Frequently Asked Questions
A National Retail Sales And Use Tax
 

1. Why a national retail sales tax?
2. Why a national retail sales tax? Why not constitutional duties, imposts and excises?
3. What is the effect of a national retail sales tax on most businesses? Won’t such a tax effectively raise prices by 14% or more, and thereby impede business?
4. Why not use a value added tax instead of a sales tax?
5. Doesn’t a National Retail Sales Tax especially hurt those on low and fixed incomes?
6. If food is not taxed, don’t rich people come out ahead compared to the poor and middle class?
7. Is a national sales and use tax constitutional? After all, many activities in commerce and retail do not cross interstate boundaries.
8. A national retail sales tax is contrary to the Founder’s formula because…
9. Trading an income tax for a national sales tax seems to be choosing the lesser of two evils. Why bother?
10. Why bother with a national sales tax? Let’s just scrap the income tax and not provide a replacement.
11. Isn’t a National Retail Sales Tax essentially a tax on labor?
12. Should labor/direct services be taxed?
13. I have one huge disagreement with your proposal and that is your advocacy of a national sales tax. History has shown that specialized excise taxes (that is, on tobacco, alcohol, firearms, gasoline, tires, etc.) provide ample revenue…
14. Why bother with exemptions? All that does is open the door to special interest groups.
15. Doesn’t providing exemptions mean we are favoring certain manufacturers and producers? If we exempt groceries, aren’t farmers, canneries, etc. coming out ahead? If we exempt insurance, aren’t insurers coming out ahead?
     

Why a national retail sales tax?

Almost everybody participates in commerce to one degree or another. Therefore, everybody pays the tax. Because everybody should pay for the cost of maintaining government, such a tax is fair. When tax burdens are shifted to one class of people, the tax is no longer fair.

A sales tax is a one-time tax paid on consumption, not production. A tax on production is usually passed on to the consumer, making the tax regressive and expensive to consumers.

With a sales tax, although the seller is responsible for collecting the tax, the buyer bears the burden of paying the tax. Therefore, sellers need not pass on the cost of this tax embedded in the cost of their goods and services. Those who can afford to buy more pay more tax, making the tax progressive.

The hidden embedded cost of the income tax is the reason it’s a regressive tax and not a progressive tax. Nobody escapes the hidden embedded costs of the income tax, and poor people are especially hit hard.

A consumption tax exposes the true cost of government. Add the fact that NESARA discourages Congress from creating currency out of thin air—forcing Congress to live on a true budget—and Americans will suddenly start to realize the magnitude of government waste and demand changes.
 

Why a national retail sales tax? Why not constitutional duties, imposts and excises?

A sales tax is an excise tax, an excise tax being a tax on a particular activity. The activities being taxed are retail exchanges in commerce. Therefore, a federal sales tax is arguably constitutional.

Although we desire and expect Congress to live within constitutional limitations, we take issue with taxing only specific activities or industries. Such taxes are unfair, inequitable, and often not uniform. When one class of people or industry is targeted for a tax, the tax burden shifts to those people. This is unfair.

Taxes must be fair to all people and all people must pay uniformly within their ability to pay. A national sales tax spreads the burden to all people and industries. Specific industry and class taxes do little but violate life, liberty, and property.

Few excise taxes are levied fairly. For example, excise taxes on firearms, distilled beverages, tobacco, etc., unfairly target specific industries and classes of people. The decades-long conflicts between revenuers and moonshiners is a prime example. Moonshiners converted crops into distilled spirits and sold those spirits for income. Targeting only that industry greatly impacted livelihoods and is unfair. However, a tax on automotive fuels and equipment makes sense because this targeted consumption tax helps pay for highways and roads. Such taxes are fair because almost all people today use automobiles, related equipment, or transportation systems, the roads, and therefore justly pay the tax.

An import tariff also can be grossly unfair. Indeed, import tariffs helped promote the discontent between the northern manufacturing states and the agricultural southern states, and eventually helped trigger the American War Among the States. In fact, the Confederate Constitution prohibited tariffs. Tariffs should not be used to encourage or discourage specific industries, or to wage political warfare. Such thinking violates the concepts of free trade. The only fair tariffs are universal tariffs on consumption. If you read the Federalist Papers, you will see that the Framers understood this too.

Another problem with taxing particular industries or classes of people is that those businesses often pass on the hidden embedded cost of the tax. Sure, those businesses pay the initial tax, but the actual cost is passed down the line to the consumer. A well written federal sales tax bill avoids that problem with a single retail tax on consumption, not production. With such a tax, the buyer pays, not the seller, therefore the seller has no reason to avoid or hide the tax.

Society can certainly use tax schemes to discourage or protect certain activities, but once this attitude prevails, there is no limit to unleashing “the power to tax is the power to destroy” mentality. Taxes should be used to raise necessary revenue, not to regulate specific private activities.

There is no such thing as a perfect tax. All taxation is forced confiscation of property. However, the minimum characteristics of a well designed federal sales tax are fairness, equity, and uniformity. NESARA meets that criteria.

Please remember how the political process works. Everybody must win for a populist bill to stand a chance. NESARA changes the rules of the game in favor of working consumers, but also includes many items to attract the support of a wide variety of special interest groups. Let’s get our foot in the door by resolving the two root issues, and the rest should follow rather easily.
 

What is the effect of a national retail sales tax on most businesses? Won’t such a tax effectively raise prices by 14% or more, and thereby impede business?

At first glance, your question implies a heavy cost to the retail sector by imposing a consumption tax. Of course, there is more to the answer than what initially meets the eye. Consider the following.

During the 1970s and early 1980s we experienced an inflation rate of nearly 20%. Inflation serves as hidden tax. Worse, you get very little to show for that tax as government consumes those resources. At least with a sales tax the public gets some say in the matter. Remember that even during times of high inflation people still spent their income in the retail sector.

Once NESARA becomes law, people begin to take home at least 15% more income; many will take home an additional 28%. That means people have more disposable income. Studies show that most people who realize an increase in income, particularly a sudden increase, tend to spend rather than save or pay off other debt.

After NESARA becomes law, many people will find themselves mortgage free. Those dedicated funds are then suddenly free to be spent on additional consumer goods.

Without the burden of income tax compliance, businesses can immediately begin to reduce prices, no longer having to pass on those costs. Estimates by experts place the hidden embedded cost of the income tax at approximately 30%. That means without that overhead, prices will fall. NESARA projects only a modest 2.5% gain in overall efficiency, but that in itself produces tremendous benefits.

Or perhaps business owners might respond by combining reduced prices with higher wages, thereby increasing the amount of disposable income to workers.

Without taxes on production, manufacturers and business can concentrate on ways to improve and expand business. Such a move would increase wages, increase the circulation of currency, and provide revenues for other businesses.

Without the dreaded income tax, income and assets will flow back into this land, even if subject to a consumption tax.

In the long run, NESARA also provides for a stable currency, which will do much to counter inflation and preserve future purchasing power of the dollar.

NESARA changes the banking laws to reduce individual debt loads and at the same time allowing more currency to circulate freely. This apparent contradiction is explained by noting that prosperity is not a function of the volume of currency but of the volume of currency circulating in commerce.

All of these factors do much to offset a consumption tax. In fact, the out-of-pocket expense likely will be less than under the current system because purchasing power increases, despite the deceptive over-the-counter addition of a consumption tax.

Let us remember one more important factor. A consumption tax dramatically exposes the cost of government. The facade of withholding at the source does much to mask the cost of taxation. A consumption tax on retail commerce cannot be hidden. In other words, Americans will almost immediately begin demanding a reduction in the sales tax rate, once they realize the true cost. In short time, not only does America heal from the tyranny of the income tax, but soon will reap benefits from a lower sales tax rate.
 

Why not use a value added tax instead of a sales tax?

For all intents and purposes the effects of the income tax is the same as a value added tax. Every company that has to pay an income tax passes those costs along to the next person in the chain of purchases. You the final consumer pay all of these taxes. A value added tax would have the same effect as the current income tax, much of the same paperwork, with many of the same loopholes.

Yes, from your or our perspective, we would no longer be paying directly for an income tax or for any value added tax. We would, however, as consumers pay dearly for the cumulative effects of a value added tax. Just as we currently do with the income tax.

Little gets solved by replacing the income tax with a value added tax.
 

Doesn’t a National Retail Sales Tax especially hurt those on low and fixed incomes?

Some of the proposed tax bills most certainly would, especially if necessities of life are not exempt. NESARA is designed to avoid this problem as NESARA recognizes the essential natural rights of life, liberty and property.

First, under NESARA necessities such as food, medicine, and mandated expenses are exempt. For most people on fixed or low incomes, most of their earnings go toward the necessities of life. Under NESARA, these expenses would be unaffected by a sales tax.

Second, NESARA recognizes and segregates labor from being taxed. Labor is the fundamental root source from which all income is derived.

Third, the annual total sales tax paid by such people will be less than what is paid by the existing annual income tax.

Consider the fabled poor family of four. At a minimum wage of $5.15/hour, two full-time wage earners provide an annual income of $21,424, (2 workers×$5.15/hour×40 hours/week×52 weeks/year = $21,424).

According to the March 1999 Current Population Survey by the U.S. Census Bureau, this annual salary places the family in the Second Quintile ($12,040 to $25,560) of income, and provides only $4,724 more than the $16,700 Poverty Guideline set by the U.S. Department of Health and Human Services for 1999.

This hard-working family’s income is only 28% above the poverty level. With careful money management the family members squeeze by each year, living modestly day-to-day. For them real middle-class status is a distant dream. Yet, millions of Americans earning less envy this family as does most of the rest of the world earning much less.

With standard deductions, filing jointly, and standard child care credit, this family pays no federal income tax.

Suppose Congress replaces the income tax with a 14% national sales and use tax; but exempts the necessities of life such as groceries, rents or leases of real estate, insurance, and medical items and services. Unlike other families earning a higher income, abolishing the federal income tax immediately adds no extra income to this family’s monthly income.

Of course, this family will be affected by the new federal retail sales and use tax. If 90% of the family’s income is spent on necessities—nontaxable items, a reasonable figure for a poor family, the taxes actually paid becomes 14% of the remainder, or $299.94 ($21,424×10%×14%).

At first glance, this appears to be an annual net loss of $299.94, making a national sales tax a bad choice, but what about those hidden embedded income taxes and the cost of collection?

When spending money for necessities the family pays directly for the goods and services received, and pays indirectly all of the hidden embedded costs of the income tax. The hidden embedded cost of the income tax affects all purchases. Assuming the national sales tax system is a mere 2.5% more efficient than the current income tax system (a conservative estimate), this family will avoid an additional $535.60 of hidden embedded taxes (2.5%×$21,424), providing an annual net savings of $235.66 per year (-$299.94 + $535.6).

As does every family and person, people near or below the poverty line, about 14% of the nation, daily pay income taxes and their associated collection costs hidden in the price of necessities. Eliminating these hidden embedded costs effectively increases everyone’s standard of living by at least 2.5%.

Furthermore, replacing the current income tax with a 14% national sales and use tax provides an approximate 5% rise in true purchasing power for every additional 25¢ per hour earned by workers. For purposes of discussion, ignore for the moment the hidden embedded effects of the income tax. If the two wage earners of the family earn only $6.07/hour, this family starts paying a federal income tax. With a 14% national sales and use tax, the two wage earners in the fabled family of four need earn only $6.61/hour each to see the sales tax directly offset current federal income taxes and realize a rise in effective purchasing power.

The hidden embedded effects of the income tax cannot be ignored. Therefore, in addition to a true rise in purchasing power caused by the higher wage, a minimal 2.5% rise in purchasing power is caused by only 2.5% improved efficiency in the tax system. A higher efficiency causes an even higher rise in purchasing power.

Regardless of the wage earned when the fabled family of four starts paying a federal income tax, converting instead to a national sales tax causes purchasing power to rise significantly.

Remember that the primary purpose of the 1942 Victory Tax was to control consumption, not to raise revenue efficiently. The tax evolved into a potent tool for political power brokers. Their power rests on their ability to manipulate the system, to give special favors to their supporters and contributors. Thus, politicians have an overriding vested interest in maintaining the current system even at the cost of a reduced standard of living for the American people. A national sales and use tax is a moral tax because political lobbyists and power brokers cannot as easily manipulate the revenue collection and spending schemes.
 

If food is not taxed, don’t rich people come out ahead compared to the poor and middle class?

First, we need to remove ourselves from the social welfare state-of-mind of always trying to “soak the rich.” Such a mentality is what caused much of our problems about a hundred years ago and opened the floodgates to the entire income tax mess. Trying to guarantee equal results instead of equal opportunity always will create havoc and friction among the classes. Rich people are not the problem, social welfare and legal plunder are the problems. Let’s attack those problems.

Second, no, a national retail sales tax does not benefit the rich. In fact, a national sales tax actually hurts the rich. Unlike the income tax, there are no tricks or avoidance schemes available. No deductible three martini lunches for business folks.

People need to eat and without eating life itself cannot be sustained. There is also a reasonable limit to how much any person can eat. Nonetheless, rich people have a much higher disposable income than do poor and middle class people, therefore rich people tend to “eat out” much more often than poor and middle class people.

NESARA recognizes natural rights such as the right to life, and does not tax food bought in a grocery store. However, food sold in a restaurant is a retail event, and those meals will be taxed. Therefore, under NESARA, low and middle income people pay little if any tax on their food budget. Rich people would pay taxes on more of their food budget than low or middle class people.

Under NESARA, rich people probably do get “soaked” in food purchases, but only because they have the resources to “eat out” more often whereas most poor and middle class people do not. However, under NESARA, nothing stops a rich person from visiting the grocery store and not paying a retail tax. Living in that manner is how many people get rich in the first place—living frugally and within their means.
 

Is a national sales and use tax constitutional? After all, many activities in commerce and retail do not cross interstate boundaries.

Good question; or at least the Supreme Court thought so when the Court took a look back in the Great Depression.

Seems that no matter what you do an activity today will involve some element of interstate commerce; electricity, communications, transportation, etc., across state lines. The Court decided that any at all was enough, that is, the Court was not going to restrict the power of Congress to tax and regulate on that basis.

Remember too that Franklin Roosevelt had expressed his displeasure in the Court’s earlier decisions and was about to “pack” the Court with tame judges if things didn’t start going his way. The Court exercised the “better part of valor.”

And will again. A similar question arose in the Judge Bork Supreme Court appointment hearings. Bork said that in some cases things might have gone the wrong way, but had gone too far to turn around. In effect, Bork told Congress that he would not be the one to poke holes in the Ship of State. The response didn’t help him though when the votes were counted.

The Court might take another look at your question, if the question was framed just right, but most likely not. Sleeping dogs and all that. Besides, the Court is as much interested in getting rid of the income tax and installing a fair money system as anyone. The salaries of judges were not to be reduced during their service (Constitution, Article III, Section 1), an argument federal judges have raised previously and lost.

However, let’s remember that although the Constitution is a document of limitations, the document does not greatly limit the powers of taxation, save the two great rules of apportionment (direct taxes) and uniformity (indirect taxes). Congress’s taxing authority is comprehensive, save for the two rules.

Then there is the question of Article I, Section 9, Clause 5. Many people believe a national sales tax violates this clause of the constitution. Yet, a strict reading shows only that exported articles may not be taxed. A national sales tax, as written in NESARA, would tax activities, not articles, and the specific activities being taxed would be the retail activities of commerce. Some people might argue that taxing the activity is the same as taxing the article. That argument sounds vaguely familiar to the argument used with the income tax in that the income is not the subject of the tax but is used only as a yardstick to determine the tax. However, we see no conflict with this clause.

Furthermore, the Supreme Court ruled in Flint v. Stone Tracy Co. that, “We must remember, too, that the revenues of the United States must be obtained in the same territory, from the same people, and excise taxes must be collected from the same activities, as are also reached by the states in order to support their local government.” So possibly the entire discussion is moot.
 

A national retail sales tax is contrary to the Founder’s formula because such a tax would provide federal jurisdiction into intrastate commerce, as well as violate (as does the present income tax) Fourth Amendment rights of businesses to be secure in their papers, etc. The Founders understood the danger of the federal government overstepping their bounds from the Limited Powers granted them to powers retained by the several states. They wisely provided a federal revenue-raising system based on tariffs and imposts, that is, import duties. This would accomplish two things: (1) Hold the feds to their “limited powers” jurisdiction of foreign and interstate commerce, and (2) Keep the federal government small in scope because, if import duties became too high, foreign governments would look elsewhere to export their goods and services. Why can’t we seem to understand these simple, plainly laid-out principles? Why do we consistently seem to want to give the federal government more power than the Founders granted them? Haven’t we had our fill after more than 200 years of plunder?

We would not make an argument against your “simple, plainly laid-out principles.”

Reading the Federalist Papers reveals that the Founders supported taxes on commerce and consumption, that is for sure. Hamilton noted that the best place to create revenues was through commerce and consumption.

From Federalist 12:

“The ability of a country to pay taxes must always be proportioned, in a great degree, to the quantity of money in circulation, and to the celerity [speed] with which it circulates. Commerce, contributing to both these objects, must of necessity render the payment of taxes easier, and facilitate the requisite supplies to the treasury.”

From Federalist 21:

“It is a signal advantage of taxes on articles of consumption, that they contain in their own nature a security against excess. They prescribe their own limit; which cannot be exceeded without defeating the end proposed, that is, an extension of the revenue. When applied to this object, the saying is as just as it is witty, that, “in political arithmetic, two and two do not always make four.” If duties are too high, they lessen the consumption; the collection is eluded; and the product to the treasury is not so great as when they are confined within proper and moderate bounds. This forms a complete barrier against any material oppression of the citizens by taxes of this class, and is itself a natural limitation of the power of imposing them.”

Regarding a vendor’s right to be secure in his or her papers, we disagree that a national sales tax would be that intrusive. Certainly some record would be needed to quantify the tax to be paid, but that is all. The effort would be no worse than the current sales taxes imposed by the states. The only thing the revenue collectors would be concerned with is the amount paid in a taxable retail activity. What was purchased, where, why, or even how would be irrelevant.

Our concern is: “How do we get from where we are now to where we should be?”

Commerce is a big category. You are concerned about intrastate commerce. Checking Article 1 Section 8 (3) of the Constitution and you can see that, when taxes are classed as regulation, there is not much limit to the Federal power. We have no argument with what should have occurred, but are working towards a solution based on what actually happened, and all the inertia that has built up over the years.

Scholars and politicians have studied the tax issue for centuries. Many taxes levied in the past were mere power tools by despotic rulers, no doubt about that. However, many people have tried to discover a just and equitable tax. All taxes are confiscation of property. In an ideal world of honest and moral people, there is no need for government. Therefore, the problem is that as a nation people must find a just and equitable method to distribute the burden of supporting government. Every person who participates and appeals to that government for protection of rights and property has a moral obligation to support that government.

Stating political goals is not the same as accomplishing them. To complete the journey, the intermediate steps must be practical and doable. If you have a warp drive solution, please let us know. If you have a plan, is your solution practical and doable? Don’t worry too much about being Constitutional. If history is any guide, once your plan is in place, regardless of what it is, there will be worlds of articles explaining in great detail how it was what the Founding Fathers had in mind all the time.
 

Trading an income tax for a national sales tax seems to be choosing the lesser of two evils. Why bother?

Why indeed?

The income tax is a hideous tax, and violates the very foundations upon which this nation was founded. The income tax is impossible to defend.

What about a national sales tax? Certainly not a perfect solution, especially at the rates most bills are proposing. However, by replacing the insidious income tax with a national sales tax, the American people finally once again take back control of America. No longer can Congress hide the true cost of government through the facade of withholding income taxes. No more will Americans have to forfeit their privacy in such an un-American manner. With a national sales tax, people begin taking home their hard-earned income. Because the national sales tax is a consumption tax, consumers decide when to be taxed, not Congress.

However, unlike other tax bills, NESARA recognizes natural rights and does not try to impose a sales tax upon basic living necessities or government-mandated necessities, nor does NESARA attempt to continue government intrusion by offering monthly rebates to compensate for taxing necessities (let’s get Congress out of micro-managing our lives, shall we?). NESARA attempts to tax only retail activities in commerce (what the Founding Forefathers had wanted).

Once people begin paying for government directly with a national sales tax (and combined with an honest money system), the proposed tax rates should fall for one simple reason. Americans will relish the new-found joy of controlling their income and will begin to greatly pressure Congress to stop the legal plunder bandwagon. Say good-bye to the welfare state as Americans become debt-free and begin to once again understand true wealth, liberty, and self-government.

No, the national sales is not perfect, but what tax is? All taxation is forced confiscation of property. The question at hand is how much do the people consent to be confiscated and is any such tax fair, equitable and uniform to all? Nonetheless, a national sales tax is an excise tax, and an excise tax is much more moral and constitutional than any income tax. Perfect? No, but let’s get our foot in the door and move one step at a time.
 

Why bother with a national sales tax? Let’s just scrap the income tax and not provide a replacement.

Sounds great!! Really!!

Just one problem. Since the social welfare state and the legal plunder mindset are now the norm rather than the exception, who is going to step forward and forfeit those handy dandy government checks?

Your grandma and grandpa, possibly even your mom and dad, are now dependent upon those wealth redistribution payments. Without proposing a plan that is revenue neutral, that is, creates no immediate change in Congressional spending, there is no hope short of the mother of all depressions or a war that will make any Congress person vote for such legislation.

Yes, scrapping the income tax and providing no replacement is the ideal, but this nation strayed long ago from ideals. Let’s get back to those ideals, but let’s not create chaos and another war through the process. Once people get the feel for having all their income in their pocket, and through a national sales tax start to realize the true cost of government, the people will start to make elected officials squirm as they demand to start reducing the fat. Yes, let’s work toward that day, but let’s not throw grandma and grandpa out on the street in the process. We needed almost a century to get into this legal plunder mess, we are not going to solve problems in one day.
 

Isn’t a National Retail Sales Tax essentially a tax on labor?

With some proposed sales tax bills, maybe, or at least will seem as much. There is little doubt that the entire topic is a potential can of worms. Much of the debate over the current income tax rests upon the disputed definitions of wages and income. Common sense and numerous Supreme court rulings dictates that wages and income are not the same, and that wages should not be subject to any “income” tax. The exact same word challenge applies to the sticky topic of a sales tax and labor.

Firstly, with NESARA, the easy answer is no. That is, NESARA allows people to reasonably segregate labor from the sales portions of contracts (Part II, Section 5(C)(16)).

However, let’s look at the question and discuss this issue in detail.

The Constitution provides Congress two methods for collecting taxes, direct taxes and indirect taxes. The phrases “direct taxes” and “direct tax” are used specifically within the Constitution, the phrase “indirect taxes” is implied.

Direct taxes are mentioned in Article I, § 2, cl. 3 and Article I, § 9, cl. 4.

Indirect taxes are mentioned in Article I, § 8, cl. 1. There are three types of indirect taxes mentioned in the Constitution: Duties, Imposts, and Excises.

Direct taxes are governed by the rule of apportionment. That is, Congress cannot levy a direct tax unless the tax is collected and proportioned according to population within the several states.

Indirect taxes are governed by the rule of uniformity, and that means such taxes must be the same throughout the nation, as well as apply equally to all people at all times.

The difference between a direct tax and an indirect tax is the subject of the tax. The subject of a direct tax is people or property. The subject of an indirect tax is an activity or event. Traditionally, a direct tax is paid by the taxpayer directly to the government and an indirect tax is paid through an intermediate party. However, we must point out that there has never been a final or definitive explanation provided to distinguish the terms. At best, the Supreme Court provides only partial definitions. Therefore, as long as no complete legal definition exists, there always will be disagreement and contention.

Additionally, the several states are liable for paying Congress any federal direct tax (although the Constitution does not specify how the states are to collect the revenues—the actual legislation creating a specific direct tax provides those means). Unlike federal direct taxes, any person can be liable for an indirect tax.

Although flawed opinions, the Brushaber and Stanton doctrine states that if apportionment is not used then the tax must be an indirect tax. By the process of elimination, because a sales tax is not being collected according to the rule of apportionment, the sales tax must be an indirect tax. Indeed, all states that collect a sales tax recognize the sales tax as such, specifically an excise tax. Essentially, an excise tax is an activity tax.

What is the activity being taxed with a sales tax? Activities in commerce, specifically retail sales.

Within the scope of “limited government” and related schemes of taxation, such activities are reasonable activities to tax because both the seller and buyer avail themselves to the laws of the land for protection of rights and property. Arguably, the fundamental purpose of government is to protect rights and property.

Although the buyer pays the tax, all sales taxes are not levied upon the consumer but upon the event. A tax on the consumer would be a direct tax. A tax on labor is a direct tax because labor is personal property. A tax on the event whereby labor is provided is an indirect tax. The seller is made liable for collecting a sales tax, but the seller passes the cost of the tax on to consumers. Arguably, this is another reason why the sales tax is called an indirect tax because the consumer does not directly pay the government the tax, but through another party.

Let’s suppose a painter bids $1,000 on a house painting job. Assume the bid includes only labor because the customer is going to supply the paint. Although NESARA allows the painter to segregate portions of labor from materials, let’s imagine this is not the case. Let’s assume the painter must now collect a national sales tax of 14% on the entire job. Does the painter collect $1,000 and then deduct 14% to leave a balance of $860? No, the painter, like all retailers, merely calculates the tax based upon the value of the goods and services sold. Thus, the painter would submit a bill for $1,140. After collecting the bill, the painter then sends the $140 tax to the tax collectors and is left with the original $1,000.

Was labor taxed? Because the painter was left with the original $1,000, an argument easily can be made that labor was not taxed. The commercial activity was certainly taxed, and the fee charged by the painter served as a yardstick to measure the tax owed, but the painter’s labor was not taxed.

If the painter had subtracted the tax from the service fee, and was left with $860, then by all means labor was taxed.

The consolation to this example is that after collecting the sales tax, the laborer is left with the original fee. That is one of the advantages of a consumption tax. That is, despite the tax, property is still exchanged for property, and the final value of that property remains unchanged. Perhaps the Founders were even wiser than we suspect because they advocated consumption taxes.

Yet, as we mentioned at the beginning of this discussion, definitions and perspectives easily change the outcome. We have provided a rational explanation why labor is not the subject of a sales tax, but is simply used to measure the tax owed. To students of the income tax struggles, this argument should sound very familiar. That explanation is almost identical to the various Supreme Court rulings regarding the early income tax cases. Like those cases, all a person need do is change the definitions and new rules apply. Early in the income tax debate Congress learned that if income cannot be taxed without the rule of apportionment, to change the name of the tax to an excise and instead tax the activity. Before the Sixteenth Amendment was ratified and the income tax law of 1913 enacted, Congress was already playing that game with the Corporation Excise Tax Act of 1909. Like it or not, the same logic will apply to any retail sales tax.

Perhaps now you can see why NESARA recognizes and segregates in any retail exchange the reasonable portions of labor. In the final analysis, although NESARA recognizes and segregates reasonable portions of labor, we believe the answer to the question is no; that is, upon close inspection a national retail sales tax is not a tax on labor, but a tax on a commercial retail activity. The market value of the labor (determined by the seller) is used as a guideline to determine the tax owed on the commercial retail activity. However, we readily agree that this might be nothing more than a game of you saying to- may-to and us saying ta-mah-to. Thus, other controls are necessary to help avoid this potential conflict. That is why NESARA includes the opportunity to segregate labor from other portions of a retail sales contract. With that foundation, we therefore urge you to also read the next question, “Should labor/direct services be taxed?”
 

Should labor/direct services be taxed?

With some proposed sales tax bills, such as H.R. 2717 and H.R. 25, labor/direct services will be taxed. However, NESARA allows people to reasonably segregate labor from the identifiable labor portions of written retail contracts (see Section 5(C)(16)).

Labor is property. Selling labor under contract is a substantive right. Therefore, the true underlying question at stake is whether or not such a substantive right can be taxed. Many people will argue no. The argument has raged for a long time and likely will not be resolved any time soon.

Although a logical argument can be made that a sales tax on services is not a tax on labor (see our FAQ above), the truth is that most people will disagree with that logic and will nonetheless see such a tax as a tax on labor.

Regardless, we see several serious issues at stake in this debate.

First, we admit that despite our logic that a sales tax does not directly tax on labor, tacking a sales tax to service contracts will probably cause resistance problems similar to those experienced today with the income tax because most people will nonetheless interpret such a tax as a tax on labor. NESARA recognizes the right to labor, recognizes labor as fundamental property, and recognizes that selling labor under contract is a substantive right. Therefore NESARA tries greatly to avoid the issue by allowing, when possible, to segregate the labor portions of contracts.

We admit, however, that some retail activities that are primarily labor likely will be hit with the sales tax (Part II, Section 5, Explanations and Details).

An issue not clearly obvious by reading NESARA, is that other proposed sales tax legislation, specifically H.R. 2717 and H.R. 25, make no attempt to segregate labor from retail contracts. We expect that when NESARA is introduced into Congress, and the Tunnel Rats and Attorneys throw their revision magic and legalese at the bill, that the segregation clause will disappear. Both H.R. 2717 and H.R. 25 clearly indicate the mind set of Congress.

However, based upon our discussion about whether or not labor is truly taxed, we can reluctantly tolerate the loss of the segregation clause because the laborer still receives his or her full fees, property is exchanged for property, and the value of that property remains unchanged by a consumption tax.

However, the loss of that clause causes unbelievable problems.

Both H.R. 2717 and H.R. 25 require all sellers to register with the state. In other words, nobody, that is, absolutely nobody will be able to sell without a license. That requirement not only includes typical service-based vocations such as lawyers and consultants, but also all of those 14-year old baby sitters and dog walkers. Those people will have to register with the state, charge their customers a sales tax in addition to their fees, and will be made liable for paying the tax to Uncle Sam. In all, registration greatly intrudes upon the privacy of such people. Leviathan survives.

NESARA has no registration requirement. NESARA was written with an understanding of fundamental rights. Fundamental economic theory recognizes that every day all of us are involved in some kind of selling and buying situation. Almost every human action is in some way an economic action. Without selling and buying most of us cannot survive. At the very core of life we must sell our labor in the market place. Although many people do not realize as much, even the standard “employment” contract is fundamentally a buyer-seller relationship.

Under a registration scheme philosophy, without registration the every day act of exercising your natural right to sell your labor will become an arbitrary statutory crime. Because every person is essentially in the business of selling their labor, everybody will have to register with the state! With registration, Leviathan will rear its ugly head and roar like the beast it is.

Under NESARA, non-business property is excluded from levies and liens, and garnishment is prohibited. However, in a true service-only contract, there is no tangible business property to levy or lien. Under such thinking we easily see Congress someday modifying NESARA so that people engaged in service-only businesses will suddenly start to see personal property being seized to satisfy alleged taxes owed.

In short, we believe a registration scheme does nothing to alleviate the current problems with the income tax. Registration is truly an invasion of privacy. Such a situation is feasibly worse than the current income tax scheme. You can be sure that any such scheme will require an extensive and exhaustive enumeration scheme. Nobody will be able to sell or buy without a number. Sound familiar?

However, there is a worse problem with this attempt to tack a sales tax onto services. If labor itself is being taxed, seems we have a direct tax without apportionment. Labor is property. Talk about having the exact same problem we have today with the infamous income tax. Is such a tax a direct tax subject to the rule of apportionment, or an indirect tax subject only to the rule of uniformity? The subject of direct taxes are people and property, the subjects of indirect taxes are events and activities. How will the courts rule on a sales tax on labor? Easy, they will rule the same way they have ruled on income taxation: that the tax is not a direct tax on labor but an indirect tax on a retail taxable activity.

At a more fundamental level, not segregating labor from retail activities exposes a more serious flaw in thinking. Without segregation, the argument is easily made that by taxing labor, income is actually being taxed. However, income and wages are not the same. In essence, we would be back to an income tax although under another name and without any real effort. Same old story!

Add this realization to the fact that both H.R. 2717 and H.R. 25 require sellers to register, and you can easily see that the same old “books and records” and loss of privacy problems never go away! Do you envision the new tax collection authorities abusing audit powers to go on fishing trips, much like the abuse we see today with the income tax?

Selling services is usually a commercial event, even if the service is almost pure labor such as in a barber shop. Labor is property and can be sold in commerce at retail. Our argument is that to tax direct labor is to tax income, the very source of our current problems.

Have we been down this road before Dorothy? NESARA recognizes the right to labor, recognizes labor as fundamental property, and recognizes that selling labor under contract is a substantive right. To directly tax labor is to tax income. Either way, such a tax is a direct tax, subject to the rule of apportionment. Registration of sellers is nothing but pure statism.

Part of the problem with this contentious topic is that regardless of the type of tax, all taxes are fundamentally a tax on labor. Although the manner in which any tax is measured or calculated can be based upon people, property or activities, only individuals can be taxed. All wealth is created through labor, thus fundamentally, all taxation ultimately will be a tax on labor. Therefore, NESARA tries to alleviate the issue by allowing, when possible, to segregate the labor portions of retail sales contracts. The ideal world has no taxation at all, and perhaps some day we humans will achieve such a world. However, America has needed approximately 150 years to create the current mess and overnight solutions are impossible. The question then becomes, “How do we rationally back out without causing disorder and chaos?” NESARA recognizes the challenge of providing a transitory tax system that eliminates the hated income tax but does not blatantly tax labor. No other current sales tax proposal attempts this.
 

I have one huge disagreement with your proposal and that is your advocacy of a national sales tax. History has shown that specialized excise taxes (that is, on tobacco, alcohol, firearms, gasoline, tires, etc.) provide ample revenue for the federal government to operate within constitutional limitations. A sales tax on the basics of life such as groceries, medicine, clothes, etc. would only slow the economy and pave the way for underground sales of these items. History has also shown that once the federal government is given the power to tax that the rate/amount of the tax only increases. Various political proposals that I’ve seen for a national sales tax call for rates as high as 17%! When you add that to local and state sales taxes, you’re looking at sales tax rates of 25% or more in some areas.

Please also bear in mind that we already have numerous federal taxes on countless commodities and transactions (for example, every gallon of gasoline has about 40 cents in federal tax; eggs have over 100 separate taxes put on them before they reach the store, etc.). The solution is to severely restrict both the government’s size and it’s ability to tax. If you have one without the other, then it’s a recipe for disaster.

You raised several issues and hopefully we can answer your concerns.

Forcing government back to within constitutional limits. We agree and to do this we must expose to all people the true cost of government. The nature of the income tax and withholding greatly masks those costs. Specialized excise taxes will do not do this because as you indirectly noted, much like the income tax, businesses merely pass on the cost of those taxes to consumers.

Taxing necessities. NESARA exempts most basic necessities of life as well as many government mandated expenses (by default mandated expenses become necessities). Taxing necessities is repugnant. Take a closer look at the bill summaries and you will see that most necessities, and even some government-mandated expenses such as insurance, are exempt. Check out Part II, Section 5B of the bill to see the list of exemptions. You list clothing as a necessity. At minimum amounts you are correct, but in the U.S. most clothing is sold as luxury items. Compare a good pair of serviceable shoes ($17) to the designer variety ($170). Compare the cost of reasonable quality clothing sold at good will stores and garage sales versus department stores. In other words, those people who buy clothing as a need will shop wisely and pay only minimal amounts of any sales tax. Those who wish to buy clothing as fashion statements and status symbols will pay more. However, people who buy clothing as a need have no less a moral obligation to support a government that provides them protection.

The percentage amount of the tax. We agree that the initial amount of any sales tax might be high, but this works to our advantage in the long run as people finally are forced to face the actual cost of government. Using visible consumption taxes that people see every day in place of hidden taxes will generate pressure on Congress to remain within constitutional limits.

Operationally, NESARA is designed to increase the efficiency of the fiscal and monetary systems while making those systems simpler and transparent. The intention is to provide people with sufficient additional resources to reduce the need for government services and then reduce the size of government. This opposes current national policy of cutting federal government services first and forcing the states or a needy public to bear the burden. The second method might work, but is very painful! And that pain produces public demand for more government intervention, recharging the cycle with a net gain for the government.

We understand your argument regarding government collecting only enough revenues to live within constitutional limitations. However, as you study our web site, you will see that we aren’t trying to return to that mode of thinking—at least not overnight. As you continue studying NESARA, you will see why we believe the bill will restore the nation to such thinking within one generation—or less. Sliding into the pit we are now in took many decades and NESARA does not require throwing little grandmothers onto the street in the recovery process. We are currently content to attack the two root problems, and once the healing begins, people will be in a better frame of mind to tackle the remaining problems. As things improve and people become progressively more self-sufficient Congress can be encouraged to live within constitutional limitations.
 

Why bother with exemptions? All that does is open the door to special interest groups.

The right to life includes being able to reasonably provide for that life. Supporting life requires certain basic necessities. Taxing basic necessities amounts to enslavement. Such thinking is repugnant to the American way of life and exhibits too many similarities to the current income tax scheme.

Additionally, taxing basic necessities is highly regressive. One proposal to counter the regressive nature of having no exemptions is to provide some kind of rebate or grant to those people most affected. Rebates or grants require completing forms declaring incomes and expenses to justify and calculate those payments. Shades of the income tax and invasion of our privacy. Let’s get government out of our daily affairs, shall we?

Regarding special interest groups: there are very few human actions in which someone doesn’t have a legitimate interest in the outcome. Whether the action concerns the television remote control, highway lane changes, or global disputes over natural resources, somebody always expresses an interest in the outcome. As long as humans are involved, differences of opinion and potential conflicts of interest will exist. This is a fundamental aspect of life.

Therefore, humans can never fully suppress special interests. Our best hope is to discourage strictly self-serving interests by the powers that be to prevent them from trampling the fundamental natural rights of any individual. NESARA certainly recognizes these fundamentals and therefore provides certain exemptions to the national retail sales tax. Anything less is unacceptable, anything more is subject to suspicion.

We have no doubt that initial congressional committee meetings on NESARA will entail jockeying to modify our proposed list of exemptions. We also have no doubt that in future years special interests will continue attempting to modify that list. We understand the political process and accept that process. We cannot change human nature—we are just trying to live within that understanding and provide a practical and politically doable solution. In that light, how could there not be any exemptions?