To promote freedom, fairness, and economic opportunity by repealing the income tax and other taxes, abolishing the Internal Revenue Service, and enacting a national sales tax to be administered primarily by the States.
The Fair Tax Act
VotersVoice.com never shares your personal information with anyone.
Yay! Proponents say the simplicity and fairness of The Fair Tax Act is obvious. Each individual and family chooses what to purchase and every purchase is taxed at the same rate, regardless of where the money came from or who spends it. It protects the poor, encourages savings, and empowers American businesses.
Nay! Opponents say this idea is unrealistic. They object to the new bureaucracy created by the sales tax and the Family Allowancea that puts every American on the federal payroll. Plus there's no guarantee prices won't soar. Just one thing for sure: The poorer you are, the more unfair this tax is.
So what do you think? Is this plan fair to YOU?
The National Sales Tax would be collected at the point of sale - at the grocery store or car lot or broker or massage therapist. Businesses that sell goods and services simply add the tax into the cost of their products. Large sellers (those who will pay over $100,000 in tax and sell more than $435,000 a year) must make tax deposits weekly. Smaller businesses pay monthly.
The percentage of the tax has been a matter of great debate. The exclusive tax rate is 30% of the price - but that only amounts to an inclusive tax rate of 23% which is the total cost you paid. Either way, you pay the same amount of tax. 23% of $97.50 is $22.50 = 30% of $75.00 is $22.50.
Of that 30%, the general revenue percent is fixed at 14.91%. So federal programs would either be limited to that amount or we would have to borrow the difference. The amount designated to Social Security and Medicare (FICA) starts at 15.09%, but can be adjusted +/- 2% in subsequent years.
"The idea of a national sales tax or a consumption tax has a lot going for it. It would make us more competitive globally … (and) level the playing field … (but) it has a real problem and that is it lowers the burden on the very highest income folks and the very lowest and raises it on middle income people."
“The Fair Tax isn't about taxes. It is about freedom. It is about jobs. It is about small government. It is about returning power to the people. It is about ensuring America's economic growth.”
Introduced the Bill in the House
“The Fair Tax fundamentally alters our prospects as a nation. Savings will increase and therefore individuals and American companies will have more money to invest in job-creating growth and companies around the globe will run to invest here as well."
The number of pages in the U. S. tax code nearly tripled in the last 30 years
“It would reduce taxes for wealthier Americans, but would not help to improve tax fairness and would significantly worsen the federal deficit.”
“You would need two other bureaucracies and they could be huge. One to enforce the sales tax. You'd also need a bureaucracy to administer the biggest welfare system ever devised which would give every American a Prebate to make up for the effects of this tax on low income people.”
“After serving 8 years on the Senate Finance Committee, my choice to meet the fairness criteria is to junk the income tax with all its exceptions, close the IRS and establish a sales tax without exceptions.”
No More IRS!
Instead, the money needed to run government will be raised through a National Sales Tax. Every purchase that's made in the U.S. will be taxed - whether it's a product or a service. So in addition to taxes on merchandise, everything from hair cuts to health care consultations will now be taxed as well. On the other hand, if you save or invest some of your income, it's not taxed at all. You only pay taxes when you spend money.
Both goods and services
EXAMPLE: If you buy a new house or car, you pay tax. But then the tax has been paid forever. So when you buy or sell a used home or car, it's tax free.
Component parts and exports are tax-free
Total costs to consumers should remain the same
Following that same principle, the materials and supplies that corporations purchase and use to produce their goods or services are also tax-free. So the company that bottles your favorite beverage, or builds your computer, or brokers your mortgage isn't taxed on the packaging or electronic components or software they used to create it. All taxes are paid only once -- when the item is sold is the U.S.
EXAMPLE: If the jeans you want cost $100 now, when you take out corporate taxes, they might only cost $75. You would then pay 30%- or $22.50 in National Sales Tax (not including any State tax) so your total purchase price is $97.50.
Every household will receive
EXAMPLE: If you're in a low to middle income category and you spend every dollar you make, you will pay 30% of your total income in taxes. If you make a million dollars and only spend half, you would only be taxed on half and your real tax rate would be 15%.
States are responsible
Taxes are collected
Companies receive monthly rebates
YOU PAY A 30% TAX
$ 75.00 Purchase Price
$ 22.50 Tax Paid
"The Fair Tax is too good to be true and voters should not take seriously any candidate who supports it."
X Treasury Secy
Wall St. Journal Columnist
However this only applies to the purchase of NEW goods. The idea is “To tax all consumption of goods and services in the United States once, without exception, but only once.” So USED goods and services are not subject to the National Sales Tax.
The Issue and The Bill
Taxes are one of the most controversial issues in politics - and always have been. Our own American Revolution was due, at least in part, to unfair taxes.
With both corporate and individual returns, there are hundreds of details and deductions that can affect your rate. As a result, the U.S. tax code which explains all those rules and regulations is now more than 70,000 pages long.
In the wake of multiple financial meltdowns, tax reform has become a hot-button issue and the Fair Tax Act, introduced in every Congress since 2003, may be gaining traction.
A "Representative" Sampling of Opinions
All American tax-payers had a lower tax rate In 2008,
Percentage of U.S. Income Paid in Federal Taxes
Source: CCH, Inc
There's no tax on R&D or education or bad debts and other common accounting practices. Also, in an effort to make U.S. prices more competitive in the global marketplace, there are no taxes on exports other than whatever tariffs apply.
However, the overall cost to the taxpayers is not expected to rise. That's because corporations currently embed their income taxes in the costs of their goods and services. Once this tax is eliminated from the pricing formulas, the costs will come down and the price paid at the point of purchase should be a wash.
The proponents of this bill believe it's fair because everyone pays the same rate on their purchases. Since everyone buys things, the tax burden will be spread among more people - and not just the people earning income. The trust fund baby, the drug dealer and the tourist will all pay taxes as well.
The catch comes when you look at how much National Sales Tax you pay as a percentage of your annual income - and that can vary widely.
New this year: Clarification of the rules for government entities, non-profit organizations and education. Although they are not the same as "taxable employers" many of the same business rules apply. Their "income" in the form of donations, dues or tuition is not taxable, nor are any of the free services they provide. However, if they provide a paid service, that service is taxed. So your gift to a church or temple or mosque isn't taxed, but the fee they charge to perform your marriage ceremony is. Your county taxes aren't taxes, but the water or trash services your county provides could be. Your association dues aren't taxes but the annual salary report you buy from them is. Your tuition is tax free, but the dorm room and meal service may not be.
To offset this regressive effect, The Fair Tax Act creates a "Family Consumption Allowance." Every family will be given an annual credit equal to the taxes paid on a poverty level income. Families register each year; then every month the government mails or electronically deposits a rebate check into your account (a task assigned to the Social Security Administration).
Corporations also receive monthly rebates and can earn credits for things like administrative efficiency, export sales, bad debts and insurance proceeds. As a result, business rebates will vary month to month and business to business.
The States will be responsible for collecting the money since 45 out of 50 already have collection systems for State sales taxes. To compensate for their administrative costs, 00.25% of the taxes collected will be used to reimburse the States.
To manage it all, a new Sales Tax Bureau will be set up on the federal level with oversight given to the Secretary of the Treasury. A separate department will be set up for excise taxes and taxes on alcohol and tobacco will continue to be collected by the Bureau of Alcohol, Tobacco and Firearms. This bill does not affect federal excise taxes or import duties. In addition, all the state and local taxes remain in effect.
This bill also has a 7-year sunset clause. Within that time frame, the 16th Amendment must be repealed or the Fair Tax is eliminated.
The Fair Tax Act starts by repealing all federal income taxes for individuals and corporations. Every dollar you make, you keep - and so does the company that employs you. The I.R.S. is gone along with all taxes on:
"Economic freedom cannot be sacrificed
"There are two big challenges. One is you would have to repeal the amendment that permits the income tax … The second is an enormous incentive to cheat on the consumption tax."
I'm not a co-sponsor of that but I would probably vote for it if it ever came to the floor (it's not going to come up because they're not getting near that).
Did You Know?
The U.S. didn't have a permanent income tax
Newt Gingrich (R-GA)
Former Gov. Mitt Romney
Rep. Ron Paul, M.D. (R-TX)
President Barack Obama (D)
“The Fair Tax ... would create a fairer, simpler tax code that allows every American the freedom to determine his or her own priorities and opportunities."
Sen. Saxby Chambliss (R-GA)
“I'm advocating throwing out the entire federal tax system and replacing it with the Fair Tax which, in my opinion, really reboots the American economy."
Rep. Rob Woodall (R-GA)
Mike Huckabee (R)
Former Gov. Gary Johnson, (Libertarian-NM)
Write a letter to Congress:
"Let's not leave out the most important part. It replaces all federal income tax that's being taken out of people's checks. It replaces the payroll tax that's being taken out of people's checks. That's the part that people often forget."
"I know the polls show that the majority of people don't support it but here's the truth. I have never met anybody who after I explained the fair tax to them are not convinced that it's better than what we have right now."
Herman Cain, Businessman (R)
Sen. Marco Rubio (R-FL)
Should undocumented kids
Source: Tax Foundation
In 2011 and 2012, we paid even less, thanks to a payroll tax holiday. Individual rates we reduced by 3.3% and corporate matches were lowed by 1.3%.
In 2013, we returned to the pre-holiday FICA rates of 7.65% for both corporations and workers. These taxes are only levied on incomes up to $113,700. Once someone's income tops that, there is no more FICA to pay.
Goods and services to be resold
S. 122 by Sen. Saxby Chambliss (R-GA), 8 co-sponsors
© Voters Voice, Inc. 2013
“I'm a Fair Tax supporter. ... I think we ought to pay on consumption not productivity because I think the model of paying on what we produce -- whether it's income, savings, investment income, capital gains -- it's counterintuitive to an economy."