MIDLOTHIAN, Texas, January 28, 2014 – U.S. Senate candidate Ken Cope today unveiled a tax plan that would replace individual income taxes with a nationwide sales tax, encourage job-creating business growth, and eliminate the Internal Revenue Service (IRS).

 

Cope, who is seeking to unseat current Senator John Cornyn in the March 4 Republican primary, calls it his "5-0-3 Plan," because:

• Overall Plan Characteristics:

  • ​Eliminates ALL PERSONAL FEDERAL INCOME TAXES

  • Eliminates the Federal IRS

  • Revenue Collecting by States Back and "Transfered" to the Treasury 

  • All Food and Medicines Are Federal Tax Free

  • Moves State Franchise Tax Departments to Federal Sales Tax Collection

  • Lower Income Participants Can Save Without the Penalty of Taxation

  • Only Pay Federal Sales Tax If You Buy Something Which Encourages Savings and Capital Accumulation

  • Capital Accumulation Results In Low Interest Rates And Economy Growth

  • Money shifts hands about seven times.  This means the 5% would occur at each level which would produce about 25%-35%

  • Every American becomes a "participant" in our tax system and "own" a piece of our American dream.

• 5 - This is a 5% national consumption or sales tax on all sales except for food and medicine.  

  • States would become the collector of the tax revenue from those individuals that make the sale​

  • Tax revenues would be collected in the quarter in which the sale was made.  This stops the deferment of revenues for years which current happens (Paradigm Shift - Time Value of Money)

  • If corporation fails to make the tax collection payment during that quarter, the corporation would lose its right to do business in that state.

• 0 - 0% Corporate Sales tax for all small businesses with gross revenue below $500K quarterly ($2 million per year).

  • This percentage would be adjustable by Congress to stimulte or ​contract economic requirements.

• 3 - Additional 3% Corporate Sales Tax on all corporate sales above $500K per quarter ($2 million per year)

  • Applies to all companies, foreign or domestic that are doing business in the U.S.

 

"My Ken Cope 503 IRS Elimination Plan is designed to relieve all individual Americans and companies from the burden of federal income tax compliance," Cope said.

 

"Companies spend millions of dollars trying to comply with IRS rules and regulations and looking for tax loopholes," Cope noted. "With my 503 Plan, that money can go to more productive uses and "loopholes" are eliminated. And I'm pretty sure most Americans would love to see the elimination of the IRS. Especially if they're conservatives and they have been, or fear they will be, a target of the IRS."

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Today, only about 49% of our American populations participate in paying taxes.  This means we have more "receivers /takers" than we have "tax payers".  This is the definition of "Socialism".  The real problem was best explained by British's Margaret Thatcher when she said, "The problem with socialism is when you run out of everyone else's money."   We are in the process of proving her point.

 

Cope said tax reform through his 503 Plan would be his top priority once elected because it effectively forces the repeal of Obamacare.  Without the IRS, Obamacare is unenforceable and none functioning.  Replacement of Obamacare with a combination of a free market-based approach to health insurance and an easy-to-administer tax system would unleash American business, he said, predicting, "This could usher in an era of growth similar to what Ronald Reagan presided over in the 1980s."

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PRESS QUESTIONS AND KEN'S RESPONSE(S):

Would your plan increase or decrease current federal tax revenues?

• I used the most current available numbers for the U.S. Gross Domestic Product, federal spending, and business revenues, and according to my calculations, the difference is just $50 billion out of a $3.5 trillion or more budget.  That's about a 1.5% difference, and that difference is actually in the federal government's favor.

• As Senator, I would push to dedicate any additional revenue to paying down the national debt.  

• My perference would be to use 1% out of the 5% and apply it to the national debt.  

• This would still leave 20%-28% revenue based upon a 5 to 7 turn per dollar spent.

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Doesn't your plan hurt the poor, who now pay no taxes?

• No.

• The 503 Plan exempts food and medical from the national sales tax, protecting two major areas of spending for the poor.

• The poor already pay taxes through the prices they pay for goods produced by corporations that the federal government taxes.

• The retail prices reflect all the costs those corporations bear, and that includes their respective federal taxes.

 

No income taxes at all, not even for the ultra-rich?

• That's correct.

• The ultra-rich, like all of us, would pay their taxes in the form of the 5 percent sales tax.

• The rich would pay more in taxes because they buy more "expensive" things.

• No "Loopholes" for the expensive toys or property.

 

How can you think this is fair when the rich don't pay more?

• The tax is computed based upon the amount that you consume.  

• The rich consume more; therefore, they will be paying more tax.  

• The rate is “fair” because everyone pays the same rate against their consumption level.  

• If we're all paying the same rate, isn't that the very definition of fair?

• The purpose of federal taxes is to pay the costs of the federal government.

• Taxes should never have been turned into a tool to redistribute wealth.

 

What about tax deductions that people have come to count on, like the home mortgage deduction?

• The Ken Cope 5-0-3 IRS Elimination Plan stops all the loopholes and gaming of the system.  

• We cannot be selective in what we stop and what we don’t.  That is what has gotten us into this predicament.  

• If there are no income taxes, there is no need to worry about deductions. Even with home mortgages, you can only deduct a portion of that interest by the time you calculate your tax. So it's a lot of effort for only a partial return.

• The 503 Plan gives everybody a 100 percent deduction on their income taxes.

 

But the poor will see higher prices for non-food or non-medicine goods, right?

• The prices that are paid today include all of the costs paid by corporations up to, and including, their respective tax bills.

• The Ken Cope 5-0-3 IRS Elimination Plan excludes food and medical costs from the national sales tax to insure that the lower income and poor are NOT unfairly impacted.  

• Under this plan, the prices of food and medical will not carry the cost of IRS compliance or taxes.  Therefore, the prices of food and medical will be reduced with competition insuring the savings are passed on to the consumer.  

• Additionally, the individual income tax eliminated which will result in all American’s having more money in their paycheck to cover those higher prices for their durable goods or personal savings accounts. 

 

Why do you feel this is such a good idea?

• What the Ken Cope 5-0-3 IRS Elimination Plan eliminates the huge bureaucracy of about 77,000 pages of over reaching and overly aggressive government tax code.  

• This would be a huge catalyst to job growth within the small businesses and major corporations alike.  

• Money that is now harbored overseas by major corporations will be able to return to America as capital investment without the fear of confiscation.

• The “Death Tax” is eliminated and families can pass on the results of their hard labor without intrusion by the Federal government. 

• The plan would be an opportunity of individuals to save and invest without the burden of complicated tax law.  

• Individuals and corporations will no longer have to pay accountants and lawyers to figure out the tax code.  The IRS would never again be a “political tool” for overly intrusive politicians.  

• Individual and personal privacy would be restored to what the framers of the Constitution intended.   

• This plan changes the business incentives in a way that encourages business growth and leads to more jobs.

• Corporations would no longer waste their resources on schemes designed to reduce their federal income taxes.

• Individuals would no longer have to file federal tax forms.

• All the expense of maintaining tens of thousands of IRS agents would be eliminated, saving money in the federal budget.

 

Who would collect the 3 percent business tax?

• Every state requires quarterly franchise tax reporting and tax collection based upon their sales.  This could easily be done by the states working with the Treasury Department, the IRS' parent department.

• Businesses would be required /incentivized to make their quarterly payments.   But because it's an easy calculation based on top-line revenues, there is no need for a tax bureaucracy to handle this task.

• Either they pay their quarterly sales tax revenue or they are barred from doing business in that respective state.

 

What do you have against the Internal Revenue Service?

• Notwithstanding the fact that the 16th amendment did not complete the constitutional amendment process, at lot!

• It isn't so much the IRS as the entire tax code that is targeted by the Ken Cope 5-0-3 IRS Elimination Plan.

• We have a far too complex tax code right now, and it is a burden on every taxpaying American and choking our American economy.

• Taxpayers live in fear that small mistakes which could subject them to aggressive and punishing IRS audits.

• With the 503 Plan, there is more money in everyone's paycheck all year long.

 

What do we do about all the unemployed IRS agents or private tax preparers?

• I would encourage them to seek more productive work in the private sector.

 

Why do you exempt companies under $2 million in gross revenue?

• Those companies are the bulk of small businesses in this country, and it is small businesses that account for the greatest job growth.

• The Ken Cope 503 IRS Elimination Plan unleashes them – as opposed to holding them back like the current tax code does – and even when they do reach $500K per quarter ($2 million  annual) in gross revenue, their tax is a relatively small 3 percent of the amount above the $500K threshold.

• So there's no disincentive for them to expand and add employees.

 

Who are the winners and who are the losers in this plan?

• I think the winners are the American people.  

• Our economy wins because of job growth and tax code elimination. 

• Businesses will benefit through reduced costs of IRS compliance and a better understanding of their costs. 

• Individuals win because the burden of IRS compliance is removed from their daily life and financial futures.  

• Estate taxes (Death Taxes) are gone, so families can truly build legacies for their ancestry.  

• The worry about income taxes is completely removed.

• Nonprofit organizations are winners, too, since they don't have to navigate complex rules to be sure they are compliant.

• Churches, for example, would no longer have to worry that preaching about political topics will make them lose their tax-free status.

• Corporations will have any increases sales tax offset by reduced compliance costs and streamlined accounting practices.

 

Isn't this a giveaway to corporate America?

• Not at all.

• In exchange for the gift of taking the tax compliance burden off their shoulders, companies with more than $2 million in gross revenues would pay a flat 3 percent calculated against their gross sales value.  If they change their prices, their respective tax fluctuates accordingly. For an example, take General Electric, which in the past made headlines when it paid zero income tax. Under my Ken Cope 5-0-3 IRS Elimination Plan, GE would have paid $4.4 billion on their 2012 revenues of $147 billion, significantly more than the $2.4 billion they reported to have paid.

• I have compared the figures from other large corporations and find that some pay more under the plan while some pay less.

 

Would this sales tax apply on the Internet?  

• Internet sales are reported through the respective state where the sales is currently reported.  

• Where ever the sales is reported, the company will be required to pay the respective national sales tax.  

• No loopholes or gaming is allowed.

 

What about business-to-business sales?  

• All sales are captured in the Ken Cope 5-0-3 IRS Elimination Plan.  

• There are no loopholes or gaming the system.  

• The only exception is for food and medical costs.

 

What about non-profit businesses with revenues of more than $2 million?  

• The term “non-profit” no longer exists.  

• If a business is generating over $2 million in sales of any goods or services, then it is subject to the sales tax.  

• No loopholes and no gaming the system.  Because there is no gaming the system, the freedoms of free speech and expression are returned to all Americans and organizations.

 

What about startup companies with revenue over $2 million but with high costs and low margins?

• They may not even have 3 percent to spare.  

• The Ken Cope 5-0-3 IRS Elimination Plan stops all loopholes and gaming of the system.  

• Small businesses with sales of over $2 million are no longer small businesses.  

• Additionally, they are provided with the offsetting savings due to the elimination of IRS compliance and their federal income tax under today’s structure.  Today, they must fully comply with ALL IRS tax code, fees, taxes and penalties. 

• The question implies that business owners are not creative towards reducing their costs.  

• When all business owners have to worry about is the 3% sales tax, I am confident that their creative business acumen will more than offset the sales tax.

 

What do you see as the impact on home sales, for instance, where the mortgage tax deduction is a big incentive to buy a home?   

• The sales tax will become part of the mortgage value that same as sales tax on cars is included in the sales note.  

• No loopholes and no gaming of the system is allowed.  

• Everyone must play by the same rules.

 

Would you retain a capital gains tax?  

• No.  

• No loopholes and no gaming of the system.  

• With the Ken Cope 5-0-3 IRS Elimination Plan there is no more capital gain tax because it is part of the 77,000 pages of over reaching and overly aggressive government tax code today.  

• Private investment is no longer discouraged, but quite the contrary it is encouraged.  

• Capital accumulation by investment firms is a good thing for individuals and businesses seeking to borrow for business expansion.  

• This means job growth.

 

What would happen with the sales tax (5%) collected by small businsses?  

• The small business would be required to pass through the sales tax receipts to the state and, ultimately the federal treasury.  

• Violation would be penalized with a combination of punitive fines and loss of their small business tax rate of 0%. 

 

How would this plan affect OBAMACARE?  

• The elimination of the IRS would effectively remove the enforcement arm of the IRS.  

• This means, that there would be no enforcement organization for the Affordable Healthcare Act (AHA, or OBAMACARE).  

• The AHA would become unenforceable and would have to be repealed because it would have no enforcement by law.  

• Due to AHA’s construction, which excludes a “severability” clause, the AHA can NOT be repaired.  It can only be repealed and replaced.  

• Replacement would force the Democrats to re-write and NEGOTIATE a new solution.  It would NOT look like, or smell like, the AHA.

• This would allow the Congress to bring capitalistic competition back to healthcare and achieve lower prices for all.

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