Some info on a proposed tax reform known as FairTax. Apparently, it is considered by many to be the best option, and has economic benefits. FairTax will not only help the savings rate which has tremendous implications for the US economy but a few of the benefits of the FairTax also include:
- The FairTax ends federal paycheck deductions of all kinds; the workingman or woman gets a full paycheck. The plan is a total replacement for all federal income and Social Security taxes: Personal, gift, estate, capital gains, alternative minimum, earned income tax credit, Social Security, Medicare, self-employment, and corporate taxes.
- The FairTax plan is revenue neutral; it neither raises nor lowers taxes. The rate is set to raise the same revenue the replaced taxes raise today. For many taxpayers, that means no overall loss or gain.
- The FairTax is a progressive tax. Only the biggest spenders pay the maximum rate; those at or below the poverty level pay an honest and transparent nothing. No one living at or under the poverty level, according to guidelines set by the Department of Health & Human Services, pays any federal tax (hidden or obvious) on any of their spending. Today our working poor are burdened with the most regressive tax of all, Social Security, which they pay with every paycheck their entire working lives. The FairTax ends that.
- The FairTax end the hidden imbedded taxes in everything we buy. According to Dale Jorgenson, Harvard economics professor, people on fixed incomes (and every other consumer in America) pay an average of 22 percent in hidden corporate taxes and compliance costs with every good they buy. Hidden taxes on services average 25 percent. The FairTax ends this. Competition forces the prices on goods and services to come down once the providers of these goods and services find that they can produce them at lower cost. The FairTax does not tax used goods.
- The FairTax encourages American manufacturing, creating good jobs at home. By removing the embedded cost of the income tax system, American-made goods are more affordable at home and more competitive overseas. This brings good jobs back to our shores, as well as keeping those we have, here. In addition, the FairTax is levied on imports sold in this country. The preference that our current system provides to foreign producers in both our own market, as well as foreign, ends. This has enormous implications with respect to our trade deficit.
- Taxpayers decide how much tax they pay above the poverty level. The wealthy are finally taxed according to their lifestyle, which the income tax has miserably failed to do since its inception; those who choose to live modestly pay less (both as a percentage of spending and overall taxes paid). And the FairTax successfully taxes accumulated wealth, which the estate tax usually fails to do.
- The FairTax triggers a very significant economic expansion. Dr. Dale Jorgenson, former chairman of Harvard University’s economics department, forecast a 10.5 percent GDP growth in the first year after enactment with decreases each year thereafter, leveling off at a rate that is slightly higher than under a continuation of the current system. That leveling off occurs after the economy has increased to between 1/4 and 1/3 larger than under a continuation of the current system. This has enormous implications for the federal budget deficit and the job picture, among others.