This Act, called the “Fair Tax Act” (a.k.a. "FairTax"), repeals all income taxes and payroll taxes, specifically:
• The individual income tax (including capital gains taxes and the alternative minimum tax).
• All individual and employer payroll taxes including Social Security, Medicare, and federal unemployment taxes.
• The corporate income tax.
• The self-employment tax (a self-employed person pays both the individual and the employer portions of Social Security and Medicare taxes).
• The estate and gift tax: Effective subsequent January 1 after the Act is passed, the Act replaces the above taxes with a national retail sales tax on all goods and services sold at retail. The tax rate is set to be revenue neutral – at the level necessary to replace the revenues generated by the repealed taxes.
A 23-percent (of the tax-inclusive sales price) sales tax is imposed on all retail sales for personal consumption of new goods and services. Exports and the purchase of inputs by businesses (i.e., intermediate sales) are not taxed, nor are used goods or any savings, investment, or education tuition expenses. The sales tax must be separately stated and charged on the sales receipt. This makes it clear to the consumer exactly how much they are paying in federal taxes.
There are no exemptions under the FairTax, meaning that no lobbyist, corporation, or individual can obtain tax advantages that are not available to the general public.
Also, everyone pays the same rate, but those who spend more pay more total taxes than those who spend less.
The FairTax provides every American family with a rebate of the sales tax on spending up to the federal poverty level (plus an extra amount to prevent any marriage penalty).
The rebate is paid monthly in advance. It allows a family of four to spend $27,380 tax free each year. The rebate for a married couple with two children is $525 per month ($6,297 annually). Therefore, no family pays federal sales tax on essential goods and services and middle-class families are effectively exempted on a large part of their annual spending.
Funding for Social Security and Medicare benefits remains the same. The Social Security and Medicare trust funds receive the same amount of money as they do under current law. The source of the trust fund revenue is a dedicated portion of sales tax revenue instead of payroll tax revenue.
States can elect to collect the federal sales tax on behalf of the federal government in exchange for a fee of one-quarter of one percent of gross collections. Retail businesses collecting the tax also get the same administrative fee.
Strong taxpayer rights provisions are incorporated into the Act. The burden of persuasion in disputes is on the government. A strong, independent problem resolution office is created. Taxpayers are entitled to professional fees in disputes unless the government establishes that its position was substantially justified.
Anyone who thinks this is a good idea should do the math with their own personal finances.
If all of the taxes mentioned are eliminated, and this system pulls in as much revenue as the current system, then someone's taxes have to go up (it's a pretty simple mathematical equation). If this system doesn't pull in as much as the current system, spending will have to be cut (in order to balance the budget), and since we can't seem to legislate enough cuts now, I'm not sure how we'll get that done with even less revenue.
This bill is an economy-killer. But don't take my word on it, do the math yourself.
I sympathize with you trying to compete with the moneyed superpacs. We won't be able to outspend them, but we can outsmart them and keep the foxes from raiding the people's henhouse.
"It ain't gonna happen!"
That is the reaction I often get when I mention the need for basic tax reform. And the defeatists are right if we let the same lawyers, politicians, lobbyists (foxes all) guard the henhouse of their privileges protected in 67,000 pages of IRS loopholes, exceptions, favoritism and confusion.
Now MSNBC is giving us all an easy way to effectively turn some politicians' heads--two click vote.
Please notify your friends and neighbors that MSNBC just began this poll: "How Would You Improve the Tax Code?" The last voting option offered is "Eliminate the income tax and create a national sales tax". So far, this option has been chosen by over 39% of those voting; this is more than the next two closest groups and more than all four of the other groups combined. Such a national sales tax with its rebate to help the poor (as in FairTax H.R. 25 & S. 13), would be truly fair and simple as it replaces the IRS income tax and untaxes the poor altogether.
Join me in casting your vote to ensure MSNBC knows just how strong America's support is for the FairTax; click this link: http://bottomline.msnbc.msn.com/_news/2012/01/24/10223771-vote-how-would-you-improve-the-tax-code (If the click doesn't work directly, ctrl click, or copy and paste this link.)
Yes, we can THIS time,
Stephen F. Uhl, Ph.D.
13401 Rancho Vistoso Blvd., #174
Oro Valley, AZ 85755
"You are not allowed to be both idle and critical; you must choose one."
The US has one of the highest corporate tax rates in the world. Under the plan above the US stock market would soar.
Without paying corporate tax, those new profits would be multiplied by the price to earning (P/E) ratio stock prices are loosely based on.
The stock market valued at 12 times forward earnings might go up as much as 30%. Those lucky enough to be in the middle class with 401Ks might be able to retire earlier than thought, and give up some of those higher paying jobs to the next generation.
This is one of those virtuous circle solutions.
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