Frequently Asked Questions
The Bill, Part II (Tax reform)
 

1. What happens to the home mortgage deduction?
2. What happens to charitable giving?
3. How will NESARA affect the home market?
4. Isn’t “Corporate America” coming out ahead (again) by abolishing the income tax?
5. Can Congress raise the rate of the sales tax?
6. How does NESARA affect Social Security?
7. NESARA does not repeal social security payroll taxes. Why not?
8. First, seniors paid into the income tax. Then under national sales tax, seniors have to pay again. Not fair!
9. What about tax evaders?
10. What happens to state income taxes?
11. If the income tax is repealed, what happens to the credits that many people now depend?
12. Some people argue that our “progressive” tax system keeps rich people from accumulating the mega wealth of the robber barons. Those people state that some individuals will become too rich and will purchase control of our government. How would you answer such a question?
13. Is the NESARA sales tax plan “revenue neutral”? In other words, does the bill raise the same amount of revenue to run the government as does the current income tax system?
14. Why are secondary stock exchanges taxed?
15. NESARA provides no provisions to repeal the Sixteenth Amendment. Why?
     

What happens to the home mortgage deduction?

Disappears, just like the income tax that supports the deduction. The deduction has relevance only within the context of the current income tax.

First, all income tax “deductions” are nothing but legal plunder and politics disguised as “fairness.” An excellent article to read is located at The Home Mortgage Interest Deduction: A $5,000 Cat?

Second, the deduction encourages private debt. Think for a moment about how this debt truly enslaves. Let’s suppose you are paying $10,000 in yearly mortgage payments. Those payments include principle and interest only, no taxes or insurance. Let’s say you are in the 28% tax bracket. Therefore, good old Congress will subsidize your debt at 28%. This means of the $10,000 paid, you can deduct $2,800. What happens to the remainder of the $10,000, that is, the $7,200 you paid to the bank? Gone. To the bank. Because most of that payment is interest and not principal, you end up almost $7,200 in the hole. Furthermore, you have to pay a 28% tax on that $7,200, or $2,016.

Now, to be fair, that $2,800 deduction shrinks over time because your payments will slowly consist more of principal than interest, and hopefully your annual income continues to rise as well. However, for simplicity’s sake, let’s keep using that $2,800 number. What would happen if you worked hard, made accelerated payments and soon found yourself debt free, with no mortgage payments? You would no longer find Congress subsidizing your debt. That is, you would no longer have that $2,800 deduction.

Since you no longer pay mortgage interest, you lose the deduction. That means you now pay taxes on the entire $10,000. With that 28% bracket, you pay an additional $784 (28% of $2,800) in taxes. However, what happened to the remainder of that $10,000? That is, the $7,200 you originally placed into the banker’s pocket? Yes, all in your pocket.

So with the mortgage, Uncle Sam and the bank cons you into thinking you are receiving a benefit. Yet, the numbers show that with a mortgage, you are $7,200 in the hole and save only $784 in taxes. Without the mortgage, you have $7,200 in your pocket—even after paying an additional $784 tax. Nobody needs a home mortgage deduction. People need to be debt free.

Lastly, under NESARA, the loss of the deduction will hardly be missed by many home owners because once existing loan contracts are converted to the new equations, many home loans will be paid in full.

That’s right, part of the debt elimination and healing process, and part of the banking reform NESARA provides, allows many home owners who have paid the equivalent of the original principal and new monetization and monthly service fees will see their loans paid in full. Those home owners will have the biggest debt load in their lives disappear!

Within a few years after that, other home owners will be joining the Jubilee since all home loans will be converted to the new banking equations. Debt free! Debt free! Debt free! What was that about a home mortgage interest deduction???
 

What happens to charitable giving?

Historically, Americans have proven repeatedly to be a most generous people. NESARA does not try to change the generous and giving hearts of Americans. In fact, charitable giving under NESARA should not only continue as before, but improve greatly.

As more Americans become debt free, and become more prosperous under NESARA, more money should become available for Americans to give more freely than ever before. Charities should see a boost in income as never before.

As Americans begin to shed the chains of the social welfare state, and more Americans become independent of government welfare, the structure of charitable giving will change as well. Giving will likely shift to more philanthropic areas.

Historically, in times of great need such as natural disasters, Americans have responded with huge hearts. A debt free America will be able to continue responding but with bigger hearts than ever before.

Lastly, NESARA does recognize the “loss” of this tax “write-off.” See Section 6 of the Bill’s Part II Explanations and Details.
 

How will NESARA affect the home market?

Under the current system, many people are playing a game of roulette, buying and selling houses primarily as an investment rather than as a home. Under the current system, older homes are left to decay rather than undergo maintenance.

NESARA encourages owning and remodeling older homes, thus providing much relief to our natural resources.

Why is this so? Under NESARA, the sale of a home is a retail taxable event.

At 14% the tax on a newly built $100,000 home is $14,000.

The sales tax on an existing home sold for the same price will be less, since the taxable base will be the sales price minus the original purchase price. Thus, for a house bought at $60,000 and sold for $100,000, the buyer will pay a tax on the gain only, 14% of $40,000, or $5,600.
 

Isn’t “Corporate America” coming out ahead (again) by abolishing the income tax?

Depends.

Corporate America, like you, will no longer have to pay income taxes. From that perspective, businesses come out ahead—but so do you. Everybody wins by no longer paying an income tax.

Once companies can stop passing along the costs of the regressive income tax, overall production costs will drop. This will cause a drop in prices. However, for consumers the new retail sales tax will somewhat cancel this effect. Nonetheless, with reduced costs and a higher market demand, companies will have to spend more money to retool for higher production.

Overall, however, when discussing income taxes Corporate America neither comes out ahead or behind. Corporations merely pass on to the next person the cost of doing business known as taxes. You the final consumer pay the combined effects of every corporation’s income tax. Once the income tax is abolished, corporations need no longer pass on this cost of business to you. You come out ahead.
 

Can Congress raise the rate of the sales tax?

Sure. However, that would be political suicide. As people become more debt free, as people become more accustomed to having more disposable income, as more people realize the true cost of government, as more people become self-sustaining and wean themselves from the social welfare state, what reason could Congress provide for raising the rate? Indeed, what reason could they provide for not lowering the rate?

Furthermore, there is a natural limit to how high a consumption tax can rise. At too high a level, people simply ignore the taxable activity and either do without, buy in other markets, or buy in the black market. A good example was the luxury tax imposed only several years ago. The rich simply decided to not buy luxury items sold in this nation. Related industries almost disappeared within the year. This is a typical response for what happens when one class of people is targeted to bear the burdens of others. People vote with their feet.
 

How does NESARA affect Social Security?

Initially, NESARA won’t affect benefits at all, or the collection of revenues.

Current beneficiaries receive their checks from the general treasury, not from any special funds. All current Social Security taxes collected are deposited into the general treasury. There never has been any special account with each person’s name. Congress, through its budgetary actions, disburses funds from the general treasury into all the entitlement programs.

Furthermore, NESARA does not repeal payroll taxes such as the Social Security and Medicare taxes. NESARA certainly could be rewritten to do so, but the overall national sales tax rate would have to be raised to compensate for the loss of revenues. This is one reason why other proposed tax packages include a much higher initial tax rate than does NESARA.

Therefore, NESARA does not initially impact such collections or disbursements. Congress still will collect revenues for this program. Congress still will be in the business of fiddling with the budget, which is where the money for all entitlement programs are derived.

Those people currently receiving benefits, or expect to receive benefits soon, will continue to do so as Congress decides.

Regarding how the Social Security Administration would track credits, people still would need to notify the Social Security Administration of wages earned. Under NESARA this reporting still would be accomplished under the payroll tax program.

NESARA is designed within one generation to double the standard of living for every citizen. Because of this improved standard of living, Social Security could fade away, or provide even higher benefits. The People decide.

NESARA opens the doors to future legislation to truly reform Social Security. Eventually, because of the higher standard of living, those who do not believe in Social Security could choose to opt out of the program. Those who choose to accept benefits, should receive much higher payments.
 

NESARA does not repeal social security payroll taxes. Why not?

Pure compromise.

Anyone who has ever peeked at the political process, at any time in history, understands that one does not get something for nothing. Indeed, life itself does not function that way. Always, always, always, there is give-and-take.

Here are some reasons why the social security payroll taxes were left alone.

Firstly, the primary goal of the bill is to repair two root problems: monetary and fiscal policy. There are numerous problems in this land, but those two are the root causes of most of the other problems. We tackle that first.

We need a sound currency; a currency controlled by the people and not an elite few. A currency system that benefits all and not a few.

Within the problem of providing a sound currency is the unfair and outdated banking laws that place much of the nation into financial bondage for most of their adult lives.

We need a fair, just, and equitable tax system. The income tax does not meet that goal. We believe a national sales tax does.

Secondly, the bill is designed to be “revenue neutral.” That means when the income tax system is scrapped, Congress does not scramble to find a way to maintain current revenues. In other words, if we provide Congress a bill to scrap the income tax, we must give them something to replace the tax.

Other tax reform bills advocating a national sales tax eliminate the social security payroll taxes, but notice the sales tax rate is more than 20%. NESARA proposes a 14% rate—a compromise. We could revise the bill to eliminate social security payroll taxes. Currently as written, that would require revising the bill also to provide for a higher initial national sales tax rate. The bill must be revenue neutral.

We have no problem eliminating social security payroll taxes—we really do not. Only that within the realm of being politically doable, we thought that a compromise between a reasonable sales tax rate and eliminating the income tax might prove easier to present to Congress—if we momentarily left social security taxes as is. The key here is being politically doable.

Thirdly, this nation needed almost 100 years to get into the current socialistic legal plunder mess. We will not escape tomorrow. We agree that optimistically we would like to see all forms of socialism disappear tomorrow. Yet, you know the reality of that happening.

We want to see social security disappear, but we do not want to kick out onto the street all of those already depending upon the scheme. Rather than eliminate social security overnight, we are “content” to watch the scheme fade away (our goal with NESARA is to walk the full mile even if we do so one inch at a time). As people who now receive benefits die, the need for the program will diminish, and within one generation, the need will exist no more.

Political solutions need time to blossom, and NESARA is no different. With a sound currency, fair banking laws, and no income tax, we strongly believe that within one generation the land will heal itself, including social security fading away. We strongly believe the effects of such transitions will be immediate, but the long-term projection is one generation. We needed almost 100 years to get into this mess and we are predicting less than 20 to get out. Not bad.

Let us eventually eliminate the social security payroll taxes, but let us solve the two root problems first.
 

First, seniors paid into the income tax. Then under national sales tax, seniors have to pay again. Not fair!

Yes, you’re right. That’s why unlike other proposed tax bills, NESARA exempts the basic necessities of life, such as food, medicine and insurance.

Since many seniors are on fixed incomes, and most of that income is a Social Security check, and most of that check goes toward necessities, seniors actually come out ahead under NESARA. Better yet, once companies begin to lower prices because they no longer need to pass on the hidden costs of the corporate income tax, the costs for necessities should drop. Also under NESARA, Congress will see an increase in revenues, and can increase benefits if desired.

Under NESARA, the standard of living will double within one generation, thus providing the opportunity for many seniors to opt out of the program or receive higher benefit checks. Under NESARA, seniors will realize a bigger bang for their buck—even with a national sales tax.
 

What about tax evaders?

Under NESARA, the long battle over the income tax finally will be over and a fairer tax will be imposed. What will there be to evade? The whole battle about the income tax is largely a moral issue along with the invasion of privacy. Let’s end the battle now with a sound monetary system and a fairer tax.
 

What happens to state income taxes?

They too should die. All income taxes are repugnant to the American way. In fact, all forms of direct taxation, either in name or implementation, are repugnant.

Most if not all state income taxes piggyback on the federal income tax scheme. This is noticeable by the fact that before one can continue with the state forms one must transfer from the federal forms to the state forms the numbers for the federal adjusted gross income.

Nothing stops a particular state from trying to maintain a state income tax. Except you. If the state legislators “don’t get it” help them “get it” by making sure they no longer stay in office.
 

If the income tax is repealed, what happens to the credits that many people now depend?

That would be for Congress to decide.

Obviously, some of the credits would go by the wayside. However, Congress, certainly can keep some of the more “politically expedient” credits, such as child care credit, or adoption credit. Despite eliminating the income tax, NESARA nonetheless provides a method to track charitable giving and that method is a “credit-based” method (see Section 6 of the Bill’s Part II Explanations and Details). Congress could do something similar with the current income tax credits that Congress decides to maintain.
 

Some people argue that our “progressive” tax system keeps rich people from accumulating the mega wealth of the robber barons. Those people state that some individuals will become too rich and will purchase control of our government. How would you answer such a question?

For starters, spend some more time at our web site. We destroy the myth that the income tax is a progressive tax. Second, even if the income tax was progressive and indeed did keep the super rich from owning the country, the tax keeps the sovereign people from owning the country too. Third, last we looked, seems to us that the nation is owned by quite a few special interest groups, thanks in large part to a tax system filled with uncountable loopholes and favoritism.

We have no problem with rich people. Rich people have mega bucks, that is, capital, and capital is what starts businesses. Businesses provide jobs. Businesses move the economy. Businesses produce goods and services, which is where wealth is found. We only care that a person creates wealth honestly and morally.

Rich people can afford to invest capital into businesses and they can afford not to. Rich people can afford to buy or not to buy. Case in point: several years ago Congress passed a luxury tax. Within one year many industries that catered to rich people almost went out of business; luxury water cruisers, for example. Why did this happen? Because the rich can afford to buy, and they can afford not to buy. Collectively, the rich decided they were not going to pay a luxury tax. That meant no sales. Those related industries almost dried up. People working in those industries lost jobs and their means of financial support. This is what happens when specific industries and products are targeted for taxation.

The problem is not rich people. In an honest and moral society, each person has equal opportunity to create his or her own wealth. NESARA is designed to provide such an environment.
 

Is the NESARA sales tax plan “revenue neutral”? In other words, does the bill raise the same amount of revenue to run the government as does the current income tax system?

NESARA is designed to be revenue neutral. However, nobody knows for sure where that neutrality line lies. Everybody, from layman to experts all are doing their best to determine exactly what is revenue neutral.

However, here is a small fact many people do not consider. Unlike other proposed tax reform bills, NESARA also fixes the “money problem” and reforms the banking laws. That means that soon after NESARA becomes law, the purchasing power of the currency will start to stabilize. We do expect two minor waves of inflation after NESARA becomes law, and we explain why in another FAQ. However, once the purchasing power of the currency stabilizes, and once people become debt free due to the new banking laws and having more disposable income to spend, people will have less demand on government services. Congress can then either reduce the sales tax rate, or use the revenue for all kinds of public projects.
 

Why are secondary stock exchanges taxed?

Under NESARA, all income and capital gains taxes are eliminated. However, NESARA does impose a nominal tax on secondary stock purchases. That tax is 10% of the sales tax rate, or as currently written, 1.4% of the purchase price. Therefore, selling 1 share of stock at $100 would yield a sales tax of $1.40; 100 shares yield a tax of $140.00. The tax is in addition to brokerage fees, commissions, etc.

This is a fair tax, largely paid by wealthy people just relieved of income and capital gains taxes. The tax is low enough to prevent capital flight from the country and high enough to raise substantial amounts of revenue. More importantly, this tax discourages market speculation, the constant moving of money to make money in the short run rather than into long-term productive investments. Long-term investors are largely unaffected by this tax.

NESARA distinguishes between initial public offerings and secondary transfers of stock. NESARA encourages new commercial investment because initial issues of stocks and bonds are not subject to the national sales tax, only trades in the secondary market. Initial investments build businesses; secondary trades merely swap ownership. Stock certificates are property and proof of company ownership. Whereas initial stock purchases capitalize a new venture, secondary exchanges are really nothing more than property sales in the commercial retail market.

True-blue libertarians (small “L”) will argue that no such tax should be levied, that the stock market should be free of entanglements. We agree in part. However, carried to its logical conclusion, there should be no taxation at all. NESARA, of course, replaces the hated income tax with a national retail sales tax. Although a true libertarian free market world has no taxes at all, NESARA is designed to be an intermediate stepping stone toward that hopeful day of libertarian thinking. As Murray Rothbard urged in his classic The Ethics of Liberty, libertarians should use whatever lawful methods possible to move toward a more libertarian society. NESARA is such a solution, providing a huge step toward a more libertarian world. Therefore, because secondary stock sales are commercial retail sales, NESARA stays within the scope of the new national retail sales tax and provides a small tax on those sales.

We must also consider the younger generation. Because NESARA is a transitional solution toward a libertarian world, we must remember that society must be allowed some adjustment time. Much of America has been in social welfare mode for a few generations now, and NESARA provides a paradigm shift in thinking. Humans are naturally resistant to change, and we want to take back America in a peaceful fashion. The younger generation will want to invest in the market, but will want to do so for long-term purposes. One day they want to retire, fund college educations for children, etc. A small tax on secondary stock sales helps provide a more stable stock market, thus enabling that younger generation an opportunity to start building for their futures. Those people who invest for the long-term will be unaffected by the sales tax on secondary stock sales and the point largely becomes moot. Only those people with the assets and ability to move large blocks of stock will be affected by the tax. And as already mentioned, the small tax provides revenues for the government. All things considered, we believe the nominal tax to be reasonable and fair.

What are the consequences of not taxing secondary sales of stock?

Obviously the rich, just relieved of capital gains and income taxes, can use their accumulated net worth to buy more income producing assets, making themselves even richer. In the larger perspective of a libertarian free market, that is exactly how the world should work. However, we are not going to make the transition to that kind of world from where we are today. Meanwhile, the working public continues to slave away at hourly wages, bearing a disproportionate share of government’s cost. True, the rich tend to buy expensive things subject to the new national sales tax and thus pay more taxes than working families, but during the transition phase this observation by itself is judged insufficient to balance the scales of justice.

Under NESARA, everyone pays their “fair share” to support the government, rich and poor alike. The rich pay the most but only in proportion to the benefits they receive from living in the world’s most wealthy nation.
 

NESARA provides no provisions to repeal the Sixteenth Amendment. Why?

First, legislation cannot repeal constitutional amendments. See the Constitution for further details.

Second, because the Sixteenth Amendment conferred no new taxing powers to Congress. Within the context of tax reform, repealing the Amendment is meaningless. The real problem with the Sixteenth is an education system and elected officials that have avoided the truth about the Sixteenth.

The issue surrounding the Sixteenth is one of possible fraud and misapplication, not tax reform.

Several Supreme Court cases teach us that the purpose of the Amendment was not to create a new constitutional class of taxation known as a direct tax without apportionment. The Amendment’s purpose was to prevent courts from having to struggle with trying to determine whether taxes on income were being applied as a direct tax or an indirect tax.

Direct taxes are governed by the rule of apportionment, indirect taxes by the rule of uniformity.

The Amendment removed this struggle from the courts by stating that taxes on income would be collected without apportionment. Since there are only the two classes of taxes, direct and indirect, the Amendment placed taxes on income in the class of indirect taxes, and governed by the rule of uniformity. With the Amendment, the courts no longer had to struggle with this issue.

The dispute with the Sixteenth is one of possible fraud and misapplication. Was the Amendment properly ratified? If so, then what was is the true purpose and meaning of the Amendment? If not properly ratified, then why have the American people been conned into believing the Amendment is the authority for an income tax when Congress had such authority from the beginning?

Since the alleged ratification of the Amendment, the income tax has never been collected according to the rule of apportionment, therefore the tax is obviously an indirect tax.

Regarding tax reform, whether the Amendment was truly ratified is irrelevant because even if properly ratified, the Amendment conferred no new powers of taxation.

However, if Congress decides to amend NESARA in order to present to the States an Amendment to repeal the Sixteenth Amendment, so be it. Under NESARA, America wins no matter what.