Fair Tax is wealth redistribution and anything but fair

43
2540
Image by: JD Hancock http://www.flickr.com/photos/jdhancock/
Image by: JD Hancock http://www.flickr.com/photos/jdhancock/

WASHINGTON, February 14, 2014 – The so-called “fair tax” (FT) is a fraud. It is more wealth redistribution and a financial scam.

In the words of its own creators, FT is more progressive than the current income tax; it increases welfare payments through its “prebate” mechanism.

The FT is essentially a national retail sales tax. The prebate is “supposed to” merely return the expected amount of fair tax paid on purchases below some cut-off, in order to prevent the tax from hurting the poor or being regressive.

This prebate is not really a refund of FT paid as its supporters say it is. It is a new $600 billion entitlement. It would have all Americans receiving a substantial monthly check from the federal government – a very bad idea for those of us who are not socialists. We simply cannot afford yet another huge entitlement that is likely to grow in the future.


The FT and prebate would leave the working poor making no contribution at all to funding the federal government. They would pay nothing even for their own Social Security and Medicare benefits. The FT and the prebate extend tax welfare to the non-working poor – and also take the next progressive Cloward-Piven step towards giving Social Security and Medicare benefits to all, regardless of work. It removes the tax penalty for misreporting Social Security wages, thereby inviting the fraudulent reporting of those wages.

While, the prebate is supposed to merely reimburse the poor for any FT they pay, it would actually pay them far more than that. It assumes that the poor spend more than the underlying Health and Human Services Poverty Guidelines, and it assumes that they will pay FT on all of their purchases. They won’t. FT also provides free Social Security and Medicare benefits to the working – and some non-working – poor.

In order to replace existing income tax revenues, FT would result in a 40 to 70 percent in-your-face retail sales tax. That would spark a taxpayer rebellion and would destroy our retail-sales-sensitive economy. That 40 percent lower bound is a base 30 percent — not 23 percent — FT plus, plus state and local sales tax – say, about 10 percent.

The 70 percent upper bound is the rate needed if we get an illustrative 30 percent FT evasion/avoidance rate. FT proposals incredibly assume zero evasion and zero intentional reduction in spending, as well as no migration from new to used goods in order to avoid the burden of the tax.

In addition to that 40 to 70 percent tax, the FT contains several hidden taxes.

The FT’s 30 percent rate is really 42 percent or more; the 12 percent is hidden by having federal, state and local governments paying FT on their purchases; ultimately, they must get that money from you.

The initial 30 percent rate is 1 to 5 percent short, and that plus any other revenue shortfall will have to be made up by raising the FT, or reintroducing an income tax.

The federal budget will rise for higher Social Security (COLA) benefits and higher COLA’s payable to all federal retirees, both induced by FT’s price increase of up to 30 percent, and for fraudulent new Social Security benefits invited by FT’s removal of the tax penalty for misreporting Social Security wages. A higher FT rate, or a new income tax, will be required to fund these.

The new IRS – the Sales Tax Administration Agency (STAA), the new federal agency that administers the FT – may well be far worse and far more invasive than today’s IRS. Consumers are liable to pay FT and must receive receipts to prove they paid FT. The STAA may audit consumers (including asking them to produce all FT receipts), and we may well have to file an “Annual FT Summary.”

We may well wind up with both a new income tax and the FT when Congress repeals the FT’s sunset clause and enacts a new income tax.

Seniors will start to pay for Social Security again, and some will pay a second or third tax on their earnings. Many middle class seniors will pay more FT than they would have paid in income tax, and many will lose purchasing power because of the nearly 30 percent price increases.

They will also lose purchasing power because of the higher state, local and federal taxes required to cover those governments’ FT payments. We will pay higher federal taxes due to higher Social Security and pension COLA’s and fraudulent Social Security benefits.

The FT promises grand economic benefits, but these are unpredictable, making the claims mere hype and promises of change.

What we need is a flat income tax with no deductions, no exemptions, no credits and a 10 percent rate. It should tax business income directly to shareholders on a very simple basis – that is, there should be no corporate income tax, with business income taxed directly to shareholders. That is, every business would be taxed like a partnership or Sub S; the shareholders pay tax rather than the entity, and there is no tax on dividends. The IRS could be neutered, and tax returns reduced to a single page.

The fair tax is neither fair nor simple, and it entails the creation of huge new bureaucracies and government payments. The flat tax is superior in all regards. Call your representatives in Congress and let them know that this is what you want.

Stephen Eldridge is a retired lifetime tax consulting professional, JD, LLM in Taxation, CPA, co-author of a 3 volume tax treatise, and lecturer. He has no financial stake in any tax system. 

Follow him on Twitter @StephenCEldridg

Click here for reuse options!
Copyright 2014 Communities Digital News

• The views expressed in this article are those of the author and do not necessarily represent the views of the editors or management of Communities Digital News.

This article is the copyrighted property of the writer and Communities Digital News, LLC. Written permission must be obtained before reprint in online or print media. REPRINTING CONTENT WITHOUT PERMISSION AND/OR PAYMENT IS THEFT AND PUNISHABLE BY LAW.

Correspondingly, Communities Digital News, LLC uses its best efforts to operate in accordance with the Fair Use Doctrine under US Copyright Law and always tries to provide proper attribution. If you have reason to believe that any written material or image has been innocently infringed, please bring it to the immediate attention of CDN via the e-mail address or phone number listed on the Contact page so that it can be resolved expeditiously.

  • jwnobles1

    Eldridge is like a broken record! His solution is keep the income tax and the IRS! We do have a conflict of visions. I wonder if Eldridge has even read HR 25, and do a lot of others. He seems to have very little comprehension of the bill and how it would work.

    • Yankee

      JWNOBLES is the Host of a very partisan FT radio show.

      JWNOBLES KNOWS full well that, as a knowledgable retired professional, that I have studied the FT EXTENSIVELY..

      My opponent on one of JWN’s ridiculously partisan and stunted radio “debates” was FT Nation’s National Spokesman, a tax professional who had much respect for what I said and wrote – we differed on only 1 point of what the NEW IRS might do – NOT what they could legally do, but what they might do,

      Sadly, it is JWN who has very little comprehension of the bill and how it would work (I was a tax professional who studied the FT extensively – I have no idea what JWN’s professional expertise is, but he NEVER discussees the substance of the FT and can only mimic FT propaganda talking points, without being able to get into any depth of substantive understanding.

      it appears to me that in his ignorance, he simply does not understand what it is that he does not understand – he can only tout the joys of the FT, without understanding its implications.

      Sadly and revealingly, JWNOBLES can only resort to Saul Alinsky ad hominem attacks, insuts and innuendos – he cannot EVER engage in a fair debate on the SUBSTANCE.

      JWNobles, I make an open public challenge to you and FairTax Nation to take part in an honest and truly fair debate – the public is watching for your reply.

      • Mark Crane

        Mr. Eldridge’s posts are exactly the same every place his comments show up. (and there are several) I suppose it’s a good thing he’s retired since it appears he spends all his time opposing the Fairtax. If his ideas are so great why not create a tax bill and offer it to congress? The Fairtax, HR25, currently has more support in congress than ANY other tax bill including the flat tax. It is true however that his plan would be preferred to what we have now. I still like the Fairtax much better.

  • Rusty Venture

    He is a CPA… he has made his living off the overly complex tax system and the IRS.

    • Yankee

      Rusty,

      With all due respect, you fail to read and think.

      1) I am retired – I no longer make a living from the IT.

      2) I no longer have any continuing financial interest in ANY tax system.

      3) I propose a Flat tax that eliminates tax preparers.

      4) I would probably pay lss in FT than IT and thus should personally favor the FT.

  • KD Bowers

    Mr. Eldridge you fail to point out one very
    significant figure with respect to your proposed 10% flat income tax … 105%.
    That is the ‘minimum’ increase in the amount of income taxes your
    proposed 10% flat income tax will impose on the average-sized, American family
    of 4 with a middle (earned) income of $50,000.
    For tax year 2013, the example family would have paid $2,441 in income
    taxes (standard deductions and exemptions) while your proposal would have more than doubled their tax amount to
    $5,000. That amount, combined with 14.21%
    seized from the labors of an employee for payroll taxes (7.65% direct from the
    employee’s pay) and 14.13% seized from the labors of the self-employed, all assessed
    on 100% of their earned income, would impose devastating consequences on middle
    income families as well as our entire fragile economy. It is principally for this reason, among many
    others, that I believe no legislator will support a 10% flat income tax with no
    deductions or exemptions.

    • Yankee

      To my friend Kerry D. Bowers (one of the very few gentlemen i have encountered among FT’ers AND candidate for President on the GOP ticket);

      For now, rather than get tied up in the precision of your figures, I will focus on the more important broader issues.

      I do not share the FT’s Progressive-Socialist heart. IMHO, the current tax code (among its many serious defects), is way too Progressive and carries far too many who pay nothing but can vote (a very dangerous condition posing a clear and present danger to the continued existence of th Republic). Too few people pay far too high a share of the total burden.

      Another important point is that Progressive-Socialists try to sweep SS/Medi into the tax system – they are not part of the fed govt general operations (AND the Constitution does not even permit the fed govt to engage in those activities!). SS/Medi are PERSONAL benefit-entitlements – they are your own pension and senior medical insurance NOT within the limited powers granted to the fed govt by the Constitution. Thankfully, we did NOT pass the 2nd Bill of Rights to gaurantee every poor person total support. Progressive-Socialists want to move our welfare society ever closer to Socialism-Communism.

      And so, yes ;

      1) Tax welfare at the bottom of the economic scale must end (gradually, so as not to impact people dramatically – but work-for-welfare must be instituted immediately).

      2) Everyone must pay for their OWN SS/Medi – NOT for someone else’s.

      3) Everone with income must pay Income Tax – everyone must have skin in the game.

      So while you try to make a dramatic cry about a high % increase in tax rates, I offer you that some would have an infinite (maybe incalculable) increase in % from a negative tax to a positive tax – AS SHOULD OCCUR!

  • Amerigo M. Cimino

    WASHINGTON, February 14, 2014 – The so-called “fair tax” (FT) is a fraud. It is more wealth redistribution and a financial scam. By: Stephen Eldridge; a retired tax consultamt.

    I can understand his attitude! The Income Tax Code; is a boon for Tax Consultants! AND all of them don’t have ALL the answers! The Fair Tax would eliminate most tax “Consultants! They will be unnecessary! The Fair Tax will replace the Income Tax! The Fair Tax is so simple; even “I” understand it! Politicians DO NOT LIKE THE FAIR TAX! The Fair Tax cannot be manipulated!
    Politicians do not like “simple”!

    • Yankee

      Amerigo,

      You, like Rusty, below and many other FT “true believers” cannot read nor can you think, analyze nor reason.

      As I replied to Rusty,

      1) I am retired – I no longer make a living from the IT.

      2) I do not have ANY continuing financial interest in ANY tax system.

      3) I propose a Flat tax that eliminates tax preparers.

      4) I would probably pay LESS in FT than in IT and thus I should personally favor the FT.

  • dutchman3

    Mr Eldridge spends too much time complaining about the increase in welfare to the poor due to the prebate. He invokes the Cloward Piven ancient strategy without any hard evidence that the Fairtax plan actually increases welfare. On the contrary, it appears that the FT plan reduces overall welfare. That is, the income tax related welfare is greater than that portion of the prebate that might be considered welfare. Check it out!

    • Yankee

      My dear friend, what in the world are you doing?

      Not only is my paper an overview of ALL of the FT’s fatal flaws, but my very first and major point is the Prebate’s creation of a new $600B ENTITLEMENT.

      I next make the point that the Prebate OVERPAYS its purported target benefit of merely repaying any FT the poor might pay.

      On this last and least significant point that you insist upon, I do not agree with you that FT is a decrease in TAX welfare (which you can’t prove either) – I believe is an increase but do not offer that point because I do not have access to sufficient detail to prove it. Also, I believe that the FT wil cause an increase in non-tax welfare.

      We FT-exposers do not have to agree on every single point – we need not enage in group-think but think and analyze as independent individuals.

    • Paul Livingston

      Another point, you are now on tax wefare with the standard deduction or better yet the itemized deduction. The FairTax eliminates all deducations and reduces the annual filing to only stating your family size with SS numbers. The FairTax is a sales tax code with a progressive tax rate up to 23% based upon how much you spend.

      The FairTax® solution moves the tax base to consumption with
      an effective tax rate that progresses up to 23%. With Prebate a two adults and 2 children
      family spending per year of $31,000 has an effective tax rate of 0%, at $45,000 a
      tax rate of 7.1%, at $75K a 13.5% rate, never 23%. End tax withholding and add the Prebate, the minimum wage take home goes from $6.70 ($7.25 minus 7.65%) to $8.52, up $1.82 and 27%. Does this look like sticking it to the middle class to you?

      • Yankee

        While the Ft reoves the SD & ID, its Prebate more than makes uo for that.

        Middle class SENIORS (who do NOT ay SS tax) will experience a higher total tax rate under FT. Dutchman3 has run a set of calculations that show that a married couple with income from about $30,000 to $100,000 pay MORE FT than IT.

        Seniors start aying GAIN for SS.

        Seniors may be taxed a 2n-3rd time.

        Senior lose purcasing power due to FT’s 25+% higher prices,

      • dutchman3

        Paul,
        Yankee has it about right. Middle class retirees would get thrown under the bus. Not only would they be forced to resume paying for their retirement benefits with their sales tax dollars, but all of their after tax savings would be double taxed by the 30% sales tax. Is that fair?
        All too often, Fairtax advocates tend to overlook the FT impact on seniors. If we could just wave the Huckabee magic wand, many of these issues would vanish. But there is no magic wand available.

        In addition, you seem to believe in the advertised 23% rate. I hope you understand that the rate a retail merchant has to add to his costs is 30%? And, because the FT proposes to have the federal government tax State and Local government consumption, (a tax cost that will have to be paid by all of us), the real FT rate rises to 42%. And, you might know that AFFT assumes zero evasion, and encourages the fairy tale that “it takes two to cheat”? Nonsense, you may pay the sales tax, but you have no clue if the merchant forwarded the tax revenue to the proper agency. A realistic evasion allowance of 15% would increase the FT rate to 60%. Paul, how high is too high?
        Finally, a word about the prebate. It is a $600 billion annual cash grant entitlement and comes at a time when entitlements are squeezing out discretionary spending in the federal budget. We just can’t stand for placing more of the budget on auto pilot! Worse yet, the prebate would create a group of millions of lower income workers who would never pay one dime in net federal taxes, yet all would still receive full retirement benefits when eligible. Is that the kind of “nanny state” you are supporting, Paul?

  • kHoagland

    Well, at least all here agree, including Mr. Eldridge, that the current tax
    code is an abomination that actually hurts the American economy–and individual
    filers.

    The argument here seems to be what would be better. Notwithstanding the
    personal attacks on people (being ignorant) because they don’t agree with
    Eldridge or on Eldridge for not seeing the advantages of the FairTax, perhaps we should just agree that it will take everyone outside Washington power corridors to overturn an entrenched tax system that so hurts America while at the same time so profiting Members of Congress, tax lobbyists and an entire industry
    built on nightmarish complexity.

    This is the essential truth that keeps getting lost in such vitriol–the
    income tax system is broken and damages us. Concerned citizens can do more to
    achieve actual change if we first stop fighting each other and focus on the
    corruption in Washington that keeps the income tax system not just alive, but
    growing.

    Fair minded people can work through the best reform after we first put defenders of the
    income tax on the ropes. The Washington, D.C., K Street army of wealthy
    lobbyists that want to keep this corrupted system in place revel in arguments
    between reformers. I say good for Eldridge and good for the FairTaxers–they are, in reality, on the same side (for now) even if they can’t quite see that.

    Focus first on the big truth–this system–and the IRS’ expanded role to
    persecute and harass–is a self-defeating evolution of what began as a modest
    tax on some income that funded what was once a limited federal government that
    did far less harm.

    • Yankee

      Ken Hoagland, long-time FT promoter, starts off using Saul Alinsky tactics of misquoting me. I do not accuse anyone of being ignorant BECAUSE they don’t agree with me (there are many who have not devoted the professional time and effort that I have and are ignorant BECAUSE they have no idea of how the FT really works and what are its practical implications – I have even had many commenters who are dead wrong on the FT provisions and on current FT propaganda; these are the peple who speak from ignorance, not just because they disagree with me).

      Even after saying in his very first sentence that we all agree that the current system is awful and must be dramatically changed, and moving on to a call for unity in changng the current system, he reverts to beating up on the current system (which we all agree with and which he stated in his 1st sentence, so what’s the point?).

      So then, what is the purpose of Mr. Hoagland’ss response. It could have ended with his first sentence.

      Is his purpose merely to allude to FT’s (false) promise of “abolishing the IRS” by saying “smaller govt”?

      Mr. Hoagland does NOT try to defend the indefensible FT on its merits – he does not discuss the SUBSTANCE of my expose of any of its fatal flaws.

  • kHoagland

    Olive branch rejected because some people would rather fight and denigrate than cooperate for the greater good. Thank goodness that fundamental reform–or progress, in general, for that matter–won’t depend on such people. No, Mr. Eldridge, life is far too short to even attempt reason with someone who would kick if he had one leg.

    • Yankee

      Well there you are, if I do not bow down and kiss your feet I get insulted.

      First, perhaps i did not recognize your “olive branch” – I would never expect an olive branch from the “passionate” FT’ers that I encounter and you have been insulting to me in the past.

      Some olive branch. You insult me by (wrongfully) accusing me of calling anyone who agrees with me “ignorant” – I corrected you.

      Next, I asked you for further exlanation. What was the purpose of all of that additional anti-current-income tax verbiage? – we had agreed in your 1st sentence that we all thought the current income tax needed to be changed dramatically. The only hint I got was your “smaller govt” allusion to “Abolish the IRS”.

      While we both want to do away with the current system, we have fundamentally different reolacement systems that are not at all compatable. I want to do something CONSTRUCTIVE, not the FT which is DESTRUCTIVE.

      READERS: Please note that Mr. Hoagland offers not one single substantive comment, but merely engages in Saul Alinsky ad hominem attacks. KH – that is not an ad himinem attack, but merely my pointing out the shirtcomings of your arguments.

      • kHoagland

        By responding with rage and insults to the idea that all here are really
        trying to create something better you’ve now made pretty clear that your real purpose
        is not reform but anger and a hunger to attack–even
        employing McCarthy’s accusation of Communism aimed at good citizens who care
        more than most and who are anything but–as you probably know very well. They really deserve your apology.

        Substance? End federal taxation on labor and savings. That is the essence
        of the FairTax. Provide a prebate, not just to make spending up to the poverty
        level tax free for the poor, but for EVERY citizen. End the motivation in
        Congress to manipulate the tax system for power and profit. Make federal taxes
        visible on every receipt so that “special favors” will become obvious to every
        consumer. Free the economy from all federal taxes on what makes the economy grow–investment, labor and savings.

        Substance? The code is broken. There are replacement ideas to make it
        better, including both the Flat Tax and the FairTax. I think the FairTax is better. That’s not good enough for
        you because it apparently provides no outlet for your unreasoning anger. It’s
        not worth another moment of what you’ve made obvious are futile attempts to find
        common ground. Good luck to you and goodbye.

        • Yankee

          READERS,

          Please help me. If you see any RAGE in my response, please lt me know – I intended none and did not feel any as I responded,

          Similarly, if you saw any ad-hominem personal attacks on KH, please let me know – I tried to make only attacks on verbiage and tactics.

          Personally, I do not believe that FT-peddlers do not care about what’s good for America at all. I will not apologize for being against Cloward-Piven destruction of the American Republic via advancing the welfare state.

          Forgive me but I will now address what KH calls SUBSTANCE (what I call superficial FT talking points) rather than discussing the SUBSTANCE of how the FT really works.

          KH says, “end fed taxon labor & savings” – but ony to be re[laced by a tax (punishment) on sending. Noted economist Murray Rothbard said something like “Consumtion taxes are not moraly superior to income taxes – they are like punishment for the privilege of iving”.

          A FT fraud. The Prebate gies well beyond paying people back for any FT they pay. While paid to al, the BOTTOM LINE is that the poor are NET NEGATIVE FT payers (& get free SS/Medi) while the rest of us are NET POSITIVE FT payers.Are all the Comrade’s happy now?

          Congress can also manipulate the FT, or any other tax system. And when Congess repeals the FT Sunset Clause and enacts a NEW IT (its true goal) it will have even more than enough room to manipulate.

          Another FT fraud. The FT does NOT expose all of its taxes on the receipt. There is another 12+% in the FT paid by fed +S/L govts which they must pass on to you. There are also higher fed taxes to pay for
          SS & all fed pension COLA’s caused by FT and for fraudulent SS benefits “invited” by FT’s removal of the tax “penalty” for reporting SS Wages.

          Reducing taxes on production & labor down to a simple 10% will unleash a torrent of economic growth.

          We already agreed a long time ago that today’s IRC is broken – why do you thnk KH keeps bringing that up again?

          Psychiatrist KH thinks I am against the FT as an avenue to channel my inner “unreasoning” rage (that advice is worth what I paid for it).

          Because KH is no longer talking to me, someone please tell him that my conclusions are based upon an untold number hours of professional analysis and have not the sllightest thing to do with any rage.

          Please note KH’s feigned indignation as a mere excuse for running away from a battle that he knows he can’t win. Note that he cannot stand his ground and fight back against someone who truly understands how the FT really works – likely better than he does.
          Note that I am willing to arue back and forth with him, but it is KH who runsa and hides.

          Note also that KH made not a single true SUBSTANTIVE counter-argument to any of the points I made in my article – he offered only FT propaganda talking points. Even when I write more detailed articles, FT’ers do not dispute any points I make, they merley offer propaganda and emotional Progressive charitable talking points (along with insults and innuendos – the rage of being exposed).

  • Paul Livingston

    The USA needs real/true tax reform to eliminate deceit, abuses and bad practices and change for the better. Real/true tax reform starts with the repeal of the 16th Amendment that enabled direct taxation; the IRS; taxes on jobs and income, savings and production and tax withholding. The 16th Amendment took freedom and liberty from We the People as protected by our original Constitution. The document that protects us from our government.

    The flat tax still needs the 16th Amendment and continues deceit, abuses, bad practices and no improvement for the future.

    The solution is to move the tax base from production to consumption with the FairTax, a sales/consumption tax code with a progressive tax rate up to 23% based upon how you spend. With the FairTax Prebate, a two adults and 2 children family
    spending per year of $31,000 has an effective tax rate of 0%, at $45,000 a
    tax rate of 7.1%, at $75K a 13.5% rate, never 23%. End tax withholding and add the Prebate, the
    minimum wage take home goes from $6.70 ($7.25 minus 7.65%) to $8.52, up $1.82
    and 27%. Does this look like sticking it
    to the middle class to you?

    • Yankee

      Yet another FT propagandist heard from Ithe FL Ft Director I believe).

      Real tax reform can be accomplished even with the 16th Amenment still in effect – please let’s not hold our breath until it is repealed.

      The Flat Tax ELIMINATES most all of the current tax system’s abuses. This is the only realistic solution, not the FT which will NEVER pass and would destroy our economy.
      Mr. Livingston does not address a single SUBSTANTIVE point I made in my article, but can only spout the same old FT propaganda.

      Not only does Mr. Llivinston continue the 23%-30% confusion (a 30% sales tax compares to a 23% Income tax, but is still a 30% SALES TAX) but he uses an illustration which adds the SS/Medi tax to the Income Tax – PLEASE NOTE: I wrote SENIORS (WHO DO NOT PAY SS/MEDI Tax) will pay more FT than IT.

      Also, he glosses over that the FT provides free SS/Medi to the poor (at our expense) – someone has to pay for that.

      Also, he implies that we all win – if the FT is supposed t be revenue neutral (it won’t be), then we all can’t win – some must lose.

      All Mr. Livingston has done is throw up a lot of confusing and misleading FT propaganda. When you analyze each point, you can see the deception and falsehood.

  • We MUST do away with the IRS. It is broken beyond repair. It has become a political power it was never meant to be. The temptation to liken the IRS to the enforcement brutes of a totalitarian State about 70 years ago is uncanny. They are out of control and cannot be trusted to clean up their act. Taxes are needed to finance critical Government needs but citizens should not be taxed on what they make but on what they spend. A national consumption tax will work. State and local governments across the country have been collecting and administering sales taxes for decades. They know how to do it, as do businesses. In short, reporting and collection will improve a great deal under a transparent Fair Tax system. The present system is asinine beyond belief. We need to totally scrap it and start fresh with the Fair Tax. Report your social security wages? Why? There will be no need to report your wages when the INCOME tax system is abolished.

    • Yankee

      tacwash,

      The IRS is broken, but NOT beyond repair. My very Flat tax would neuter it and solve a great many of its problems.

      We don’t have to scrap the entire IT, just bring it under control – which my Flat Tax accomplishes.

      While business knows how to collect and pay sales taxes, a 40-70% retail sales tax will create a Black Market the likes of which the world has never seen. In the words of FT-paid
      Harvard economust Dale Jorgenson “in replacing 3 taxes, the FT takes on too great a burden for it to carry”.

      • Yankee,

        It is broken indeed. I understand that you think it can be repaired. It is OK with me if you think so but you have not convinced me that it can be. I have repaired things all my life and one thing I learned in the process is that there comes a time when it is not worth fixing something that has a fatal flaw. Taxing income is a flaw. The problem with bureaucrats and politicians is the desire to control my income rather than control their outgo. We would all be better off if we could keep all our income and control our outgo. That has no flaw.

        • Yankee

          tacwash,

          As noted economust Murray Rothbard said,”Taxing consumptiin is not morally superior to taxing income. It’s like punishing us for the privilege of living”.

          The real problem is Congress’ unconstitutional spending.

          If we can change the entire system (FT) we can, by definition, make lesser changes, my Fat Tax, that would solve most all the problems.

          It is LESS impractcal to construct a truly Flat tax than the make a revolutionary change like the FT.

          • Yankee,

            We both agree that the unconstitutional spending by Congress is the problem. There is a lot of unconstitutional stuff that has gone on by all three branches of our government in DC, that’s for sure. Due respect to your quoted economist, but I doubt that he and I use the same standard for measuring morality. I do believe however that it is immoral for the government to punish citizens for making money by taxing their income, be it by an assigned flat tax or some variable system with loopholes. Yes, I say THAT is more immoral than giving citizens the control of their tax payments by a flat tax only on what we chose to to spend on new products.

          • Yankee

            tacwash,

            We are all entitled to have our own opinions, viewpoints and tastes.

            You think it’s immoral punishment of making money,

            I (and Murray Rothbard) believe it is immoral punishment to lay a heavy tax every time we spend a dollar of our hard earned money,
            AND pay hidden higher fed + S/L taxes,
            AND make buying new homes much more difficult,
            AND have a more invasive new IRS (the STAA),
            AND winding up with BOTH a FT AND a NEW IT – all of which will destroy our retail-sales-sensitive economy,
            AND which advances the welfare state.

          • Yankee,

            I can see that you have made up your mind to stay with the corrupt IRS system and will let it go at that. I only hope that other readers will not be taken in by the potshots you take at the Fair Tax. Most people know how bad the IRS system is but personally (we are all entitled to our own viewpoints) I see your remarks about the Fair Tax as characterizations from a biased proponent of a scaled down status quo. When you say the Fair Tax lays a heavy tax burden on us EVERY TIME we spend a dollar, it is just plain not so. I’ve read the bill. Farewell my friend.

          • Yankee

            I have made up my mind to neuter today’s IRS, not to change it to a corrupt STAA and a NEW corrupt IRS.

            I made specific substative critical comments – those are not mere “potshots” – you never addressed the several specific criticisms I outlined in my last reply to you. Is it that you cannot do so?

            You accuse me of “bias”, but you can’t address a single substantive issue.

            Yes, I said that every time you send a dollar of your hard earned money, that will cost you 40-70% in sales tax (FT + S/L) – how is that “not so” in your opinion.

            Farewell and best of luck to you – you will need it.

  • Paul Livingston

    Yankee, you mention the flat tax eliminates most of the abuses. So the evil is still there. Why not do the job right? Why are you afraid of repealing the 16th Amendment? Do you love and need the government to tell you that to do? Do you like being ruled? Are you afraid of freedom and liberty as guaranteed by our Constitution before amended? From your writing I bet you are good at gaming the present tax code too. You can’t accept a definition that the FairTax is an inclusive tax, like the inclusive tax rates on income and pay roll. No, you want to distort the definition. I bet you like being deceived too by paying hidden taxes in higher prices so business has the money to pay their taxes.

    • Yankee

      Paul,

      You are very good at deceptive propaganda.

      The GENERAL “evil” you complain of (i.e., a tax enforcement system) is a necessary evil that must exist in ANY tax system (ye, including your precious FT). The SPECIFIC evil you really are addressing (e.g., IRS harassing Tea Party groups) are fixed by my Flat Tax (entities are not taxed, only commercial activities).

      I am not “afraid” of repealing the 16th, I am just being a sober adult who realizes that it won’t happen anytme in the foreseeable future.

      Forgive me Paul, but “do I love govt telling me what to do – do I love being ruled – am I afraid of fredom and liberty” are all just rhetorical nonsense.

      Wth all due modesty, many considered me absolutely outstanding at protecting my clients from the insatiable spendthrifts in Congress.

      What I can’t accept is being conned. A 30% SALES TAX may be comparable to a 23% IT, but it is still a 30% SLES TAX NOT a 23% SALES TAX. My FT friend (Kerry D. Bowers who commented in this discussion) askd a me and colleague (Dutchan3) for our critiques in preparation for a FT snior level meetng to discuss those deceptions harmful to the FT marketing effort. My recollection is that kerry himself, brought up the FT’s deceptive 23% vs 30% spiel. The FT marketing getting more honest would help FT marketing.

      No I don’t like being deceived by hidden taxes in the cost of goods, but it appears that YOU are happy with HIDDEN TAXES in higher fed + S/L taxes for 1) the FT they must must and get back from you, 2). higher fed taxes to pay for SS COLAs &, Fed Pension COLA’s, & for fraudulent SS benefits “invited” by FT’s elimination of the tax “penalty” for reporting higher SS Wages.

  • Phil_will1

    The current system started out pretty close to a flat tax a little over 100 years ago. The 1986 Tax Reform Act flattened the rate chart and eliminated many of the deductions. For decades now, members of congress of both political parties and virtually every occupant of The White House have supported tax simplification. Congress routinely passes legislation with titles such as “The Tax Simplification Act of _____.” And yet, year after year, congressional session after congressional session, we don’t get simplification, we get greater and greater complexity. We have been attempting to define the ever elusive term “taxable income” for a full century and the net result of that project and the expenditure of incalculable sums of time, energy and resources is the biggest mess that anyone can imagine. Perhaps it is time to consider another approach?

    “The Flat Tax” has been around for quite some time now – longer than the FairTax in fact. However, if you ask five different flat tax supporters which version they support, you are quite likely to get five different answers. Why is it that anytime someone wants to advocate a flat tax, they have to design their own personal version? (See Rick Perry, Stephen Eldridge & Heritage) This isn’t “Build-A-Bear” or Burger King (hold the pickles, hold the lettuce, special orders don’t upset us). This is about a single, unified tax system that is not economically destructive, is globally competitive and is comprehensible to average Americans.

    Speaking of being globally competitive, the United States is currently the only one of 34 OECD nations with no border adjustment mechanism in its tax system. As a result, we have by far the largest trade deficit in recorded human history. China is not in the OECD, but they, too, have a border adjustment mechanism, as does the vast majority of the rest of the world. If Mr. Eldridge’s proposal were adopted, the United States would remain the only nation in the OECD (and one of the few in the world) with no such mechanism in what many experts have labelled “the globalization century”. This serious structural deficiency is only going to cause more and more economic damage if the experts’ predictions of greater and greater global competition proves out.

    There are other economic advantages to the FairTax, but I will save those for another time.

    The other point that I would make is that Mr. Eldridge’s projections of a 40 to 70% FairTax rate (which are based on flawed and deceptive assumptions) are based on the rate that it would take to be revenue neutral (in the eyes of FairTax critics). In order to arrive at his 10% rate, he merely waved his hand and uttered “let it be”. The bill that he based his proposal on (HR 1040) is not revenue neutral, and certainly his is not. That means, of course, that neither HR 1040 nor his proposal will ever be seriously debated in congress. Of course, if you have no serious intent to ever do something about our horribly dysfunctional tax system, that is not seen as a fatal flaw. FairTaxers could merely wave their hands and make their rate 10% if they were as unserious as Mr. Eldridge.

    • Yankee

      Phil,

      You too are a good propagandist.

      Yes, the IT started out simple and became complicated and Congress employed its deceptive legislation titles (e.g., the ACA) to describe some minor flattenings. However, it is false logic to say that because true simplefication has failed to date, that we must stop tryng to truly simplefy. HR 1040 does so and I make one further leap from that.
      If you think its rational to think we can dump the entire system for the FT then , by definition, you must accept that we can make LESS revolutionary changes (that will resolve virtually all the problems with our tax system).

      Your 2nd paragraph is truly puzzling. Exactly why can’t people offer diferent versions of a Flat Tax. You claim yours (FT) is about a single system – NO, after discussing the FT’s fatal flaws, many FT’ers tell me “well, it’s not about HR 25 it’s about some sort of consumption tax”.

      Please explain what you consider to be my “flawed & deceptive assumtions which are the basis for my 40-70% combined S/L + FT RATE. Remember, 30% FT + e.g., 10% S/L sales tax = 40%. Add 30% (the rate needed is evasion/avoidance is an illustrative 30%, it could be higher – you just have to run through the numbers) – total 70%.We all await your explanation.

      Nex, you make a false connection between border-adjusted consumption taxes and international competetiveness. The US does not have a NRST to be border-adjusted,
      many other nations do. The US does have some uncompetetive IT rules.

      I use a 10% rate making rough calculations that showed that it worked to replace IT revenues. More imortantly, the 10% rate is popular. Even if it theoretically produced less revenue, I believe that it would produce an explosion of economic activity and the revenues would increase dramatically over time.

      HR 1040 had 10 Co-sponsors (including 6 who EARIER Co-Sponsored the FT (and thus presumably prefer HR 1040) after only a few months (compared to FT’s 72 after 15-20 YEARS, many of who would NEVER actually vote for it).

      • Phil_will1

        1. You imply that I am giving up on simplification. Nothing could be further from the truth. I am giving up on simplifying an income tax because (a) we have been trying to do that for 100 years and the results have been a disaster, and (b) most of the complexity of the current system revolves around the deductions from gross income to arrive at taxable income. Determining gross revenue (or sales) is relatively simple an almost all cases. Could congress complicate that straightforward exercise? Of course, but they would have much less freedom and latitude to operate within and hopefully, an aroused electorate that would be more alert to efforts to complicate.

        2. You certainly can offer as many flat tax options as you wish, but as I am sure a “tax expert” such as yourself will understand, in order to get anything done, you have to have substantial popular support for a single proposal. Legislators have for years stated that no consensus has been reached on the issue of tax reform and they have used that as an excuse for doing nothing (except voting for more complex and uncompetitive fixes). I heard that a lot when I first started, not so much any more since the FairTax has overtaken the alternatives. However, that is truer in some areas of the country than in others.

        3. I will be happy to explain what I was referring to in my “flawed and deceptive assumptions” phrase. The FairTax critics who have derived much higher sales tax rates than AFFT have examined the proposal (which as you know is an actual bill in congress) and taken exception to various aspects of its design. They have, for example, said that the rebate won’t work, so they have speculated on all of the exemptions that the various special interests would want inserted and calculated the rate that would be required to offset the shrinkage of the base that would result. So they end up with, not the FairTax, but a modified version of the proposal. It is a form of tax reform that they themselves do not support and I would suspect that you don’t either. FairTax supporters also do not support this modified version. So you have a form of tax reform that has no known popular support anywhere and they score that and attribute it to the FairTax, which has more popular support than any other tax reform proposal in the nation. Quite a tricky slight of hand, huh?

        Then you have your own deception when you state that state sales tax rates average 10% and then add that rate to the FairTax to arrive at your base of 40%. There are two problems with this approach. The first is that few, if any states have a 10% sales tax rate and it certainly isn’t an average. However, the bigger issue is that you would continue paying the state sales tax (at whatever real rate it happens to be) under either a continuation of the current system or your proposal. Yet you do not add that rate onto your proposal to arrive at a “real” figure. We also note that even though you leave payroll taxes intact, you do not add those taxes to your proposed flat tax to arrive at the real impact on wages.

        You also ignored Kerry Bowers’ main point, which is that your proposal would result in a substantial tax increase to the middle class. How is THAT good for the economy? Do you really think that what this nation needs is a greater tax burden on the middle class?

        4. You state that I make a “false connection” between consumption taxes and border adjustability. If that connection is false, then the WTO (World Trade Organization), which has ruled that neither an income nor a payroll tax may be border adjusted, is making that same “false connection”. The WTO, as you know, has the authority to slap on punitive fines to member nations violating their trade directives; an authority which they have exercised in the past. This is one of the reasons that nations all over the world have been moving toward consumption taxes and lowering their income tax rates over the past couple of decades.

        5. Your response to your 10% rate validates my criticism of it. You are either unaware of the congressional rule requiring tax reform proposals to be revenue neutral (using static scoring) or for some reason believe that this rule does not apply to you. You believe that your proposal would produce greater economic growth and you are banking on that. That is called dynamic scoring. The battle between dynamic and static scoring has been waging in Washington for some time now and has taken place independent of the FairTax movement. I personally believe that dynamic is the more legitimate methodology, even though I acknowledge that the critics have a point when they object based on the fact that forecasting future economic growth rates is a tricky undertaking. As Bill Krystal said on TV a couple of months ago, he asked 4 economists the same question and got 5 answers back. Nevertheless, static scoring is a requirement of congress currently and since all roads to real tax reform lead through Washington, the FairTax has chosen to play by the rules. You have chosen for some unexplained reason to ignore them.

        As for the economic boost, I can imagine that your proposal would lead to some, but not nearly to the extent that the FairTax would. For one thing, Dr. Arthur Laffer estimated a couple of years ago that the compliance costs of the current system were $431 Billion per year at that time. They increase with each passing year, so it is probably around $450 billion/year now if you utilize Dr. Laffer’s definition of compliance costs. As you know, different studies have defined compliance costs differently and they come up with different estimates of their cost as a result. All of them come up with numbers that are in the hundreds of billions per year. Dr. Laffer estimated that 50% of those would be saved with a flat tax (not the Stephen Eldrdige flat tax) and 90% would be saved with the FairTax. He also estimated that the compliance cost savings alone of the FairTax would boost GDP growth somewhere between 1/2 and 1 percentage point going out for years. That is just compliance cost savings, which are actually a relatively minor reason for the FairTax’s boost to economic growth.

        The primary reason that the FairTax would accelerate the rate of economic growth tremendously. At its heart, the FairTax would initiate two major economic shifts simultaneously:
        A. It would cause shifts in the pricing of U. S. produced goods versus domestic produced goods, both here and in foreign markets, which would significantly increase the demand for U. S. produced goods all over the world, including our own domestic market, the largest consumer market in the world, and
        B. Eliminating the income tax and payroll taxes would make the U. S. the most attractive destination for capital on the planet. You may have heard that there are trillions of dollars in profits owned by U. S. based multi-nationals parked offshore. These are badly needed in our own economy, but are being invested offshore instead. However, this is only the tip of the iceburg. Eliminating virtually all business taxes would stimulate not only the repatriation of most or all of those funds, but unleash a torrent of other foreign capital into this nation. This is the 21st century – the globalization century – and the competition for capital (which is the fuel that any economy runs on) is only going to intensify from here.

        It is the convergence of these two enormous economic forces that provide that major impetus for a quite significant economic boost to the U. S. economy. Interestingly enough, “the flat tax” not only does not offer one of them; it offers neither.

        I have to go get some work done. That is enough of this for now.

        • Yankee

          Phil_will1 (Part 1 – this covers your points 1-3 above)

          Thank you for your extensive post that addresses specific issues.
          If you feel that any of my reply here is insufficient, please let me know and I will do my best to provide a better explanation.

          1 & 2;, I am sorry to hear that you have given up on simplifying the IT. I can easily understand being frustrated with it, but simplification is very possible IF WE ALL CALL FOR IT. The thieving class in Congress may not be able to agree on a Flat IT, but WE the people can.

          HR 1040 taxes only 4 items of income – I would start with today’s items of income and pare them down and SIMPLEFY the remaining ones. HR 1040 has No deductions but a family Exemption – I would have NO such exemption. Thus individual taxes are VERY simple. HR 1040 and I use different verbiage to make business taxes as simple as posssible (i.e., All income, less all expense incurred to earn revenue).

          3. I do not use any alternative version of the FT – I start with the FT AS WRITTEN. It STARTS with a 30% SALES TAX. to that I add a sample 10% S/L sales tax rate – combined rate STARTS at 40%.

          NEXT, because the FT assumes ZERO FTevasion/avoidance that 40% will have to rise to make u for lost revenues. At a sample 30% evasion/avidance rate (it could be higher) the combined rate will have to rise to over 70%. Of course, the FT could 1st repeal the exemptions for education expense and USED goods & include the rental vaue of your home, but that might not be enough and the rate would still rise but perhaps not as much.

          While many states have a 10% sales tax rate (or close to it), I use 10% not as an average but as a simplefying illustrative round number.

          My sole point in combining them is to highlight the sticker shock that buyers will encounter at the cash register, which will spark a taxpayer revolt which will destroy our retail sales sensitive economy.

          I had no intent to deceive. Yes, in addition to my 10% Flat tax you will also pay SS/Medi tax (as you should) as well as S/L sales taxes.

          I did not ignore Kerry’s point – I thought answered it so I will try again.
          My 10% tax will hurt the lowest economic class that is paying negative taxes today and under the FT (they should contribute to the cost of govt and to their own SS/Medi).

          Perhaps the lowest end of the middle cass might be hurt – hard to say because it would depend on their deductions (but it is “fair” IMHO that everyone pay 10% of their income).

          Dutcman3 ran some calculations – middle income married SENIORS (who are NOT paying SS/Medi directly any more) pay more in FT than they would pay in IT on income from about $30,000 -$110,000
          (I will have to find the exact figures for you ). Middle income SENIORS will start to pay agan for SS/Medi and will see their buying power decline due to higher prices.

          Everyone can’t win if FT is to revenue neutral. Under the FT, someone has to pay in order for the poor to receive free SS/Medi and a big Prebate check that exceeds any FT they might pay. It appears that the middle class will bear the brunt of that.

          I must take a break – I will return and cover the rest of your points.

          Againn, thank you for your comments..

        • Yankee

          Phil (Part 2 – your point 4 )

          I am not familiar with what WTO is doing in this regard (among others) nor do I understand exactly what it means that “neither an income nor a payroll tax may be border adjusted”.

          Much (if not most) of the rest of the world does not tax income earned outside of their borders (in general) – the US is unusual in that it taxes (e.g.) a US corp’s earnings anywhere in the world where they are earned and also taxes dividends from non-US subsidiaries, etc.Perhaps this is what you refer to as border-adjustings vs (US) non-border adjusting.

          I do not buy into your theory that the US’s failure to follow the rest of the world’s lead and “border adjusting” its Income Tax (nor that we can only fix it with a border-adjusted FT) is the cause of our trade deficit. IMHO, that procees from our open import trade policies, our consumption economy and our failure to demand equal trade access to other nations.

          If you think border-adjusting would help our trade balance (I don’t, I see US corporations increasingly operating abroad), we could simply change our IT to be border-adjusted just like the rest of the world – we don’t need the FT to fix that.

          Quere: the US’s non-border-adjusted IT would seem to violate the WTO rule that you quoted – does WTO penalize the US for that? If so, we can simply make our IT border-adjusted; we don’t need the FT.

        • Yankee

          Phil (part 3 – Your point 5)

          You may have jumped to the wrong conclusion.

          I do not claim to be an expert on Congress’s legislative methodology, including JCT’s scoring process.While I am generally famiiar with the terms dynamic & static scoring I am not confident that I understand their nuances.

          For example, I believe that static scoring assumes that TAXPAYER BEHAVIOR does not change (dynamic scoring can assume changes in TAXPAYER BEHAVIOR). It appears that BOTH can take into account some projected ECONOMIC changes that CBO uses in its projections.
          Also JCT uses a 10 year projection and it is the 10 year total that is te taget – is is not limited to the 1s year effect.

          My initial informal calculations showed that my 10% rate was sufficient to replace IT revenues. Also, even if that is a little short, Congress can always reduce tax rates. Further, if it is a little short AND absolutely had to be revenue neutral, I could live with a higher initial rate
          which reduces as revenues rise.

        • Yankee

          Phil, (Part Your Economics)

          You say ” …I can imagine that your proposal would lead to some, but not nearly to the extent that the FairTax would.”

          On the subject of economics, your opinion, my opinion Arthur Laffer’s

          (I am a fan of his) opinion as well as everyone else opinion are all equaly uncertain. Economics is NOt a physical science like chemistry where mixing 2 oart Hydrogen with 1 part Oxygen make water – EVER TIME.

          I don’t knw what Dr. Laffer includes in compliance costss, but I am aware that the FT’s definition is 90% thin air. That is, it is the theoretical cost of preparaing tax returns using time estimaes and a $39.50/hr for oour time – a methodology that the IRS gave up on years ago. A couple of years ago, one of the FT statute co-authors testified before Congress and his table showed only appx. $50B in CASH savings and the rest of his total $400+B in this theoretical time savings. Also, thank you for saying not MY Flat Tax – I think mine OR HR 1040 would achieve the same (maybe 90%) savings in time and dollar savings, because we wold both simpley filing down to maybe 1 page.

          I must dispute your next point about the FT providing any large new trade advantage.I calculate that US prices (before FT) may decine

          only 3-4% which does not provide any big advantage in international trade. Ft’s Dr. Dale Jorgenson said (in his 2nd paper) that prices will only decline by a MAXIMUM POTENTIAL of 7%). AFFT’s Chief Economist raised that to 12.5% but using figures that don’t make sense to me. She uses 7.9% for removal of embedded IT, but corp taxes are only appx. $300B while total FT sales are $11.2 T (arguably even $14T for total GDP exclusive of imputed rental value of homes) – that resukts in a 2.9% or lower figure. Thus, with about a 7% MAXIMUM POTENTIAL decline, assuming 1/2 of that is passed on to customers, that would yield only about a 3-4% pre FT price decline

          The US as an attractive destination: The US REMAINS unattractive (maybe just a tad less so) because of its high cost labor, its ineffeicient labor, its overbearing regulatory environent, its extremely litigious environment, among other un-attractive features.

          Te supposed $Trillions of $ parked offfshore, just itching to fly home.
          Abot 7 years ago, Congress enacted a mere 5.5% tax on bringing such earnings home. An underwhelming $350 came home. FTwill NOT bring back a lot of money- it’s not there to bring home. Instead of the destructive FT, all we need to to eliinate any tax on bringing home overseas earnings (i.e., the water’s edge approach used by the restbof the world.

          My Flat Tax would offer the lowest rate of tax on corporations and individuals AND make US taxes very SIMPLE. From a tax perspective only, the US would be made extremely atttractive to foreigners.

        • Yankee

          Phil,

          This is an addendum to my Part 3 – your point 4 about being renue neutral and JCT scoring.

          I will stick my neck out here.

          Your beloved FT will NEVER be scored as revenue neutral.

          Although the FT economists rationalized their using a ZERO factor for FTevasion/avoidance, JCT will NOT! JCT will have to produce some figure while understanding that no figure for evasion/avoidance at such unprecedented high sales tax rates is reliable.

          Because FT assumes ZERO, ANY reasonable factor for evasion/avoidance will cause FT to fall FAR short of CBO’s current $42T revenue estimate over the next 10 years.

          It is interesting to me that JCT shows its product ONLY to the sponsoring Congressman not to the public). Rob Woodall hel a conference call to the FT faithful recently. I am confident that I heard something that the the FT faithful did not. IMHO, Woodall already knows the truth of my comment immeditely above, because he said to the FT faithful that they may have to change the prvisions of the FT in order to score adequate revenue.

        • Yankee

          Phil,

          Again I compliment and thank you for your thoughtful comments.
          They require thoughtful responses on the substantive issues.

  • Yankee

    READERS;

    My Article mentions my preferred plan, a very Flat Income Tax, but only after a very tough decison was reached to include it.

    That is, I am advised not to include it because FT’ers will make my alternative the focus of the their arguments in order to distract from the FT’s fatal flaws.

    It is a false argument for FT to caim that my Flat tax is no good AND THEREFORE YOU MUST ADOPT THEIR FT.

    I will write another article dealing ONLY with the Flat Tax. This Article is intended to address the fatal flaws of the FT – let’s focus on the substance of those arguments.

  • Yankee

    FT propaganda has done a very good job of whipping up peoples’ agitation at the IRS, stressing particularly IRS abuses of it powers in trying to supress tea parties.

    First, it is much less difficult politically to make changes WITHIN the IT system than it would be to throw it out entirely AND even much more so to replace it with the outrageous FT,

    The IRS can be fixed by changing the tax law (by simplefying, eliminating all the complexity that IRS utilizes to torture us AND changing the presumption to say that ONLY commercial activities are taxed) and by changing the culture and personnnel at the IRS.

    Don not ignore the fact that the FT provides us with a NEW IRS (i.e., the STAA) to administer the FT (and will audit consumers) AND when Congress repeals the FT’s Sunset Clause and enacts the NEW IT, the STAA wil then also audit that IT.