The FairTax proposal is a comprehensive plan to replace federal income and
payroll taxes, including personal, gift, estate, capital gains, alternative
minimum, Social Security/Medicare, self-employment, and corporate taxes.
The FairTax proposal integrates such features as a progressive national retail
sales tax, dollar-for-dollar revenue replacement, and a rebate to ensure that no
American pays such federal taxes up to the poverty level. Included in the
FairTax Plan is the repeal of the 16th Amendment to the Constitution. The
FairTax allows Americans to keep 100 percent of their paychecks (minus any state
income taxes), ends corporate taxes and compliance costs hidden in the retail
cost of goods and services, and fully funds the federal government while
fulfilling the promise of Social Security and Medicare.
Americans take home their whole paychecks.
Not only do more Americans have jobs, but they also take home 100 percent of
their paychecks (except where state income taxes apply). No federal income
taxes or payroll taxes are withheld from paychecks, pensions, or Social Security
checks.
The prebate makes the FairTax progressive.
To ensure no American pays tax on necessities, the FairTax Plan provides a
prepaid, monthly rebate (prebate) for every registered household to cover the
consumption tax spent on necessities up to the federal poverty level.
This, along with several other features, is how the FairTax completely untaxes
the poor, lowers the tax burden on most, while making the overall rate
progressive. However, the FairTax is progressive based on
lifestyle/spending choices, rather than simply punishing those taxpayers who are
successful. Do you see how much freer life is with the FairTax instead of
the income tax?
No tax on used goods. The amount you pay to fund the government
is totally visible.
With the FairTax you are only taxed once on any good or service. If you choose
to buy used goods − used car, used home, used appliances − you do
not pay the FairTax. If, as a business owner or farmer, you buy something
for strictly business purposes (not for personal consumption), you pay no
consumption tax. The FairTax is charged just as state sales taxes are
today. When you decide what to buy and how much to spend, you see exactly
how much you are contributing to the government with each purchase.
Retail prices no longer hide corporate taxes or compliance costs,
which together drive up costs for those who can least afford to pay.
Did you know that income taxes and the cost of complying with them currently
make up 20 percent or more of all retail prices? It’s true.
According to Dr. Dale Jorgenson of Harvard University, hidden income taxes are
passed on to the consumer in the form of higher prices for everything you buy.
If competition does not allow prices to rise, corporations lower labor costs,
again hurting those who can least afford to lose their jobs. Finally, if
prices are as high as competition allows and labor costs are as low as
practical, profits/dividends to shareholders are driven down, thereby hurting
retirement savings for moms-and-pops and pension funds invested in Corporate
America. With the FairTax, the sham of corporate taxation ends,
competition drives prices down, more people in America have jobs, and
retirement/pension funds see improved performance.
The income tax exports our jobs, rather than our products. The
FairTax brings jobs home.
Most importantly, the FairTax does not burden U.S. exports the way the current
income tax system does. The FairTax removes the cost of corporate taxes
and compliance costs from the cost of U.S. exports, putting U.S. exports on a
level playing field with foreign competitors. Lower prices sharply
increase demand for U.S. exports, thereby increasing job creation in U.S.
manufacturing sectors. At home, imports are subject to the same FairTax
rate as domestically produced goods. Not only does the FairTax put U.S.
products sold here on the same tax footing as foreign imports, but the dramatic
lowering of compliance costs in comparison to other countries’ value-added
taxes also gives U.S. products a definitive pricing advantage which foreign tax
systems cannot match.
The FairTax strategy is revenue neutral: Neither raise nor
lower taxes so consumer costs remain stable.
The FairTax pays for all current government operations, including
Social Security and Medicare. Government revenues are more stable and
predictable than with the federal income tax because consumption is a more
constant revenue base than is income.
If you were in a 23-percent income tax bracket, the federal government would take $23 out of your paycheck for every $100 you made. With the FairTax, if the federal government gets $23 out of every $100 spent in America, the same total revenue is delivered to the federal government. This is revenue neutrality. So, instead of paycheck-earning Americans paying 7.65 percent of their paychecks in Social Security/Medicare payroll taxes, plus an average of 18 percent of their paychecks in federal income tax, for a total of about 25.65 percent, consumers in America pay only $23 out of every $100. Or about 30 percent at the cash register when they elect to spend on new goods or services for their own personal consumption. And this tax is collected only on spending above the federal poverty level, providing important progressivity.
Tax criminals don’t make criminals out of honest taxpayers.
Today, the IRS will admit to 16 percent noncompliance with the code.
FairTax.org will be generous and simply take the position that this is likely a
conservative estimate of the underground economy. However, this does not
take into account the criminal/drug/porn economy, which equally conservative
estimates put at one trillion dollars of untaxed activity. The FairTax
does tax this -- criminals love to flash that cash at retail -- while continuing
to provide the federal penalties so effective in bringing such miscreants to
justice. The substantial decrease in points of compliance -- from
every wage earner, investor, and retiree, down to only retailers -- also
allows enforcement to concentrate on following the money to criminal activity,
rather than making potential criminals out of every taxpayer struggling to
decipher the current code.
What is the FairTax Plan?
The FairTax Plan is a comprehensive proposal that replaces all federal income
and payroll based taxes with an integrated approach including a progressive
national retail sales tax, a prebate to ensure no American pays federal taxes on
spending up to the poverty level, dollar-for-dollar federal revenue replacement,
and, through companion legislation, the repeal of the 16th Amendment. This
nonpartisan legislation (HR 25/S 1025) abolishes all federal personal and
corporate income taxes, gift, estate, capital gains, alternative minimum, Social
Security, Medicare, and self-employment taxes and replaces them with one simple,
visible, federal retail sales tax administered primarily by existing state sales
tax authorities. The IRS is disbanded and defunded. The FairTax
taxes us only on what we choose to spend on new goods or services, not on what
we earn. The FairTax is a fair, efficient, transparent, and intelligent
solution to the frustration and inequity of our current tax system.