Sketch of the FairTax
is a consumption tax designed to replace the entire federal income
tax system, including personal, payroll, corporate, self-employment,
capital gains, gift, and inheritance taxes. The FairTax will allow
Americans to keep 100% of their paychecks, it will dramatically
reduce pre-tax prices, and it will fully fund the Federal government,
including Social Security and Medicare.
With the FairTax, you will get to take home 100% of your paycheck.
No income taxes or payroll taxes will be withheld from your paycheck,
pension, or Social Security check.
Did you know that hidden income taxes currently make up 20% to 30%
of all retail prices? It's true. According to Dr. Dale Jorgenson
of Harvard, hidden income taxes are passed on to the consumer in
the form of higher prices, from 20% to 30% higher than they would
otherwise be for everything you buy.
Therefore, when the FairTax Act of 2001 abolishes the federal income
tax system, prices will drop 20% to 30%. The proposed FairTax rate
is 23%. So, instead of paying 15.3% of your paycheck in payroll
taxes, plus an average of 28% of your paycheck in federal income
tax, for a total of about 43% of your paycheck going to the federal
government in Washington, you pay only a 23% consumption tax each
time you purchase a new good or service for your own personal consumption
above the federal poverty level.
At this 23% rate, the FairTax will pay for all current government
operations, including Social Security and Medicare. With a consumption
tax like the FairTax, government revenues will be even more stable
than they are now because consumption tends to be more constant
With the FairTax, if you choose to buy any new good or service for
yourself, a consumption tax of 23%, will be added into the price.
If you choose to buy used goods used car, used home, used clothing
you do not pay the FairTax. If, as a business owner, you buy something
for strictly business purposes (not for personal consumption), you
pay no consumption tax. So, in deciding what to buy, you get to
choose whether or not you will pay the federal consumption tax.
Perhaps most importantly, to ensure that no American will pay tax
on necessities, the FairTax plan provides a prepaid, monthly rebate
for every registered household to cover the 23% consumption tax
spent on necessities up to the federal poverty level. This is how
the FairTax completely untaxes the poor, and lowers the tax burden
on everyone else. Can you see how much freer life will be with the
FairTax instead of the income tax?