It’s been my custom to save interesting articles from the Chronicle editorial page. A few years ago, a well-written letter by John F. Morse of Beverly Hills caught my eye. His point was correct; under Fair Tax, retirees living on Social Security and savings don’t get the same treatment as younger people do. They must now spend money which has already been taxed, and like everyone else, pay a 23% embedded federal sales tax on all new goods and services.

Let’s look a bit deeper into his criticism using the figures Mr. Morse suggested. Under Fair Tax, a retiree’s $26,000 from Social Security and $13,000 from a 401K is all tax free. Now consider the Fair Tax provision whereby all spending up to poverty level is tax free for everyone with a valid Social Security number. Poverty level for one person is about $10,000; but when he spends that first $10,000 on new goods and services (used items are tax free), he pays $2,300 in taxes. Under the “prebate” provision, Treasury rebates all that money to him in 12 monthly payments. So far his taxes are still zero. Now look at the other $29,000.

Recall how we eliminated not only the IRS and income taxes on individuals but also all business and corporate income taxes as well. These embedded business taxes are passed on to consumers as higher prices. The average is about 22% on everything we buy. Eliminating these taxes means a $100 product costs $78 now. At this point, retirees are paying a 23% sales tax on products costing 22% less. It’s not perfect but pretty close to a wash. There’s another plus for seniors and everyone else. When the U.S. no longer taxes income but only what we buy, the trillions sheltered in offshore financial centers to avoid income taxes can return. Economists estimate a healthy growth in investments.

Take note: The first $10,000 spent is buying goods originally marked at $12,750.

Joseph P. Ryan


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Mr. Ryan does not appear to understand some of the many critical deceptions of the FAIRtax ("FT"). First, he deceptively quotes the FT rate as 23% (of the sales price). When stating a sales tax rate the way we normally do, that translates to a 30% (not 23%) rate on the price BEFORE adding the sales tax. He ASSUMES that today's 22% "embedded taxes" in the cost of goods would DISAPPEAR with the FT. While that was the original lie, they have been forced back down and now admit to a big price increase of (I say) almost the full 30%. Thus, seniors would pay be MORE in FT than they would have pay in Income Taxes, which will be FULLY reflected in the prices they must pay. Because they must pay FT on every dollar of spending, the FT would be a 2nd tax when they spend Income-taxed dollars AND they are paying SS/Medicare "taxes" again, even though they have no earned income. Seniors also lose purchasing power for a number of reason. see The exemption for used property may well be a scam. The poverty level for ge 1st person in the household for 2019 is $12,490, not the $10,000 Mr Ryan states. For a full discussion, see

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