So, what is the FairTax?
The following is taken from the FairTax website:
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 neutrality, and, through companion legislation, the repeal of the 16th Amendment.
The FairTax Act (HR 25, S 1025) is nonpartisan legislation. It 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 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.
-Enables workers to keep their entire paycheck
-Enables retirees to keep their entire pension
-Refunds in advance the tax on purchases of basic necessities
-Allows American products to compete fairly
-Brings transparency and accountability to tax policy
-Ensures Social Security and Medicare funding
-Closes all loopholes and brings fairness to taxation
-Abolishes the IRS
The FairTax replaces our current, complicated tax system with a simple alternative, an easy-to-use sales tax. Instead of paying multiple taxes on your income, you are taxed only on spending.
The FairTax calls for a simple 23% sales tax. Compared to our current sales tax, this seems to be a huge tax. However, when you buy an item now you are paying more tax than you realize. Because the item has already been taxed several times before the consumer purchases it (the producer has been taxed, each individual item in the product has been taxed, etc.), the retail price has been raised to include those taxes. With the FairTax each item will be taxed once - when it is purchased. In addition, there will be no tax on used items (cars, items from resale shops, etc.).
Many people have been concerned about how the FairTax will affect the poor. Because of the monthly prebate, the FairTax actually ends up un-taxing the poor. Click here for a clear explanation of the prebate.
The FairTax website has a wealth of additional information and research, answers to critics of the FairTax, a list of which Presidential and Congressional candidates support or do not support the FairTax, and much, much more.