"What is the FairTax and why should I care?" is probably the first thing that popped into your head coming to this website. In short, the FairTax is a proposed change to the United States tax laws. It would replace all federal income taxes with just one single national sales tax. In layman's terms, it would get rid of the thousands of unnecessary taxes and replace them with a simple and straightforward system.
There is a list of what the FairTax plans on changing, and here are some of the things one could look forward to.
To put this in perspective, the average family household would realize a 46% or more tax cut with the FairTax. That is $3,390 per year for a household earning $50,000 a year. (Source: The FairTax And Middle Americans, Laurence J. Kotlikoff, Economist, Boston University)
| Why it benefits Democrats | Why it benefits Republicans |
| The FairTax eliminates the highly regressive tax on wages of the working poor and middle class. The FairTax removes the single most regressive element (The payroll tax) for wage earners. | The FairTax removes the IRS and the 67,500 pages of tax code, and the $265 billion spent yearly in tax code filing and compliance |
| The FairTax is the only plan that completely untaxes the poor. Even a person with a zero prcent income tax rate today must pay payroll taxes on the first dollar they earn and also pay hidden federal taxes in the prices of everything they buy. | The FairTax provides a huge boost to the American economy, and key sectors such as manufacturing, and levels the playing field for international trade. |
| The FairTax stops the export of jobs. Our income tax favors imports over US production by exempting imports from US tax, and we penalize US exports by allowing foreign nations to impose taxes when our goods enter their shores | The FairTax keeps the American military strong by establishing a broader base of tax revenues to fund our forces, than the current income tax. |
| The FairTax untaxes education. The FairTax rewards education and upward mobility in the simplest and most powerful way: It eliminates tuition from all federal taxation. | With the FairTax, nobody flies below the tax-paying radar, including illegal immigrants or others who currently are paid below the table, and don't pay income taxes. It creates a new system that, unlike our current tax laws, does not favor debt over wealth. |
| The FairTax is the only plan that targets and taxes existing wealth, not the fruits of labor. The FairTax will tax every dollar of accumulated wealth in the most efficient way possible when it is spent. | The FairTax shores up Social Security and Medicare by creating a larger base of payers including tourists and travelers, not just current tax payers. |
| The FairTax is revenue neutral. The FairTax, at a 23 percent tax rate, raises the same amount of money for the federal government as today's income tax system. This means that steep budget cuts are not required to pass meaningful tax reform. | The FairTax frees everyone from the hassle of filing taxes every April 15th on Tax Day. It removes not only the income tax, but also FICA, Meicare, capital gains, death taxes, and payroll taxes. |
| The FairTax promotes the American Dream. The FairTax makes home ownership more affordable because used homes are totally untaxed, and three out of four homebuyers buy used homes. | the FairTax helps small business owners by removing the burden of payroll taxes. It also brings jobs back home by making the US the worldwide magnet for capital and investment. |
| The FairTax sales tax rate isn't graduated; everyone's resources get taxed at the same 23 percent effective rate. What makes the FairTax progressive is its rebate. The rebate is a trivial share of the resources of the rich, but 23 percent of the resources of the poor. Since our current tax system is regressive, adopting the FairTax would achieve progressivity. | The FairTax retools the American economy to compete in a 21st-century economy. It also creates transparency in government by removing the tax code as a way for Congress to punish enemies and help friends. |
Yes. Some people who are in power do support the FairTax. On January 7, 2003, Representative John Linder sponsored The FairTax Act, H.R. 25. Rep. Linder writes about the FairTax,
"It offers long-needed tax relief - in the form of lower prices, nearly nonexistent compliant costs, and the ability to choose how much to spend in taxes - to all Americans, while eliminating the income tax and allowing Americans to keep 100 percent of their paycheck. The FairTax will dramatically reduce prices, protect and ensure funding of Social Security and Medicare, empower the low-income earners, and put choice and control back into the hands of every American. All the crucial elements are in place: a public that is eager and ready for a fairer tax system, and a Congress willing to seriously consider genuine tax reform. To be competitive in this new century and to renew the American dream, we must change the way we fund out national government.
The FairTax Act:Repeals all corporate and individual income taxes, payroll taxes, self-employment taxes, capital gains taxes, estate taxes and gift taxes. It imposes a revenue-neutral national sales tax on all new goods and services at the point of final purchase for consumption. Business-to-business transactions and used products (Which have already been taxed) are not subject to the sales tax. The FairTax offers a universal rebate in an amount equal to the sales tax on essential goods and services so that no American pays taxes on the purchase of necessities."
Americans For Fair Taxation was formed in 1995 as a 501 (c)(4) nonprofit, nonpartisan, grassroots organization solely dedicated to replacing the current tax system. In 1995 three business men - Leo Linbeck, Jack Trotter, and Robert McNair - saw how the current income tax code was harming the country and looked for an improved tax system. It began as a research organization with the initial goal of finding out what the American people wanted in a tax system, what they felt was the best way for the government to collect revenue, and how taxation could be achieved in a way that most benefited the economy and the taxpayers. Many diverse groups of Americans participated in the extensive polling and group studies, and then a nonpartisan team of economists was commissioned to develop the FairTax plan. In 1997 the FairTax was formed and in 1999 it was law by Reps. John Linder (R-GA) and Colin Peterson (D-MN). In the Senate it is S. 296. The organization today has hundreds of thousands of members and volunteers nationwide. Its plan supports sound economic research, education of citizens and community leaders, and grassroots mobilization efforts.
This website is not related to FairTax.org. It is simply a website devoted to spreading the word of FairTax itself. However, FairTax.org has influenced the material on this website and many of the facts have come from there. For more information on FairTax, please visit FairTax.org.