Because the current tax system affects almost every aspect of modern life, replacing it with a much simpler and more efficient system will have far reaching effects. Here is a simple explanation of the FairTax plan. There are links to various papers on specific topics below.
The FairTax legislation ends the taxation of income by the federal government and replaces it with one progressive national retail sales tax on new goods and services. It also ends filing tax returns for all individuals and all non-retail businesses. The Internal Revenue Service is given three years from the passage of the FairTax to shut down their operations. April 15 will become just another spring day, especially if the individual states mirror their tax systems to the FairTax.
Because we do not want the FairTax and the income tax simultaneously, the legislation specifies that if the Sixteenth Amendment to the U.S. Constitution, the one that allows an income tax, is not repealed in the seven years after the FairTax passes, the FairTax will sunset. At that point the Congress will have to come up with a system of revenue collection. Are the people likely to go back to filing tax returns under penalty of perjury and having taxes withheld from their paychecks?
The FairTax taxes new goods, not used. Things are taxed once at the retail level, unlike the current system. Services are taxed.. For example, if you buy a new car the FairTax will be assessed. If you buy a used car there will be no tax. If you take your car for service, the labor will include the FairTax. A new part will include the tax, a used one will not.
The FairTax rate is 23% inclusive, 30% exclusive. Income taxes are calculated inclusively, sales taxes are usually calculated exclusively. Either rate costs the same dollar amount out of pocket. But a flat rate sales tax is regressive and hurts the poor the most. That is why the FairTax has the Family Consumption Allowance, or Prebate, which is a rebate based on family size of the amount of FairTax each household will spend on basic necessities. The Prebate makes the FairTax progressive. See the 2016 Prebate Schedule below.
The cost of education (tuition) is not taxed because education is an investment that should be encouraged.
Governments at all levels pay the FairTax on products and services because if they didn’t the government would end up doing everything. If a private trash collection business had to collect the FairTax and the local municipal government did not, who would end up collecting the trash?
Finally, the FairTax allows what Albert Einstein called the eighth wonder of the world, the most powerful force in the universe- compound interest. Under the current system if you earn a dollar you are taxed a few times on that. If you put it in an interest bearing account, you pay tax on the interest. If you invest it in a stock and earn dividends, you pay tax on the dividends. If you sell that stock for a gain, you pay a tax on the gain. If you die and pass on that dollar, there may be additional taxes on that. Under the FairTax none of those tax events occur. You are free to earn income and grow it tax free. You will only be taxed when you spend it and if you pass it on to your heirs they get it tax free.
Here is some more information about the FairTax:
An overview of the FairTax:FairTax-Overview
The 2016 Prebate Schedule:2016-FairTaxPrebateSchedule
A comparison chart of the FairTax, Flat Income Tax and the current system:FairTax-flat-tax-income-comparison-chart2014
A March 2017 study on Tax Evasion and the FairTax by Dr. Cebula:Evasion Study
How the FairTax affects Education:Education-and-FairTax
The FairTax and the States:Fiscal-Federalism-The-National-FairTax-and-the-States
How the FairTax affects new car sales:Automobiles-and-the-FairTax
Home ownership and the FairTax:Home-Ownership-and-the-FairTax
The economy, business, and taxpayers with the FairTax:BusinessEconomyTaxpayersFairTax
Charitable Giving and the FairTax:Charitable-Giving-and-NonProfits
Senior citizens and the FairTax:Seniors-and-the-FairTax
Small Business and the FairTax:SmallBusinessImpact
What the current federal tax system is costing you:WhatTheFederalTaxSystemIsCostingYou
Why the FairTax taxes final Government Consumption:Government-Consumption-and-FairTax
A plain english version of the FairTax bill:Plain-English-Version-2015
There is much more information available about the FairTax. If you have a question about a specific topic, email it to firstname.lastname@example.org