In Depth the Fair Tax Act of 2005

The Fair Tax; Just the two words fair and tax used together have to be one of the greatest oxymorons ever stated, until now! With the creation of the Fair Tax Act it is now possible to say those two words without choking.

To quote from the Fair Tax 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.

What this effectively does is tax consumption rather than production. Many people can’t see where this would be much of an improvement over our present system but the advantages far outweigh any drawbacks the proposal will ever have. One of the greatest advantages is it will vastly increase the country’s tax base. Yeah, it will in fact increase not only how much money is taken in each year but it will also make sure everyone pays taxes.

Consider this; how many of these profession or people presently pay income taxes of any kind?

Prostitutes, drug dealers, illegal immigrants and scores of other people who get paid under the radar. All of these people would be paying taxes each and every time they bought goods or services. This would effectively eliminate many of the reasons most people have for wanting immigration reform.

Just the savings from the disbanding of the IRS would help in controlling our runaway national debt. Our president wants to withhold annual colas from our federal employees and senior citizens to start on the road to solvency but just doing away with the IRS would make these cuts pale by comparison.

With the Fair Tax every person gets every dime they earn, that’s right, no deductions. They then buy what they need or want from their salary as they see fit and the taxes are paid through the purchases. Many of these purchases would be for food, gasoline or utilities and because no one would have a choice but to buy these items they are covered by what is called a “prebate”.

An example of the prebate:

If you are a married couple your consumption allowance would be $21,660. Your annual prebate would be $4982 and this would be paid to you the first of every month in increments of $415. This is you prebate for consumable goods every month. If, for example, you purchase $1000 worth of groceries each month your taxes would be $230 and this would come from the prebate.

Most people in our government who are fighting to keep this proposal from becoming law are doing so because it will effectively take away most of their power. If they can’t threaten or barter with lower or higher taxes it takes away almost all of their power.