/effort) will never have to handle thosefunds.

It would be possible, of course, that a person nothaving a bank account or good conscience, couldmake a private sale or other transaction, in whichhe/she collected True Tax, but did not report ordeposit it in the bank. Hopefully, most of thesesales would be so small that the tax loss would benegligible. It would take a lot of such activity tocreate a problem with such a low tax rate;


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however, those individuals would have to beprosecuted under the law, if discovered. It isestimated by good authority that the presentsystem sustains a cheating or non-reportingfactor of about $315 billion per year.

The most likely method of handling the collectionwould be to require everyone expecting to be a“collector” of tax to have a bank account and tobe registered as a “collector”. Personal accountswould be exempt. The collector’s (or business)deposit slips would contain areas designated as“True Tax collected” and “regular” deposits. Thebanks’ computer software would automaticallyenter the amounts to the proper accounts.

When thinking of such people, for example, as ahamburger stand operator at the State fair. He isprobably not equipped with a cash register thatsegregates monies according to types of salesmade, so it is easier for him to let the computerfigure the tax as an included portion of his prices.

What we have done at this point is slash, by atremendous amount, the size of the presentbureaucracy, which we have let grow wildly forgenerations. We are instigating a twenty-firstcentury cure for 19th and 20th century problems.There are many who will argue against this plan,citing private enterprise intrusion into the publicarena, but the banks have for many years, beencollecting tax funds for the government, i.e.,


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payroll tax deposits made by businesses, largeand small and millions of small service providers.

We would imagine up to this point, all the readerswho are bankers, or are supporters of thebanking industry, are grinding their teeth inanguish at the thought of being the tax collectorsfor the government. But, fear not, bankers! Whatif you were paid for this service and paid well?And they should be paid well, perhaps 1% of thefunds collected. That would be quite a nice sum,1% of probably $10 trillion is 100 billion dollarsin fees. This might sound like a large amount ofmoney for such a service, but it is estimated thatthe graduated income tax with all its paperworkand complex rules, penalties and interestcharges, presently costs the taxpayers of Americasome 315—350 billion dollars a year. The bankmethod reduces our tax burden from this taxcollection program by 71% or a savings ofapproximately $250 billion annually. Not bad.

Such a simple tax as the True Tax plan proposescould not have been possible at all twenty yearsago. It is truly a tax for the 21st century and it isonly possible today because of the most elaboratebanking systems and procedures imaginable, allof which were designed and produced by our ownAmerican banking industry. Clearly, they areuniquely more capable of collecting our requiredtax revenues than an antiquated bureaucracy,such as the Internal Revenue Service. We would


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still have that Department, but it would not be solarge, nor so powerful.


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Chapter 12

TAX SHOULD BE TRANSPARENT TO PAYERS

The True Tax plan should appeal to individualtaxpayers because they can readily see they areactually paying a smaller tax (no personal incometax and 1% on a $60,000 salary amounts to only$600 dollars/year, only IF we assume the personspends the entire salary). Additionally with theTrue Tax plan, there are no returns to file and noaudits or questions about their tax payments.There would be no IRS Tax Code of 67,000 pagesto be referred to in almost every phase of life.(Just think of all the trees we will be saving!)

Our proposal also provides an additional caveatthat a minimum 10% of this revenue from theTrue Tax must be used to streamline government,or be returned to the American population. Theproblem with every tax system has beenwastefulness and subsequent expansion ofgovernment. Currently there are many redundantprograms generated by policy makers that exact asubstantial toll on Americans in excess of $200billion per year. Congress would then have thewatchful eye of every American to ensure that taxdollars are used for intended programs. Obsoleteprograms should be eliminated and thoseprogram funds returned to Americans, instead ofbeing used as a slush fund for a pet project.


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The envisioned transparency would certainlyreveal to the taxpayer the inequities of thepresent system of graduated income tax. Thetaxpayer would immediately see that our presentsystem leans ever more heavily upon the uppermiddle class. With living costs constantly risingand the tax burden also rising, the middle classworker is at the crisis stage. Union workers arepromised huge fringe benefits, but those promisesseem to be fading as employers’ budgets aregetting harder and harder to balance andcompanies are defaulting on unfunded retirementplans.

Another great by-product of the True Tax is abroadening of the tax base, which clears awayany aspects of a “spite” tax such as we now have;that of “tax the rich!” This discriminatory bias ofthe graduated income tax probably arose in thelate 19th century, when the socialist movementwas emerging. Envy, jealousy, and revenge wererampant, primarily due to the robber barons ofthat era and their arrogant treatment of the lowerclasses of that day’s society. The graduatedincome tax was twice abolished, but wassomehow revived to plague us for decades again.

The True Tax system would have perfecttransparency throughout all the transactionsmaking up the economic tax base. This systemwould be based on the latest technology, and theTreasury could publish the daily tax collections to


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taxpayers in a matter of hours. Quite differentfrom the days of Thomas Jefferson.


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Chapter 13

ELIMINATE CLASS CONFLICT

Envy can create class conflict. It is a trait ofhuman nature to become envious of someonewho has earned or otherwise come intopossession of wealth. Even though the wealthyperson might have worked long and hard to earnsuch wealth, many people will tend to unfairlypenalize them, if they can. Envy has probablybeen there since some brave caveman broughtback a few more hides from his hunt than thoseof his neighbors. It will always be around, butmany of us know it is wrong to covet.

The True Tax plan eliminates class conflict andwill be welcomed by almost everyone, rich andpoor. However, many of the people who the taxwill help the most, will still have the feeling thatthe plan doesn’t “soak the rich” enough. Thisconditioned reaction, even though the plan willprovide more than enough revenue to meetbudget needs and then some. And really, even ifyou were to confiscate all the wealth (as many ofour politicians seem to advocate), the rich aregoing to survive quite well, regardless.

A typical family income of today that totals about$65,000 per year will result in an income tax ofabout 12%, or $7,500 including both Federal andState taxes. Under the True Tax plan, the year’stax amount paid would be less than $1,000 total


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for both Federal and State. Can you see what aburden the graduated income tax puts on theaverage person when comparing it to our plan?And, as we have previously noted, the 1% ratewould be enough to erase the debt, also.

Under the True Tax plan, if an employee has apaycheck due for, say $500, he would get the fullamount as take-home pay. Of course, asmentioned above, Social Security deductionswould have already been made, but no incometax deducted. The employer would pay the TrueTax directly to the bank (because the employer isthe ‘buyer’ in this case) and without the taxwithholding, the employee would have that muchmore money to take home. This could reach, asthe example previously shown, hundreds ofdollars a month more in paychecks to manyemployees, depending on their rate of pay.

Another group that has had some complaintsabout the True Tax plan is that of charitableinstitutions. These complaints have not comefrom the leading charities and churches, but fromgroups that in many cases, only exist to supportthe fund-raisers themselves. These are the ‘third-class-mail’ groups, the telemarketer types. Allcharities would benefit from the fact that the TrueTax plan would put much more money at thedisposal of the middle-class taxpayers, theworking people, and they are mainly the onessupporting most churches and bona fide charitiesalready. The True Tax would also liberate many


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charities from mountains of record keeping andreporting. Other charities would argue that sincethere is no income tax deduction under the TrueTax system, raising donations would be muchmore difficult. We would argue that genuinelycaring people will donate because of theparticular cause, not because of the taxdeduction. At the least, we would certainly hopethat to be so.


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Chapter 14

OF PROFIT AND POLITICS

The adoption of the True Tax plan would spur theU.S. economy like nothing ever seen before. Sincethere will be no income tax withholding takenfrom paychecks, our plan would create animmediate influx of disposable income to allAmericans, similar to the effect of the tax ratecuts of previous years. More income results inmore spending, which indubitably improves ourbase economy. It’s even likely the True Taxsystem could result in price deflation and creategreater demands for goods and services. Thepresent price structure in all Americanbusinesses contains built-in income tax charges.Not being economists, we don’t know if there is aname for this ingredient, but it is there,nonetheless. In effect presently, you as a finalbuyer of goods or services are paying someoneelse’s income tax. These manufacturers andbusinesses cannot realize a market profit, unlessthis expense/charge is covered in their pricing.Now, if you take away the income tax in thestages below, it works as a reverse of the VAT“blossom” effect and lowers the final priceaccordingly.

The proponents of the “Fair Tax”, who wanted toinstall a 23% retail sales tax to replace thegraduated income tax, tried to say that themarket would automatically force a drop in all


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retail prices and the 23% sales tax would, ineffect, leave retail prices the same. Not so. Even ifthis were true, it would take the market so long toadjust that taxpayers would have long since,repealed the “Fair Tax”. On the other hand, if theTrue Tax plan was put into effect, it wouldn’t takelong for the different sellers to look at the factthey had no income tax to pay, so they couldlower their selling costs, and still have more profitthan they had before the True Tax plan was putinto force. The free marketplace is self-correctingand almost always right.

There might be a problem with inflation in the oldsense of the word, the old “too much moneychasing too few goods” theory. But with ajudicious use of savings incentives, we think wewould rebound nicely into a terrifically strong andstable economy; possibly even strong enough toreturn our dollar to the ‘gold standard’ in thenear future.

Another troublesome area would be in thepolitical field. If you look at the pastCongressional history, the politicians have beenbold enough to take advantage of buying re-election votes against challengers by using anyexcess funds they see in the tax coffers. As aresult, we are still reaping the bitter harvest ofexcess spending on hundreds of vote-buying,almost fraudulent pork-barrel programs, sotaxpayers beware! Conversely, the 1% True Taxwill provide ample funds to rid us of those deficits


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predicted and accumulated by past and presentAdministrations. We predict the 1% will alsoprovide the amount required to reduce theNational Debt, that monstrosity presently headedtoward $18 trillion. We desperately need the TrueTax!

Regarding the tax spending required by Bills fromCongress, many were masqueraded as legitimatepolicies to deal with an emergency or nationalcrisis, yet were laden by leaders/rulers withunconstitutional additions (Earmarks, Pork,Grants, other Programs, etc.), which programsnever die and continually expand beyond theiroriginal intent. Often, most of the benefitspromised are siphoned off to party supporters togarner more votes, instead of providing theseresources to the intended recipients. Sadly, weare misled and foolishly believe the politicians willtreat our tax monies with respect and do right thenext time, yet surprisingly, very few are ever heldaccountable or thrown in jail for misuse of ourtax money. Why haven’t George Soros, BenjaminBernanke, Hank Paulson, Richard Trumka, AndySterns, Wade & Dale Rathke, Franklin Raines,Chris Dodd, Barney Frank, AIG, Goldman SachsExecs, Nancy Pelosi, Harry Reid, John Boehner,etc. been indicted? We could name others, butnone are accountable, nor been indicted, norbrought before a televised Grand Jury. In fact,every one of them have been garnished withexcessive benefits. Why? Largely because themedia outlets are agents aiding and abetting;


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perpetuating the lies. Don’t you find it amazingand ironic, that almost every official must swearallegiance to the U.S. Constitution and to defendit from all enemies, foreign or domestic? Yet,almost no punitive action is taken by all ‘closed-door hearings.’ Thomas Jefferson said, “One Manwith Courage is a Majority”. Will you make astand and join this movement to Restore ourNation? There is not another agenda moreimportant than protecting our Nation againstenemies, foreign and domestic. Don’t be fooled bythe wolves dressed in sheep’s clothing.


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Chapter 15

WINNERS AND LOSERS

There would be winners and losers under theTrue Tax plan. The winners are everydayAmericans who believe in the Constitution,honesty and truth. The losers will be thoseentities that have siphoned the resources of thisgreat nation for far too long and promotedwasteful government programs/spending. What isuniquely interesting; this is a non-partisan planand compatible with any political party that ishonest and truthful. Republicans could live up totheir stated tradition of cutting the size ofgovernment, reducing the National Debt,reversing the “soak the rich” policies, cuttingtaxes, and preserving the rights of privacy andpersonal freedom. Real Democrats would agree ingeneral with the True Tax plan and couldchampion social programs for those Americanstruly in need with abundantly available funding;assuring these programs would be managed asoriginally intended, going to the intendedrecipients by eliminating fraud, waste and abuseensuring the viability for generations to come.The losers will be the radicals whether from theleft, or the right.

It will be the left wing Socialist/Progressiveportion of the Democrat party, however, whichfights the True Tax plan to the death. After all,the plan would kill two of their icons, the


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graduated income tax and the Estate tax. It hasalways seemed strange that so many of thesefolks who advocate re-distribution of wealth arethemselves, incredibly wealthy. How does thatfigure?

Other losers would be tax-preparation companiesand other tax preparers. This would be a mixedbag of good and bad. Some of these people havetaken tests and exams and are qualified to gowith their clients all the way to the Tax Court.Others are store-front operators, who are therefor the filing season and then are gone. Many aremerely fronts for lending agencies who will loanthe filer his “refund” immediately at a huge price.The IRS seems to check a lot of these latterreturns for accuracy and veracity. Is there anywonder why? For those preparers who combinethis service as a ‘seasonal’ part of their regularbusiness, not having to deal with computingreturns will be considered a true blessing.

There would be another and larger number ofsolid professionals that would, in many cases, belosers, and they are certified public accountantsand tax lawyers. We doubt that the CPAs wouldlose as much as the tax lawyers. The accountantswere merely taking care of business financialreporting, audits and business consulting. Theywould go back to the thing they would be best atdoing, and that is attempting to help theirbusiness clients make or keep profits.


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Most tax lawyers are also well-versed inaccounting principles and would fit into thebusiness world seamlessly. Others would staywith the tax law field for years, as many of thelarge tax cases would not be solved for years afterthe income tax and death taxes are gone.Actually, under the True Tax plan, the income taxcould still be in existence for some corporationsfor at least a few years. Others still, would moveto different areas of law.

The largest group of people who would be loserswould be the IRS and many State agencyemployees devoted to handling State incometaxes, sales taxes and Use taxes. We have nofigures in mind for the numbers cut fromgovernment payrolls, but it could be huge. Thiswould cause an initial problem, but the problemwould work itself out in a few years. In any case,the IRS will not just go away. There will still bemany jobs the department needs to do, so it willnever be completely out of business.

In addressing all of those who will be negativelyaffected by the institution of the True Tax plan,we must all realize and acknowledge “the 800-pound Gorilla in the room.” We can ill afford toavoid these negatives to a relatively small portionof the total U.S. work force, when the very fate ofour Nation hinges on the financial solvency of it.In short, we no longer have the option to continuewith the present taxation system, like it or not!


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Chapter 16

THE ONE-TIME WINDFALL

Adoption of the True Tax plan would create alarge windfall of tax monies that no otherproposed plan has ever mentioned. This fundshould be, and probably would be, used to easeany economic discomfort caused by thediscarding of the graduated income tax. Thegovernment employees idled by the shift to asimpler system, would have to either be absorbedinto other government departments, or let goentirely with an adequate severance arrangement.

The windfall would come in when the new TrueTax and the present Income Tax systems overlapinitially. The income taxes are not paid on a cashbasis. They are partially paid during the year bywithholding from wage earners and paid byadvance estimated payments by corporations andself-employed workers. Sometimes, tremendousamounts of tax revenues even come into thegovernment’s hands long after the end of the taxyear to which they applied.

April 15th is commonly thought of as the date thatthe income tax is paid, but this is not the finaldate at all. Many corporations use a fiscal year forreporting and paying the balance of their taxliability, and corporations do not have to file andpay their final taxes until two and one-halfmonths after the end of their fiscal year.


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Therefore, these filings would result in a sort ofdelayed-action in payments, and the governmentwould receive many billions of cash revenuesfrom the ‘old’ tax system, even after the True Taxwas placed in use and receiving transaction-based revenues.

Actually, there would be income tax revenuescoming in for several years after a changeover.Many billions would be received due to incometax extensions, term payments on past years’taxes and audits. Also, many tax lawsuits wouldbe settled in later years, some adding revenues.

Thus, this windfall would be huge. It is such asurety, that many politicians would salivate atthis development. They might immediately wantto pay off the National Debt, (there wouldn’t bethat much of a windfall), pay up the arrears inthe Social Security Trust Funds or pension themisplaced government employees. Whatever theirdesires, there will be a battle for the money, butthat is, all in all, a good problem to have.Personally, we feel that payment on the NationalDebt is of the utmost importance in keepingAmerica’s credit rating ‘tops’ as the leader of theworld.

As we have said previously, the rate of the TrueTax will have to be set by budget requirementsand might vary from year to year. The rate willalso depend on the number of types of taxes to becancelled by use of the True Tax plan. The rate


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could increase slightly for inclusion of SocialSecurity (FICA) tax, or a national health careprogram, or whatever Congress determines. TheTrue Tax rate could also decrease if a continuingnumber of dollars in excess of the budget isreceived, or all our debt is paid off. Regardless ofrealization of any other aids in the quest fordeliverance from the income tax, the hugefinancial windfall would be a tremendous bonus!


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Chapter 17

TRUE TAX PLAN HELPFUL TO STATES

The simplicity and transparency of the True Taxplan and the broad tax base it provides, alsoopens another attraction for all taxpayers andthat is its ease of adoption by all 50 States of theUnion, plus the District of Columbia and InsularAreas such as American Samoa, Puerto Rico,Guam, etc. None of the other plans have evenconsidered or mentioned this possibility.

Currently, personal income taxes are collected viathe Federal Reserve Banks. However, anothersparkling aspect of the True Tax plan is, it wouldrequire the States to be the Federal tax collectionmechanism themselves, plus, if they desired,would allow the individual States to piggy-backon the TT by creating the necessary apparatusesfor collection of their State taxes. In the future,should the Federal Government forget its designof limited government, the States could thenwithhold collected revenues to remind the FederalGovernment of this nation’s system of checks andbalances in order to prevent a different form ofgovernment to be created, i.e. Oligarchy.

Our nation was designed as a duo Republic. TheStates are designed to keep the Federal System incheck. States would also be allowed to set theirown percentage of tax, or tax rate, so it wouldcover their budget requirements. What a novel


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idea! States could become collection rateincubators, allowing adjustments over time asnecessary to facilitate what works best for them,instead of having a centralized system forcing acookie cutter method, which might cause moreharm than good for some States or Protectorates.‘One size fits all’ does not work when it comes toindividual States and their separate needs. Forexample, New York State may have tremendousin-State transaction dollar amounts and mightonly need a piggy-back tax of 1%, while the Stateof Wyoming might set their piggyback rate to 2%or more due to their smaller population tax basewithin Wyoming. On the other hand, it might notrequire any more, percentage wise, than NewYork, because its infrastructures are considerablyless. In probability, the True Tax would be a fairlysimple mathematical computation to determinethe needed percentage to cover the States’respective budgets. One formula might be todivide the annual budget amount by the averagenumber of transaction dollars in that State.

Of course, the states would be free to choose theirown tax systems of either or both, income tax andretail sales tax, but the tremendous costs andproblems with those methods, versus the TrueTax plan, would make it almost foolish for Statesto exercise such antiquated tax systems.

Unbeknownst to many residents in almost everystate, the States, like the Federal, are equallyguilty of expanding State government size. Also,


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many of the states share the same convoluted taxsystem which promotes centralized or Marxistideologies. Additionally, even the county and citygovernments promote similar systems. ManyStates have sales taxes and income taxes, andcoincidently have large numbers of governmentemployees engaging in administration, collectionand enforcement of strikingly different orcontradictory tax codes. There are also glaringdifferences in sales tax regulations, some statescharging sales tax on food items, while others donot. In some agricultural states, there are nosales or Use tax charged on farm equipment,while in more industrial states, tax breaks areallowed on industrial equipment. The True Taxwould level the playing field and eliminate allarguments between groups of taxpayers. It wouldnot affect State Sovereignty.

There are many “nuisance” taxes that the TrueTax plan would eliminate, such as estate andinheritance taxes, escheat taxes (escheat tax - isa common law doctrine that operates to ensurethat personal property is not left in limbo andownerless) and one most silly tax, the Use tax.There are many more, but these are usuallyconsidered the worst. The Use tax is one that ispoorly designed, generally detested and probablyabout as unfair as any tax could be. It is usedprimarily to keep people from purchasing itemsfrom out-of-State to avoid payment of State salestax on those items. Another interesting note:many of these Use taxes are used to expand


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government, or are placed in Retirement Accountsto ensure lavish benefit packages for retirees.Makes you go hmmmm, doesn’t it?

In the State of Idaho, for example, everyone issubject to the Use tax and there is a line near theend of the personal State tax return form thatasks if the filer owes any Use tax. Almost no oneever uses the line, so almost everyone isautomatically and technically a tax evader, if theydon’t report that they owe a couple of dollarsbecause they subscribed to a few magazines froma company based in New York.

The Idaho State Tax Commission some years agohired a collection specialist team to concentrateon collection of the Use tax. They focused theirattention mostly on licensed professionals in theState, using license revocation threats to collectup to seven to ten years’ back taxes, all the whileadding numerous penalties and interest to thebills. They also ignored any statutes of limitations(if there were any), forcing the licensees to goback some nine years to dig up long out-of-daterecords. The effort was finally reported by theState as a great victory for the Use taxenforcement people. None of the licensees affectedseemed to have the courage to fight the onerousrules and the class discrimination involved, andno apologies were ever made by the State.

Such State taxes as the Use tax and othernuisance levies are only that, nuisances. They are


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not equally enforced and are discriminatory to theextreme, usually not even paying the cost ofadministration and collection. In the Stategovernments, a huge number of bureaucratsexist, who could be eliminated by use of piggy-backing on the True Tax plan. Many billions oftaxpayers’ hard-eared dollars could be saved andmuch class anger eliminated as well.


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Chapter 18

FAILURES OF THE IRS

Many years ago the Internal Revenue Serviceproclaimed that its mission was “to collect theproper amount of tax revenue, serve the public bycontinually improving the quality of our productsand services, and perform in a mannerwarranting the highest degree of publicconfidence in our integrity, efficiency andfairness.” As said, this was long ago. Standardshave slipped, as bureaucratic institutions lackproper or qualified oversight/supervision andlack adequate skills or knowledge to perform theirduties in a professional manner. Additionally,these workers are dumbed down throughpractices or policies to preserve the status quoand political correctness, all but crushingworkplace ingenuity and creativity. We willaddress some of these slippages next.

Some years ago the Washington Post noted thatin the year 2001, the IRS was underpaid bycheats and mistakes to the tune of $345 billion.So what’s a billion here and a billion there, it’s allin the game, right? This figure has not decreasedin the later years, believe me. The Tax Code is socomplex and out-of-date that anyone caninadvertently become a tax evader. On the otherhand, how many taxpayers have overpaid inerror? We have had many, many taxpayers tellus, “Don’t take that deduction. It’s not involving


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that much money and I don’t want an audit.” Sothe government gets a few more dollars not calledfor. Conversely, the drug pusher picks up manythousands and doesn’t even file a return so thegovernment loses thousands. Where is thefairness there?

Along with the estimated $345 billion thatannually goes out the window to the cheaters andmistakes, the nation has another problem withthe income tax, the cost of keeping records,additional paperwork, labor costs and the cost offiling, or paying someone to file tax returns. Thisproblem of filing returns is growing each year, asnot only the Federal Tax Codes, but also theindividual States add hundreds of new taxproblems for professional tax preparers. Anymore,a tax preparer is only as good as his softwaredesigner.

So, if you add the two figures above, you willbe looking at almost three-quarters of a trilliondollars. With our national budget running nearover $3 trillion we’re getting into some realmoney. The True Tax plan would eliminate amultitude of problems for taxpayers, especiallysmall business owners.

The IRS also announced in 2006 that they weregoing to hire private collection entities (and did) tocollect some $7.7 billion in delinquent taxes owedthe government. These private collectors bid onthe job and three private collection firms were


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chosen from thirty-three that applied. This is anindication of the tremendous growth of the powerof the IRS in the past few years. This smacks of atremendous invasion of privacy by using privatefirms, but the IRS has been accused of privacyinvasions many times before and yet they keepdoing it. We don’t know if some committee in theHouse of Representatives ordered this action, orwhether it was a unilateral decision by the IRS.

Many of our legislators in Washington screamedterribly some years ago when the administrationdid some telephone monitoring of suspectedterrorist organizations calling from foreigncountries, but ironically, none of them seem tohave any objections to turning over delinquenttax payments to private firms with no privacyover-sight being shown.

A bit later in 2006, the IRS announced that theywere planning to sell certain tax information fromreturns to marketers, seemingly another invasionof privacy. The actual story that we saw said,“The Internal Revenue Service is going to quietlyloosen the once inviolable privacy of Federalincome tax records. If it succeeds, accountantsand other income tax return preparers will for thefirst time be able to sell information fromindividual returns – or entire returns – tomarketers and data brokers.” Sometime later,this action was not completed by the IRS, but thiswas typical of the mindset which continues inthis agency.


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Read the above paragraph again carefully.Doesn’t this make a bland (and blind) tax such asthe True Tax, almost a necessity? And yet, if weeven make the slightest mention of a nationalidentity card to forestall the problem of illegalimmigrants holding jobs and abusing the presenttax system, we get a tremendous uproar from theLiberal/Progressive Left regarding invasion ofprivacy.

Another major problem haunting middle-classtaxpayers and partially the fault of the InternalRevenue Service is one of the worst and mostnon-transparent tax laws ever dreamed up, theAlternative Minimum Tax. This monstrosity of alaw was put in the Tax Code many years ago andaffected only a few people for many years. It was a“spite” tax that was to make sure the super-richpaid at least some tax. It was not adjusted forinflation and really didn’t get much attention for alot of years. But in recent years, it has becomemore and more significant and has now reachedthe point where it affects many middle-classtaxpayers, as well. The AMT, because it is notadjusted for inflation, now hits middle-classtaxpayers and small business owners especiallyhard. It takes away a noticeable portion of the taxrelief extended to them by the Bush tax cuts. Itdoes this by re-adjusting accelerated depreciationdeductions and capital gains deductions. It isextremely hard to forecast the tax impact of manytransactions involving items addressed by the


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AMT. A large capital gain during the year cantrigger tax problems in a number of fields andcause near-panic for taxpayers when thecomputer program spits out a figure of tax duethat has not been foreseen.

President Bush called many times for repeal ofthe AMT. But it, like many fetish items in the TaxCode, is almost a motto for the tax-and-spendcrowd of politicians, so it never is seriouslyconsidered as a millstone around the necks oftaxpayers. It has been temporarily reduced orpostponed somewhat, but it still survives. Unlikethe death tax (Estate tax) the AMT didn’t die in2010, and the Estate tax could return if Congressfails to act. The AMT seems to be here forever andgets more intrusive each year.


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Chapter 19

ADOPTION OF THE TRUE TAX PLAN

Adoption of the True Tax plan will have, without abit of luck, a long, hard fight. The fight is notbecause the True Tax is complex or hard toimplement. In fact, the True Tax allows a verysmooth transition and eliminates uncertainty inits implementation. The True Tax, having aConstitutional agenda, must contend withpowerful enemies of Freedom, those who have avested interest in the game of divide and conquer,and who often use the shell game, or smoke andmirrors to defraud Americans of its resources.These enemies will be powerful and will knowthat they have everything to lose and very littlereal defense. But, American conservative thinkinghas been diligently chipping away at the ‘ists’ forthe last seventy-five years (Socialists,Communists, atheists), which includes theProgressives, Liberals, ‘Big Labor’ groups, andmost Democrats (Socialist Democrats). The goodnews in this is that regardless of the impressivenumber of these groups, conservatives stilloutnumber their sum total of support.

The Socialistic thinkers who saddled us with thegraduated income tax, the death tax, and the gifttax, very adroitly welded the taxes into oursystem by use of the 16th Amendment, thusmaking it sound and seem terribly difficult to


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discard the income tax. The rhetoric and spinmachine is the only hard issue to handle, andimplementation will have to percolate up viagrassroots efforts with a resolve to restoreAmerica.

With conservatives having the numericalmajority, the task then becomes one of awarenessand enlightenment of the True Tax system to allcitizens, but especially to the grassroots folks,who really haven’t paid much attention to mattersof this sort their entire lives. It is generallyaccepted that “Knowledge is power,” so ourundauntable mission from this moment forwardmust be to provide that knowledge to theAmerican people in time to accept the True Tax!

Elimination of our National Debt andstreamlining government will make it apparent weshould champion the cause to repeal the 16th

Amendment. The personal income tax is derivedfrom the 16th Amendment and many argue itslegitimacy. No matter the debate, the personalincome tax has become an onerous burden andexpansion of government and subsequentexpansion of taxation. Note: In 1913, the first1040 Individual Return created a tax rate of 1%,an extra 1% more to those making over $20,000and incremental increases of 1% at eachproceeding threshold. It is obvious from thebeginning; it was designed as a progressive taxand the beginning of class warfare in America.


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My, how dreadfully far we have come. However,the True Tax will set us free again.

1040 Tax Form dated 1913

Repealing the 16th sounds so simple, but is goingto be a big job, and do we not subsequently needto establish the new tax system within the


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repealing Amendment? We would argue we do.Any Amendment can be repealed, as was the 18th

Amendment regarding Prohibition. However, theprocess makes it a significant task, as the repealmust be ratified by a majority of the states andthere we get into the heavy debate of politicswhich could drag out until it is too late forRestoring America.

It would seem that the states would benefitgreatly if they adopted their plan as a piggy-backon the Federal levy. Each State could separatelyset their tax amount to absorb their income tax,sales and Use tax, and any other that theywanted to remove from the backs of theirtaxpayers. They would be able to cut the size oftheir government, cut expenses tremendously andstill have State autonomy. Many small nuisancetaxes could be junked by the states, many ofthem being in force since early in the last centuryand outdated long ago.

Supporters of the True Tax plan would have toform committees in every State and solicitmemberships in the organizations that wouldpush for the new tax system. It would have to becrafted into a bill that would be initiated in theHouse of Representatives. If passed there, itwould go to the Senate for approval there, then tothe President. A long struggle possibly, but notimpossible. Not many people expected Prohibitionto be ended back in the Twenties. But it was.


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Once the True Tax plan is adopted, it would beeasy for the U. S. Treasury to craft a new TaxCode. It would probably be less than five hundredpages, not the seventy thousand or so that wenow have! Think of the printing costs that wouldsave. Also, the trees!

We would be greatly surprised if the bankingindustry took more than a month to have theircomputers changed to complement the new taxplan. Then, on Day One we would usher in a newera, the Age of Common Sense!


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Chapter 20

CONCLUSION AND OTHER COMMENTS

The True Tax plan of taxation is simple, fair andefficient. It is chargeable on every transaction ofany type. It is universal; it has no deductions, noexemptions and no limits. It is deposited into thegovernment’s bank account within days (or evenhours), so the receipt is almost immediate. It isimposed at a rate of 1% (to the Federal), so it iseasy to compute even without a cash register orcomputer.

There is no further action required of the payer;no returns, no paperwork. There will be noinvasion of privacy by government agents orprivate individuals.

The total tax charged might also include a Statetax of 1- 3% as a “piggy-back” amount for thestates, thus enabling the states to eliminateincome and sales taxes as the Federalgovernment will.

The True Tax plan will do what Conservativepoliticians have tried to promise for a century ormore—cut the size of government It will eliminatethe “spite tax” syndrome shown by so many ofour Liberal and Progressive citizens.

But the most American thing that will emanatefrom the adoption of the True Tax plan will be one


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of the original “unalienable rights” guaranteed usby the Constitution, the right of personal privacy.It will give us back the old-time feeling that “aman’s home is his castle” and no one should havethe right to pry into his personal affairs withoutjust legal cause. In an ironic twist of fate, wesome years ago noted that Russia, the originalhome of Communism and champion of theCommunist Manifesto, now has a “Flat Tax” witha rate of 13%. We could hardly believe it when wediscovered this. Initiated in 2001, the taxrevenues generated by this tax in Russiaabsolutely exploded upward. None of our tax-and-spend tax planners have mentioned this Flat Taxmiracle which replaced a Graduated Income Taxsystem for the Russian taxpayers!

It is almost a sure thing that when countrieslower their tax rates, by whatever means, theireconomies explode upward. In a strong economy,politicians tend to promise all sorts of goodies tothe taxpayers, and the country could fall intodebt and financial distress again if they do. Thisis a problem we may face when the True Tax isadopted, so we must always watch our legislatorscarefully. However, the True Tax has a provisionto streamline government and prevent thetendency of politicians to manipulate or misleadthe public with unconstitutional promises whichresult in the expansion of government. It is timethat Americans wake up from their sleep andremain vigilant to ensure we have a governmentof the People and for the People.


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In summary, we feel that the True Tax plan is theonly way to go to have a simple, fair and broad-based tax system, which will work silently, buteffectively, to generate enough in tax revenues topay the government’s obligations without unduepressure on its citizens.


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Chapter 21

Frequently Asked Questions (FAQs)

In the following pages you will find answers tosome of the most interesting questions that havebeen asked about the True Tax plan.

Q. What will happen to my IRAs and my 401K?

A. Nothing but good things. Your savings will stillbe there, possibly with fewer restrictions onwithdrawals. Actually, you might even use thesavings plan already started as a base for a long-term savings program with the extra take-homepay you will have when the True Tax plan isadopted. A national savings plan could besponsored that would enhance the benefits of theSocial Security program. All economists will agreethat the solidity of a country’s economy is avigorous savings base by its citizens. What betterway to save, since we have IRAs and 401Ksalready at hand?

Q. What would be the result if I sold a familyheirloom on e-Bay for, say $30,000.00 to someonein India? Would the person have to pay the TrueTax? And, if I am not normally a commercialaccount holder, would I have to open a specialaccount so the bank would hold out the tax?

A. This is a Point of Sale (POS) transaction. Itwould be the responsibility of POS entity to


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collect the transaction tax and deposit it as theywould any sales tax. The buyer would have to paythe tax just like on any other transaction. It willbe up to the Congress to spell out specific rules,but it would be a taxable transaction. As todepositing the tax collected, that could behandled in a number of different ways. You couldbe required to deposit it directly into the U.S.Treasury account at your bank, or personalaccount deposit slips could have a box on theirface that could account for unusual deposits bypersonal account holders. Of course, if you werean antique dealer, it would be taken care of in theusual manner. Also, it would be likely that e-Baywould collect and deposit the tax from the buyerfor you.

This said, we might think for a minute aboutpayment of the tax by a foreign person ororganization. Why not? We have developed atremendous market and should be repaid for thedevelopment that American individuals andorganizations have created over the last century.In the countries with the VAT tax, one must paythe tax and may then apply for a refund later (butonly if exceeding a minimum set amount ofrefund).

Q. I am a farmer. Would I have to collect the TrueTax from hay buyers or livestock buyers? Andwhat about all the unused depreciation tied up inthe expensive equipment I have?


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A. Yes, you would collect the True Tax. You wouldbe classified as a commercial enterprise andwould collect the tax just the same as if you werea grocer or a landlord. And, in answer to yourquestion of depreciation, you would lose any taxadvantage still locked into your investment inequipment. However, you would gain from thestandpoint of not paying out income taxes,sometimes on crops unsold. And think of themany, many hours you would save from having todo less arduous paperwork.

Q. What will happen to charitable organizations ifthe income tax code isn’t there to push donors tosupport them?

A. The bulk of the non-taxable organizations andfoundations will survive the changeover. However,many of the fly-by-night groups and foundationswill fall by the wayside. It has been shown overthe years that many of them are operated only fora few paychecks for their management anyway.Contributors will have more money to contributeunder the True Tax plan, so the well-organizedand well-attended churches, foundations andother charitable entities will go on as usual. Thereis one thing that should be noted here, however,and that is that the charitable organizations willall pay the tax when they buy supplies, land,automobiles, trucks, salaries, etc. Because oftheir non-profit status, the corporate tax of 10%would not apply to them. The non-profits will paythe 1% True Tax when they buy something just


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like everyone else or every entity, but there wouldbe significant benefits to these organizationeliminating needless paperwork. In the interest inpreserving our nation and keeping the playingfield equal, they will pay the tax with noexemptions, deductions, depreciations norfavoritism. We need all hands on deck to RestoreAmerica.

Q. About 15 months ago I bought a tremendoushome on a PGA-rated golf course that had justopened. The land and home values have sky-rocketed since I bought, and I now have an offer inwhich I would realize a profit of over $300,000.00.What would be my tax under the present tax codeand what would it be under the True Tax plan?

A. Under the True Tax, this is a complextransaction and the total tax due would be 1% or$3,000. However, the buyer would pay 1% of thetotal of the down payment plus closing costs atclosing. The remainder would be amortized overthe cost of the loan (See Chapter 7). Currently,under the present system for 2011, you wouldpay no tax at all at either purchase, or sale, if youhad occupied your home for two years before thesale, but this is expected to expire in 2012.However, this Administration has added a 3%sales tax hidden in the healthcare bill which alsoincludes Federal government requirements toupgrade, or prove that, homes sold to meetenvironmental and energy standards; thus you,


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the seller would pay an excess of $9,000 for allthat.

Q. Would I still have Social Security and Medicarepayments deducted from my paycheck?

A. Yes, we’re afraid so, at least for some period oftime until all the bugs are worked out of thesystem. Eventually, these could be eliminatedaltogether. We also have a funding problem with‘Obamacare’. After a few years, we think thatlegislators will find by broadening the tax base tothe ultimate, as they will have done with the TrueTax, that budgetary problems are easily solved.We doubt that Congress would immediately giveup the Social Security or Medicare entitlements,even with their ever-rising costs. After a period oftime to find our boundaries, we should expect tosee payroll taxes either greatly reduced, or gonealtogether. Then we should take the terribleburden off the backs of our grand-children andgreat-grand-children, that of keeping us protectedin our senior years. The young people of todayhave little confidence in the present system. Allthe present system needs is money and the TrueTax can produce that.

Q. “You have a good idea here, my friend, but itwill never happen. You would never get thisthrough Congress in the first place” and “thestates would never let the Federal governmentcollect their taxes for them. You’re wasting yourtime. It’ll just never happen!”


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A. This comment came from one of my hard-nosed clients. I have tried to explain to him manytimes that the True Tax is a tax that relieves themiddle-class of the terrible responsibility ofproviding almost all the revenue the Federalgovernment requires. We believe that a poll of allvoters asked about the True Tax system wouldshow about 75% would vote for its support. Theother 25% would be: Liberals, Socialists andProgressives; who would resent any effort to freepeople of their ‘social control programs’, whichthey originally imbedded in our now decayinggraduated tax system.

Q. This is nothing but a giveaway for the rich andthe big corporations. It does nothing for theworking man and the middle-class. The rich oughtto be taxed at about 50% and the big corporationsabout the same. The poor should be paying no taxat all. Your plan is pure Rich Republican. It willnever work!

A. It was unfortunate that this remark was madeto me by an acquaintance(Liberal/Socialist/Progressive) and one-timeclient. It only shows that he was parroting thestandard mantra of the Far Left. Unlike thecurrent system that penalizes the wealthy, or theFair Tax that provides amnesty to the wealthy,the True Tax treats the wealthy individuals thesame as everyone else. It is the only system thatis actually equitable and reasonable. A


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reasonable estimate would be a 10% tax rate tomake large U.S. corporations more competitiveand prevent migration of these entities to othernations and promote job creation in the U.S. TheTrue Tax eliminates the system of class warfare.Businesses, the wealthy and poor alike willbenefit from the True Tax. Repatriated dollars willbe taxed at 20% rate the same as foreigncorporations, levied because these entitiesavoided a convoluted and confusing system.Since excess taxes are returned to the public, thepoor would initially benefit greatly with aconservative estimate for $10 trillion dollars andreceive approximately $20,000/couple. Thisrebate, for a few years, almost completely cutstaxes for the middle class and the poor.Accordingly, the good thing it does far out-weighsthe supposed bad things. It restores initiative intoour younger generation workers; it puts moneyback into the pockets of the families of ourcountry so they can raise their quality of life; itgets the IRS out of our private financial affairs;and it gets everyone back into the act of being acitizen, not just a name and number on a 1040form.

Q. Why are you so sure that the states will agreeto let the U.S. Treasury collect their taxes? Theycould just go it alone with their own tax systems,couldn’t they?

A. Yes, they certainly could go it alone, but at atremendously unnecessary cost. Most of the


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states that have an income tax merely use theFederal adjusted gross income figures to starttheir tax-collecting process. It would be somewhatdisconcerting, we would think, when a Statekeeps on with their old programs, when it couldpiggy-back with the Federal and cut tremendousamounts from its tax-collecting costs. Or, theycould be given the option to make their ownarrangements within their borders and have theircollections paid directly to them by the collectingbanks. These decisions and rules would be amatter for the individual State legislatures toaddress.


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BIBLIOGRAPHY

Bureau of Economic Analysis (BEA), U.S. Department ofCommerce, as of October 31, 2010.

Statistics on payment and settlement systems in the CPSScountries - Figures for 2009 Bank for International Settlements(BIS), Basel, Switzerland. 2009 data

Taxation for the 21ST Century: the automated paymenttransaction (APT) tax, Edgar L. Feige, Professor of EconomicEmeritus, University of Wisconsin-Madison, October 2000.

The 2010 Federal Reserve Payments Study, Noncash PaymentTrends in the United States: 2006 – 2009, Released December8, 2010. Copyright 2010, Federal Reserve System.


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It’s time for Us to Tell Congress What to Do!!!!

Are you ready to be counted in our fight to Restore America?

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THE TRUE TAX WILL SAVE AMERICA!

The Tea Party has created a plan which will dump theI.R.S.

The True Tax could make America debt free in just afew years!

Yes, it is time to turn the I.R.S. into a simple bookkeepingdepartment of the Federal Government, and we now have the

means to do just that.

THE TRUE TAX IS A ‘TRANSACTION’ TAX OFONLY 1 %!

Debt Ceilings, budget Short-Falls and lack of tax dollars will be athing of the past. This is not a ‘Value-Added Tax’ or someEuropean Tax Hybrid; it is a fresh approach to rebuilding the

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financial infrastructure of the U.S. We The People must send aclear message to this and future generations, our generation tookthe initiative and build a fair and honest tax system even a 3rdgrader can understand.

Enough is enough; The I.R.S. has tarnished our sterlingheritage. It is a behemoth system even its agents or creatorscan’t grasp, with tentacles invading our privacy, consumingwealth of individuals, businesses and our nation. Far toomany have been harmed by its mismanagement. We canRestore Our Nation and Blot out this blemish now!

We must keep pressure on Washington and make ourRepresentatives convert to the True Tax before it is too late and

return sanity to our beloved nation!

Yes, I Will Stand Up For America!

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