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Fair Tax - What Are the Advantages?

November 25, 2011 | Comments: 0 | Views: 93

I am a student at Ivy Tech Community College in Sellersburg, Indiana that is studying the fair tax. I am discussing from the viewpoint of being in support of the fair tax. In my opinion everyone should have some skin in the game and pay their fair share of taxes. It is a proposal to replace the current tax system. The plan would eliminate all federal personal and corporate income taxes, gift, estate, capital gains, alternative minimum, Social Security, Medicare, and self-employment taxes. Taxes would be replaced with a 23% Federal retail sales tax. The sales tax wouldn't apply to imports, goods used by businesses to produce other goods, or used goods. the 16th Amendment would be repealed and the IRS would be disbanded and defunded. A 23% sales tax would normally impact the poor the most. The Fair Tax Act proposes that a prebate be paid equivalent to 23% of the poverty level. The poverty guideline for a family of four in 2011 is 29,420. A Family of four at the poverty level would receive a monthly prebate of $564.

The consumption increases to 11.7 percent more by the tenth year than it would be if the current system were to remain in place. Charitable giving increases by $2.1 billion (about 1 percent) in the first year over what it would be if the current system remained in place, by 2.4 percent in year 10. States could cut their sales tax rates by more than half, or 3.2 percentage points from 5.4 to 2.2 percent, if they conformed their state sales tax bases to the Fair Tax base. The Fair Tax rate of 23 percent on a total taxable consumption base will generate $2.586 trillion dollars $358 billion more than the taxes it replaces. It provides the equivalent of a turbocharged mortgage interest deduction, reducing the true cost of buying a home by 19 percent.

One of the advantages of the fair tax is eliminating annual income taxes and the cost of tax preparers. Federal government spending would be reduced with the elimination of the IRS. Supporters of the fair tax argue that increased consumer spending would increase GDP, jobs, productivity, and wages because workers would be able to keep 100% of their wages. I feel with the prebate monthly check paying for the majority of household essentials. I can control the amount that I am taxed on my purchases on a monthly basis. Also by buying used items you wouldn't be taxed.

Source: EzineArticles
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