Imagine Legislation That
Enables Single Parents to Support Their Families
 

Many single parents find themselves strapped financially. Many live paycheck to paycheck, with little or no expectation of ever getting ahead. Such subsistence is not enjoying the fruits of one’s labor, but simply existing. The National Economic Stabilization and Recovery Act, NESARA, changes this picture.

NESARA alters America’s fiscal policy by replacing the income tax with a national sales tax.

Under the current income tax system, many low-income single parents pay little or no income tax, so why should single parents be interested in replacing the income tax with a national sales tax? Simply because NESARA is designed to eliminate the hidden costs of the income tax and to double the standard of living for everyone within one generation.
 

At a minimum wage of $5.15/hour, a single parent wage earner provides for their family an annual income of $10,712, ($5.15/hour×40 hours/week×52 weeks/year = $10,712).

According to the March 1999 Current Population Survey by the U.S. Census Bureau, this annual salary places the family below the poverty level, providing $3,168 less than the $13,880 Poverty Guideline set by the U.S. Department of Health and Human Services for 1999.

The family members squeeze by each year, subsisting day-to-day. For them real middle-class status is beyond a distant dream.

With standard deductions 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 adds nothing to this family’s monthly income immediately.

Of course, this family will be immediately 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 annual taxes actually paid becomes 14% of the remainder, or $149.97 ($10,712×10%×14%).

At first glance, this appears to be an annual net loss for this family of $149.97, 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 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 $267.80 of hidden embedded taxes (2.5%×$10,712), providing an annual net savings of $117.83 per year. ($267.80 minus $149.97)

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 twenty-five cents per hour earned by workers.

With two children and child care costs of $5,000 per year a single parent wage earner starts paying a federal income tax with an hourly wage of $10.58/hour. At that wage the single parent would pay an income tax of only $6.96. At the same wage the single parent would directly pay $308.09 annually if a 14% sales tax was imposed. However, because of the improved efficiency of the new sales tax system, and the elimination of hidden embedded income taxes, this family would see a net annual gain of $1,353.03!

The hidden effects of the income tax cannot be ignored. Therefore, in addition to a true rise in purchasing power caused by the higher wage, a 2.5% increase in the efficiency of the tax system increases purchasing power by that same percentage on the total money earned.

Regardless of the wage earned, converting to a national sales tax causes an immediate and significant increase in everyone’s purchasing power.

More information about, and a copy of the bill, are located on this web site. A spreadsheet is also available.