U.S. Rep. John Linder with the 2007 Tax code a...

U.S. Rep. John Linder with the 2007 Tax code and complete set of Title 26 of the US Code of Federal Regulations, from his official House website, http://linder.house.gov/_images/forresources/FairTax%20vs.%20Tax%20Code%202.jpg (Photo credit: Wikipedia)

Imagine no IRS. It's easy if you try.

With Republicans poised to once again have the Senate and maybe even the White House in 2012, it is time to push for the “Fair Tax.”

Watch the video and read the summary below.  I really would like to see your comments.

The Fair Tax Summarized

“The Act is called the “Fair Tax Act of 2007.”  As of Dec. 31, 2008, it 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 January 1, 2009 it 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  The tax rate is set to be revenue neutral – at the level necessary to replace the revenues generated by the repealed taxes.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.”

Meaningful tax reform is way overdue.  I believe the Fair Tax is the best hope we have of weeding out much of the corruption, cronyism and social meddling that our current tax code institutionalizes.

Check it out.

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Thank you so much for your interest.  I’ll do my best to continue to earn it.

Moran

Email me at mindofmoran@aol.com

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Comments
  1. John Baker says:

    I completely agree with this. The only complication I see is the paying back to persons under a certain income limit. Wouldn’t that require some sort of reporting of income?

    Why not bypass that and make all essentials such as food, drugs and medicine tax free, like the states do, and tax everything else?

  2. Rita Aberg says:

    The fair tax looks good from your description, except for the 23% unless I misunderstood this as the percentage charged for everything. I just don’t know how this will affect the retail sales on certain items that are luxury items like jewelry. I like it other than having a question about that.

    • Joe says:

      Rita, under the FairTax, people will continue to purchase luxury items for the same reason they do under the Income Tax. That is because they deem the luxury item is worth more to them than the money it takes to purchase it.

  3. John Baker says:

    Rita, One major advantage of the Fair Tax is that EVERYONE pays taxes. There will be no such thing as an underground economy such as drug dealers etc. Also, by paying at the time of purchase everyone will see exactly how much their government is costing them and this will create an incentive for everyone to demand more accountability.

    Also, our elected officials won’t be able to buy votes by giving their donor friends tax incentives. It eliminates the corruption that exists in the current system.

  4. Scrap Iron says:

    People, this is really simple.
    Right now, on average, 22% of the price of everything you buy is federal taxes.
    The Fair tax removes that from the cost of the goods and services you buy.Add in an inclusive rate of 23% and the price is very close to what it was before.
    I’ve seen higher price increases due to inflation at the grocery store just this past year.

    Look at it this way. Prices stay the same, but you get to keep ALL of your paycheck, That’s an extra10% to 30% MORE to spend ANY WAY YOU WANT.
    And then you get the prebate each month to offset the taxes you pay for your basic needs. For a single male, that’$187.50
    For someone making $500/week, you have an extra $600 (or more) to spend. And remember, the price you pay for goods and services remain (almost) the same.

    And of course, when the politicians cannot manipulate the tax code to favor one industry, one business, or in some cases, one person, CONGRESS LOSES POWER.
    What could be better than THAT?

  5. Scrap Iron says:

    Oh, Moran, THANK YOU for getting people involved with this.

    For everyone else, learn about the Fair Tax and talk about it with your friends and co-workers. The more people that learn about the Fair Tax, the easier it will be to get it passed into law.

    • mindofmoran says:

      You bet, Scrap Iron. I think it’s time to really push the Fair Tax. It will be high on my list from here on out. Thanks for reminding me about it. It had really fallen off my radar!

      Moran

  6. Mark says:

    Fairtax is utter nonsense. I know- I was a fairtax cult member early on.

    But I had brains enough to read the book — and ask questions.

    A trillion dollar hidden tax on city and state government? I saw that and asked questions.

    Yes — a trillion dollars. Yes, a hidden tax. Go see the fine print, and go see three Fairtax spokesmen try to explain it away.

    Don’t be mad at me that you were fooled by this idiocy — just go read the fine print, use your brain, see if the spokesmen make any sense.

    http://fairtaxfineprint.blogspot.com/

  7. Scrap Iron says:

    To John Baker-
    Are you talking about the prebate?
    There is no income limit.
    That’s the whole point about the Fair Tax. Income doesn’t matter anymore.
    I get the prebate, you get the prebate, even Bill gates gets the prebate.
    Everyone is treated the same. That’s what makes it fair.

  8. Scrap Iron says:

    To Mark-
    About the hidden tax.
    Yeah, everyone pays. Every end user of a product or service pays.
    But here’s the beauty of the Fair Tax.
    When the embedded federal tax is REMOVED from the cost of goods, the Fair Tax is added back in. The price stays about the same.
    Those city state AND the federal government have been paying that tax anyway. Now its out in the open.
    Actually, I find it humorous that the federal government will have to pay the Fair Tax, don’t you?
    Like I’ve said, the tax is being paid now.
    You tell me what the difference is.
    You don’t pay a tax when you pay wages, only when you purchase a product or a serviice.

  9. Scrap Iron says:

    That”s just it, Moran.
    The embedded taxes are ALREADY THERE, so sayong that states will be hit with an ADDITIONAL tax liability is outlandish.

  10. […] Comments Joe on Time for the Fair Tax.D. on Can we tame the beast?Can we tame the beas… on Michael Moore lays it out. […]

    • locodoc says:

      > Please stay on this. If you read the fine print you’ll find the tax on government is mostly for sales to end users. That is if government sells electricity, etc. it is taxed. This is to get government out of business that should be done by the private sector. Most of these government businesses are subsidized by tax money at some point. Mark, you should read the entire FairTax bill.

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