Fair Tax is a national consumption tax instead of income tax Proposed to be about 23%, which would include making social security solvent. You pay only when you buy.
Would NOT be on top of Federal income tax.
Nothing to file. No paperwork – saves $500 billion in government paperwork alone.
The difference: Income taxes productivity; fair tax taxes only spending. Savings are tax free.
Those who make $25,000 a year or less do not pay any tax at all. Everyone receives a annual rebate of $5000 a year so those at poverty level would actually make some money.
It would tax a vast body of people who now avoid paying income taxes, like those in the entertainment industry, illegal immigrants and drug dealers. Also people who use massive tax holes to pay less tax, like John Kerry.
Merchants who usually pass the cost of tax along to their customers could cut prices 20% to 30%. This would make domestic goods more competitive in international trade.
The Fair Tax bills provide for a monthly rebate that would be paid at the beginning of every month to valid Social Security cardholders. The amount paid would be equal to the amount of tax paid for essential goods and services.
The research puts the tax rate at 23 percent, not at an "estimated" rate of between 20 and 23 percent. Nor does the Fair Tax apply to all spending. Rather, the tax is only collected on all new products sold at retail and services. Business-to-business sales and used items such as automobiles and the selling of an existing home to a buyer are not taxed.
Research by Professor Dale Jorgenson of Harvard University's School of Economics clearly shows that prices will drop by as much as 22 percent on products and 25 percent on services.
There will be no exempting items by category because the research has shown that the wealthy spend much more on prepared food, clothing, housing and medical care than do the poor.
Instead of the Fair Tax being collected from approximately 180 million working people, it will be collected from 300 million-plus Americans, and the more than 40 million visitors to our shores. Further, a recent study by American Farm Bureau economist Ross Korves shows the Fair Tax base was less variable than the income tax base because even with the loss of jobs or the inability to work, people do not stop consuming. And finally, for the first time, it will make criminals honest taxpayers and dramatically reduce the more than $1 trillion underground economy.
On real estate: Say your son and new daughter-in-law want to buy a $150,000 new home as their starter home. If you subtract the 30% the home builder has added on to cover the embedded tax and compliance costs, the real price becomes $105,000. Then you add onto that the 23% FairTax , or $34,500. That makes the price of the home $34,500+105,000 equaling $139, 500. Also, they get a monthly tax return from the government based on their income to help pay for furnishings. The appraisal values in a new home community include embedded tax and compliance costs on all materials and construction.
Now, when they present you with two new grandchildren and have a couple of promotions under at least his belt (this tax may save them so much money she may decide to stay home to raise the children), they can sell their now used home without worrying about a value added tax. It's really a win/win situation all around.
Consumption is a more stable source of revenue than income. A recent study by American Farm Bureau economist Ross Korves shows the FairTax base was less variable than the income tax base. Why? Because during difficult times due to loss of a job or an inability to work, people may not have as much income, or may have no income at all. They borrow funds or use savings. They may not have earnings, but they still continue to consume.
Any questions? Please ask and I'll research the answer for you. Meanwhile, for more information check out www.fairtax.org and click on "learn more."