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The FairTax Effect
The day the takes effect it will be like joining some weird national game of Monopoly already in progress -- the majority of properties are already sold and have houses and hotels on them - yet you are all supposed to be equal and it's supposed to be fair! Let me say this loud and clear for anyone that needs a ten-word-or-less version of the FairTax plan. "SOAK THE MIDDLE CLASS". Those four words describe it as perfectly as possible because that's exactly what it does.
The whole logic of the is wrong. It taxes the money that you earned and worked hard for, and makes "free money" like gifts that you didn't work for tax free. Not only is this an incentive to be lazy, it smacks of feudalism and class warfare. It's Communism in its approach (ie: everyone is equal but some are more equal - the ones who inherited money). It goes completely against the founding fathers policy of working hard and being successful. It taxes food, shelter, and medicine while making estates, gifts, and capital gains totally tax free. It also tries to get people hooked on a tiny monthly welfare check from the government. It takes away incentive to be successful and productive while it makes it attractive for people to be lazy.
Christial Trejbal in an in the went so far as to call the FairTax Plan the "" and said, "one would have to be the sort who believes in elves repairing shoes, gnomes managing Zurich banks and pixies dancing under the full moon to buy into it." This ass-backwards pro-oligarchy plan could ruin America. For a better alternative see the NO-TAX Plan.
The FairTax increases the size of government making all who sell or trade part of the Big Brother network. This new tax bill gives the government additional powers to rule the poor and literally grants additional rights to the wealthiest people in America. George Orwell would have been proud.
The FairTax is ANTI-FAMILY. The FairTax penalizes poor families for buying food, clothes, shelter, and medical care by taxing all the basic necessities of life. These things are NOT taxed right now (and shouldn't be) but they ARE HEAVILY TAXED under the FairTax plan. Remember this when you get barraged by a FairTax supporter that says the prebate will give you a portion of this additional tax back and you should be grateful to the new Big Brother Government for giving you anything back. The FairTax bill penalizes those who live paycheck to paycheck taxing every dollar spent to make ends meet while UN-TAXING the rich and wealthy who live off of inheritances, trusts, gifts, and old money.
What You Lose Under the FairTax
1. The Home
Mortgage tax deduction - no more deduction your mortgage interest - no
incentive to buy a house.
2. The Per-Child tax deduction for dependants - no more help for large families.
3. The deduction for State and Local taxes - tack on the taxes.
4. The College Tuition tax deduction - sorry kids.
5. Roth IRA - will be taxed twice because your money is taxed again when you spend it.
6. Charitable Contributions deductions - no help for the faithful.
7. Child Care Credits - no more help for single moms and poor families with kids.
8. Refinancing Points deduction - no more incentive to refinance.
9. Health Insurance Premiums deduction - no more help for the sick.
What You Gain Under the FairTax
1. New 30 percent
tax on every New House or property you buy.
2. New 30 percent tax on Cars, Boats, Campers, Home Appliances, TV's
3. New 30 percent tax on Food, Clothing, Shelter, Rent, Electricity, Gas, Phone Service
4. New 30 percent tax on Medicine, Surgical procedures, Hospital stays, Dental Services
5. New 30 percent tax on Legal Services, Trial Services, Legal Advice, Legal Winnings and losses.
6. Double Taxation on Roth IRA's or retirement money you took as a lump sum.
7. Your consumption is now directly linked to inflation - prices go up - your taxes go up.
8. Interest on Credit Cards, Loans, and Mortgages now taxed at 30 percent on top of what you owe.
9. You now have to pay the government for permission to live in America by paying taxes on all you consume.
Income Tax rate versus Sales Tax rate
As we said before the clever but dishonest presentations of the FairTax Book never tell the reader that there are two tax rates that the fair tax is proposing. Under the old income tax, your individual tax rate covered you entire income (100 percent) minus deductions. Under the FairTax we have two tax rates: 1. A sales tax rate of 30 percent. 2. An income tax rate that depends entirely on how much you consume.
While it is true that everyone would pay the same sales tax rate of 30 percent, that rate would only apply to what they consumed - not your income as in the previous income tax. Under the FairTax if one consumed nothing then their income tax rate was zero percent. If they used all their money on food, clothes, rent, health care, and other consumables then they paid an income tax rate of 100 percent. Since estates, gifts, and capital gains are untaxed under the FairTax the rich come out very well when examining the percentage of their income that they pay in taxes. Since the poor spend all their income on necessities, they suffer greatly because they are taxed on everything they have.
The Ugly Truth about the FairTax
If you remember nothing else about this entire website just remember this: The ugly truth, the real purpose, and hidden goal of the so-called FairTax is to: completely and forever eliminate the estate tax, the gift tax, and capital gains taxes for the super-rich and shift taxes to the middle class. It is nothing more than an under-the-table money grab. Everything else is bullshit and bickering, smoke and mirrors, senseless squabbling, and distractions and innuendo to keep people occupied and away from the actual money grab. While idiots are endlessly arguing percentages and prebates they are missing the main point - the money grab for billionaires.
Think clearly now. Why adopt the FairTax? Will it lower taxes? According to AFFT, NO...it will just replace the current system at the same tax level. Even if that was true then why do it? Risk our entire economy on a untried plan that cuts massive amounts of taxes for just the super wealthy and gives no explanation of how that will be made up? It doesn't make any sense. Voluntarily switch to a system that puts new taxes on health care, food, and legal services? It doesn't make sense. Look at it in the clear cool light of logic and it falls apart like the cheap con game it is.
What the billionaires are counting on is the apathy of liberals and the willing ignorance of the talk-radio audience in helping cut their own throats. It will take only a simple majority in Congress and the President's signature to pass this horrible bill. But that's only the first half of the FairTax plan - the other half is the repeal of the Sixteenth Amendment. Even Neal Boortz admits that the Sixteenth Amendment would have to be repealed for the FairTax to work as designed.
You can debate percentage rates and prebates till you're blue in the face. You can make wild-assed predictions about spending habits, what billionaires will do with their newfound wealth, how many people can eat at McDonalds everyday, but it is all secondary to the huge damage this garbage FairTax bill will do to our already faltering economy. Debate and justify the estate, gift, and capital gains tax cuts first then mess with the rest.
Let's assume the FairTax bill passed. The immediate effect is this: $700 billion in revenue is gone - the super wealthy now have that money. The super rich will now pay only about 5 percent of their income in taxes and it will have never been so good to be rich then since the days of the Pharaohs. Middle class people will immediately notice the spike in prices. Even firm supporters must now deal with a 30 percent tax on houses to health care. Interestingly enough the new media will start "preparing" the citizens for higher tax rates as the politicians find out that the FairTax didn't cover the debt spending or the missing $700 billion. This "preparation" may include news stories about Social Security going bust or other patriotic stories about how the poor and middle class will have to suffer for the benefit of "the country" or "national security" or something as equally absurd.
It might not fail right away...it may take a few years...but it will fail eventually. The supporters admit that in order for the FairTax plan to work as advertised the Sixteenth Amendment has to be repealed and other tax laws must changed. If they don't repeal the amendment or pass the other laws then the FairTax plan will fail. But let's say it does fail. Some politicians will want to reinstate the old tax system. However, something will have changed....there will be a handful of well funded rich people buying ads and putting their slant into the media that they already own. It will be totally impossible to reintroduce the estate tax, gift tax, or capital gains tax even if the FairTax fails miserably. What that means is that the FairTax is a one-shot deal - it can't be reversed. If it does fail then someone will HAVE to make up the difference and it won't be the super wealthy...which is their goal anyway.
If the FairTax authors really believed in the FairTax then they should pull out the "elimination of the estate, gift, and capital gains taxes" from the bill and replace it with a guarantee - if the majority of Americans think the FairTax is working as promised after ten years, then and only then cut the estate tax, the gift tax, and capital gains tax.
How Much is my "Prebate"?
Probably the saddest part of this scam called the is the prebate. The Tax plan supporters claim it doesn't tax the necessities of life so everyone gets a prebate check in the mail each month supposedly to cover the tax on life's necessities (just the tax). What they don't tell you up front is that the maximum prebate per person is only $187 per month and they are only refunding the "" tax a person at the poverty level would pay. No real tax exemptions. So FairTax prebate = the fairtax a person at the poverty level would pay or $187 a month. Since they are only refunding the minimum a person in poverty would get, then the middle class loses big time. But wait a minute! I'm not at the poverty level...so where's my tax rebate on my necessities that I actually purchased? Answer: You lose it all except $187 under the FairTax.
The poverty level is ridiculously low and has no basis in reality. Real necessities per month = food + clothes + rent + heat + electricity + gas + healthcare. For a single person living in the ghetto and eating the cheapest foods imaginable and wearing used clothes and the minimum on everything else stacks up like this: Necessities per month = $400 + $80 + $600 + $100 + $50 + $150 + $200 = $1580 minimum per month for basic life support. At a rate of 30 percent that means our true poverty level prebate should be $475 a month to cover the taxes on minimum necessities. It reality it should be as high as $1500 per month for a middle class family to truly cover the minimum costs (not just the tax) of living at the poverty level.
But oops, there's even more bad news, if the FairTax is passed, all those prices (food + clothes + rent + heat + electricity + gas + healthcare) go up by 30 percent. This means the true cost is this (adjusted up 30 percent): Necessities per month = $520 + $104 + $780 + $130 + $65 + $190 + $260 = $2054 minimum per month for basic life support. At a rate of 30 percent that means our true poverty level prebate (With FairTax) should be $617 a month to cover the taxes on minimum necessities. It reality it should be as high as $1950 per month for a middle class family to truly cover the minimum costs (not just the tax) of living at the poverty level.
It really amused us to read the comments in one of the FairTax forums on the web. When asked why the real necessities aren't covered by the FairTax prebate instead of the poverty level FairTax prebate of $187, the supporters said that only gluttons would eat that much food or spend so much on necessities and that the poverty level was totally reasonable. Give me a break.
Because the FairTax gives back billions to the wealthy one would think that the poor and middle classes would get something in return. Not so. The big money conservatives that promote the FairTax deceptively advertise that it will not tax necessities of life. This is a lie. The necessities of a middle class person are much higher than the $187 figure for just the poverty level taxes they pulled out of a hat. Alternatively, the progressive No-Tax Plan makes food, rent, heat, electricity, gas, education, and healthcare tax free to all working people - please check it out.
Shouldn't food, clothes, rent, and healthcare be tax-free? Not according to the FairTax. If fact, the excuse used in the FairTax Book for not making food tax-free is that it would benefit the wealthy disproportionately. Give us a break. Who do they think they are fooling? You would have to be an uneducated moron to believe that. The provides no exemptions, just a paltry $187 to cover a poverty-stricken persons tax on necessities. The wealthy get back billions under the FairTax. The poor, the middle class AND the wealthy get a tiny monthly prebate check. It doesn't sound FAIR to me.
The Dirty Little Secret They Don't Want You to Know
Linder and Boortz both admit that in order for the FairTax to work, the 16th Amendment has to be repealed. They say so right in the book. What they don't talk about is what would happen to the FairTax if the Sixteenth Amendment was not repealed.
As I said before it will take only a simple majority in Congress and the President's signature to pass the FairTax into law. But then what? What are the odds that three quarters of the states will ratify the repeal? Not very good. We can't get the Equal Rights Amendment (liberal) or Flag Burning Amendment (conservative) passed so chances are it won't be repealed. The billionaires behind this bill are counting on Congress passing it with a simple majority to give the super-wealthy a huge tax cut (estate taxes, gift taxes, capital gains). Then the poor people can worry about the impossible task of getting the Sixteenth Amendment repealed as long as the billionaires get what they want first.
To put it bluntly, the FairTax was designed so the billionaires get their tax breaks up front. Even if the Sixteenth Amendment is not repealed they still get their tax break. And once a tax break that size is given, they will spare no expense in buying off politicians to make sure it is never enacted again. Once the estate taxes, gift taxes, and capital gains taxes are gone it's unlikely you will ever hear from those billionaires again. They will be away celebrating their new found wealth! Neal Boortz and his cronies of course will blame the failure on the Democrats for not getting the Sixteenth Amendment repealed. The funding will all dry up, the rallies will stop, and America will have been fooled. Hell, Neal may even write a book about it to squeeze a few more dollars out of the American people.
To make matters worse, many Constitutional scholars now say that the government has always had the right to tax incomes, property, and other forms of wealth. The 16th Amendment isn't really necessary for that to happen. There are where it was decided that the government may tax any form of money or wealth and the 16th Amendment was only needed to avoid taxation by population or land ownership and to be able to tax uniformly. Even if the 16th Amendment is repealed the government can still tax income and property.
What happened to my paycheck? A.K.A. You're going to cut my salary?
I'm glad picked up on this little quirk of the FairTax. (See ) In an AFFT funded study, it was theorized that because the taxes paid by everyone in the chain of production are embedded in the cost of goods, prices could decline an average of 20 percent if all those taxes were scrapped. The FairTax book went on and on ad nauseam about this opinion without disclosing a fine print.
Money Magazine points out that the FairTax Book fails to mention that prices can only fall this sharply if companies cut wages and they illustrate the point with this example: Say your salary is $100,000 a year today, but you take home $80,000 after taxes. Your company is still paying that extra $20,000. In a FairTax world, it will save that money, and be able to lower its prices accordingly, only if it can reduce your salary to $80,000. In other words, your take-home pay is the same as before. Sure, you'd get to "keep 100 percent of your paycheck," as Boortz and Linder repeatedly write, but it would be a smaller paycheck. That's kind of a big thing to leave out.
"Prices at the store are the same. Your boss stops taking all that money out of your paycheck. Uncle Sam is sending you money instead. And, oh yeah, the government is still up and running. This just can't happen. "It is practically and logically impossible for the government be collecting the same amount of money as before and have everyone suddenly be better off," says Daniel Shaviro, a tax law professor at New York University.
The FairTax proponents like to begin their propaganda with, "Imagine getting your whole paycheck....", and try to offset criticism of a 30 percent tax on new homes, cars, medical bills etc., by saying, "With your whole paycheck you can afford the 30 percent extra on a new home." The only problem is that unless you have a contract that stipulates a specific amount of money, your salary will probably be cut by the amount that the employer has to pay in taxes. Your $75,000 a year becomes $48,000, with no taxes taken out on your pay stub. Presto - Changeo - Ala-Kazam - you get your "whole" paycheck (and since your employer no longer has to pay unemployment taxes, social security taxes, etc. on you, then they get to pass the savings on to the customer or keep the money).
On the bright side, if you are a professional or belong to a union and have a signed contract that says you will get that $100,000 then you will get $100,000 no matter what. However, if you are working without a contract you better hope your boss is benevolent and gives you the difference between you take home under the old plan versus the new plan because the law does not specify that they have to. They can keep it. If you make $75,000 but take home $48,000 a year and don't have a contract, then you will probably still take home $48,000 per year depending on the generosity of your employer.
What Happened to My Social Security?
The plan calls for people to stop paying social security - both the employees and employers share. That's it...just stop paying it. Just take it out of the general fund. No plan for social security survival. No plan at all...just stop paying social security and Medicare and it will all magically sort itself out. Except that the plan cuts the estate tax, gift tax, and capital gains taxes to the tune of $700 billion a year so the treasury will suffer a major major major shortage of funds. Where will the money come from?
Take the money out of the general fund? Hold on there. That's not accurate. No matter what they say, taxes will go up or benefits will go down. You can't just take $700 billion out of the budget, give it to the wealthy, and expect this so-called "revenue neutral" plan to run everything like it is today on what is left over. Benefits will have to be cut. After all, we only have a limited budget and do have defense contractors to feed - why should we look out for "special interests" like the elderly?
Does that scare you? It should. This will hurt your parents, your grandparents, and eventually you. In order to make social security work we need more funds, not less. We need to make the rich pay social security tax on all income - not just up to the cut off point. We need to keep the social security money out of the control of the President and Congress.
What about your retirement savings? Under the FairTax plan if you have existing money it is taxed twice - once long ago when you earned it and saved it in the bank and once when you spend it under the new FairTax. Got money in a Roth IRA? As soon as you buy something with that money you will pay the 30% FairTax tax. There is no provision for people who already have lots of money in retirement savings and in Roth IRA's - they are simply taxed twice. The elderly will be hit the worst. What's really sad is that health insurance for the elderly is hugely expensive because the elderly need more care - and because medical expenses, surgery, and prescription drugs are 30 percent taxable under the FairTax plan, those few dollars the elderly put away will soon vanish into thin air. The No-Tax plan is an alternative elderly-friendly plan that puts the taxes where they belong - back on the wealthy.
My House Costs How Much?
Under the all new homes will have a 30 percent tax added to them. People with a newer mortgage might just burn down their houses instead of selling them so they can start fresh without taxes - thus recouping their 30 percent tax that would otherwise be lost. Because of the gigantic taxes imposed by the , people will no longer be interested in new homes but will instead have to compete for existing used homes in order to avoid the 30 percent tax. This will drive up the demand tremendously. Fortunately for the majority of the wealthy, they own a lot of real estate and will be making a killing selling their junk property. They will, of course, keep the prime real estate in the family by forever passing it on to their offspring tax-free. There will also be massive cheating by renovating. One can see small older homes "attached" to big new homes to avoid taxes.
Let's get to the crux of the situation. This is what will happen to the people that choose to pay the tax and build a house. Not only will they pay the 30 percent tax on top of the price, they will also experience a drop in value of 30 percent the first year. Yes they will and I'll show you why. Do not listen to supporters telling you that you won't lose money - you will. It's as plain as day that you will. Just read on.
Imagine two houses - same floor plan, same size, same color, same everything, right next to each other. House A was built one month before the went into effect. House B was build 1 month after the went into effect.
House A, built in May of 2007, at a cost of $100,000. The buyer put down $10,000 and borrowed $90,000 at 7 percent over 30 years. That's a $598 payment and will cost the owners $215,500 over 30 years. However, having a mortgage interest deduction, the actual interest saved would been $32,340 so the entire cost of the house would have been $183,160 over 30 years. But because the FairTax kills the home mortgage deduction for existing mortgage holders the cost will be $215,500 over 30 years.
House B, built in July of 2007, at a cost of $100,000. The tax on the house is $30,000 so the sale price is $130,000. The buyer put down $10,000 and borrowed $120,000 at 7 percent over 30 years. That's a $719 payment and will cost the owners $258,667 over 30 years. Since there is no mortgage deduction the price will stand at $258,667 over 30 years.
Now pay close attention. It's now 2008 and both owners want to sell and move to Florida. They have both made about one years worth of payments and have decreased their principal by about $1000. Since the houses are exactly the same, built one month apart, and located right next to each other they should be assessed at the same market value. The county assessor comes over, looks at the identical houses and says that the fair market value of each house is now $102,000 (One years worth of appreciation).
The owners of house A (pre-FairTax) will not lose any money when they sell - in fact they gained $2000 in appreciation of fair market value. Since the appraised fair market value of house B (purchased after FairTax) is only $102,000 then the owner of house B will lose $28,000 (part of the 30K paid in taxes) because it is now a used house just like house A and is only appraised at $102,000. People are not going to pay $130,000 for an exact duplicate of a house selling for $102,000 built one month before. It's like driving a new car off the lot and experiencing a 30 percent loss of value in just one day.
This only makes sense. When you go to the store and buy a television and pay 6 percent sales tax, there is no way you could turn around and sell it for what you paid for it (including tax) because the televisions in the store would be cheaper. Granted, houses do appreciate, but it will take quite a while to make up 30 percent! This is simple economics folks. You can't just magically miracle the fair market value up a few notches. When you sell it it will be used and must compete with all other used homes whether you lost money or not.
The unfairness of this tax is many fold. The current home mortgage deduction is used by anyone currently buying a house. The takes this away. The home mortgage deduction is an incentive to buy a home and feel like you are part of America and have something to defend. You great-granddad got it, your granddad got it, then your dad got it, so why not you? Because some billionaire want a little extra money so he can build new factories in Mexico? I don't think so. With the price of houses (for middle class and poor) it's unthinkable to buy a house without the deduction. Real Americans will fight this rotten Communist FairTax Plan until it is dead and buried.
Never Get Sick Again
One of the most disturbing things about the is the treatment of healthcare. Healthcare is a necessity and shouldn't be taxed, yet someone has to pay for the estate tax cuts. Healthcare services and health insurance are both taxable under the at the rate of 30 percent. Since the FairTax kills employer deductions for contributing to healthcare, there would no longer be a tax reason for employers to provide health insurance and many would drop it as a result. With many more uninsured people straining government healthcare programs taxes would have to go up as a result. Getting sick under the could cause massive bankruptcy, loss of home and other assets, and massive borrowing to pay for already expensive services bloated by a 30 percent tax.
Healthcare is more expensive in America than in any other country. Why? The main reason is that medical education is controlled and regulated by private industry. Most people don't realize this but the colleges offering medical degrees in the United States will only graduate a fixed number of doctors no matter how many people qualify. Medical students are told during the first days of medical school that only a certain number will graduate no matter what their grade point average. A class could start with 100 students but maybe only 60 will graduate, even if all 100 had a 3.5 GPA or better. By setting the number of graduating doctors low, the salaries can be kept high (although they would say it keeps the quality high).
Other countries don't have that problem. They graduate many times the doctors that the United States does. They also have different levels of medical professionals. The lesser trained treat the common cold, set broken bones, and treat sickness. The medical schools are regulated by the government and allow anyone who qualifies to graduate. Malpractice Insurance also keeps prices high. In other countries the government handles insuring doctors so the cost is spread out and relatively cheap.
While a lot could be done to improve healthcare in America, the plan does nothing to provide health care for all. However, it does give the medical profession tax breaks (as if the were providing healthcare to all). is not fair to the sick and disabled.
Other Goods and Services
It's not only houses, healthcare, food, rent, and clothing that will be more expensive. Other goods and service will go up with a 30 percent tax added on. That $40 tank of gas is now $52. That cable bill is now $100. Even eating at McDonalds for lunch will be over $10. I pity the poor kids making minimum wage (so much for purchasing power remaining the same). Airline tickets will probably be so high you will cancel your vacation.
Donations will also be taxable if the FairTax passes. Giving 10% of you income to church with now be taxable so you will now be giving 13.4 percent. You will no longer have a deduction for day care (The underlying message is: you might as well go back to being a homemaker) No more deductions on Insurance premiums. Child Support will be taxed. Unless you are a business (and can show a reasonable profit - not just a hobby) you will not be able to deduct professional expenses.
Thinking about buying a small used house tax free and making a gazillion home improvements? Those home improvements are no longer deductible. Of course your mortgage interest deduction is gone with the wind. No more credit for state and local taxes. No more credit for property taxes. No more tax exemptions. Yes, your rent is now taxable.
Hopefully you won't ever get in trouble and require expensive legal services. A 30 percent tax on $300 per hour is a bit much to swallow. Worse yet, if you ever get hurt you will get a lot less of a settlement (if you win) and a lot bigger bill if you don't. Currently, taxes on legal services are not reimbursable if you win.
Got credit cards and loans? Yep, there's a Fair Tax on those too because it's a service. Because you are paying for a service your interest is taxed. The more money you borrow or the longer you wait to pay it off, the higher your tax is.
Thinking about selling your house? The Fairtax has it's dirty little fingers in there too. Under the FairTax you must pay taxes on those huge realtor fees to sell your house because it's a service. No more tax deduction. Just a great big new TAX you must pay and boy will this one be expensive! If I were a realtor I would be very scared about my future earnings when people decide to sell their own homes.
Do you rent an apartment or condo? Simple. If you rent, it is considered a service so you will pay the FairTax as part of every rent check. Will your rent go up? Yes it will. However, if you have rich relatives that can "will" you a house as part of an estate or "give" you a home as a gift, then you will pay absolutely nothing. Fair and Balanced the FairTax way.
Can't Buy Anything Without A National ID Card
While the bill does not contain a specific requirement that every purchase be linked to an individual's ID, it has been alluded to by the FairTax proponents as a key control on immigration and making sure illegal immigrants don't benefit from the prebate. We expect that if the FairTax bill passes, a United States National ID card will be required when you buy anything. Databases will will track all your purchases. You will need the card to get other ID, to vote, and it may end up replacing the passport. The government needs this for identifying all the recipients of the prebate checks. Heaven knows we wouldn't want a $187 check to fall into the hands of an illegal immigrant. People will willingly give up their privacy for the supposed increase in security they get from knowing that big brother is watching at Homeland Security.
Worse yet, the information could be made available to corporations. Your insurance rates would go up for eating unhealthy foods, smoking, or drinking. You credit may take on a whole new dimension. Depending on which party is in charge you may be a patriot or a terrorist. Your home might be searched for "national security reasons" for buying too many guns, fertilizer, or donating to the wrong groups. It will make profiling at airports look like child's play. But it's the price you will pay for the war on terror and the FairTax.