The FairTax replaces the income tax and all other federal taxes with a national consumption tax. The FairTax is levied only once, at the point of purchase on new goods and services. The simplicity of the FairTax frees Americans from our current overwhelming tax code and unshackles the U.S. economy.
The FairTax:
-Abolishes the IRS
-Closes all tax loopholes and brings fairness to taxation
-Maintains our current Social Security and Medicare benefits
-Brings transparency and accountability to tax policy
-Allows American products to compete fairly
-Reimburses the tax on purchases of basic necessities
-Enables retirees to keep their entire pension
-Enables workers to keep their entire paycheck
What is taxed?
The FairTax is a single-rate, federal retail sales tax collected only once, at the final point of purchase of new goods and services for personal consumption. Used items are not taxed. Business-to-business purchases for the production of goods and services are not taxed. A rebate makes the effective rate progressive.
Exactly what taxes are abolished?
The FairTax is replacement, not reform. It replaces federal income taxes including, personal, estate, gift, capital gains, alternative minimum, Social Security, Medicare, self-employment, and corporate taxes.
How does the rebate work?
All valid Social Security cardholders who are U.S. residents receive a monthly rebate equivalent to the FairTax paid on essential goods and services, also known as the poverty level expenditures. The rebate is paid in advance, in equal installments each month. The size of the rebate is determined by the Department of Health & Human Services poverty level guideline multiplied by the tax rate. This is a well-accepted, long-used poverty-level calculation that includes food, clothing, shelter, transportation, medical care, etc.
How does the FairTax affect wages and prices?
Americans who produce goods and earn wages must pay significant tax and compliance costs under the current federal income tax. These taxes and costs both reduce after-tax wages and profits and are then passed on to the consumers of those goods and services in the form of price increases. When the FairTax removes income, capital gains, payroll and death taxes, the pre-FairTax prices of these goods and services will fall. The removal of these hidden taxes may also allow wages to rise. Exactly how much prices will fall and wages will rise depends on market forces. For example, in a profession with many jobs and too few to fill them, wages will likely increase more than in fields where there are too many employees and not enough jobs.
