The Fair Tax and the Individual

Consider John, who lives in a country where citizens must pay taxes to the Government. Not surprising as most countries collect taxes, and not unreasonable. However John's Government has set it up so that he is taxed when he earns money, when he spends money, when he saves money, when he invests money, when he gives away money, and when he dies. He also pays a tax to support those who have decided not to work at all! Where is this oppressive country, who takes so much away from those who strive to achieve? North Korea, Communist China, Socialist Cuba.......? John lives in the United States of America.

Why are we content with a tax system that punishes us for advancement and progress?? There is a movement under way, in the form of HR 25 The Fair Tax Act, before Congress that will remove ALL of the aforementioned taxes and replace it with a 23% national sales tax on all goods and services and repeal the 16th Amendment of the Constitution. In other words, you would be taxed on what you consume, not what you work hard for and earn.

The most common misconception here, and the one that "educated" members of Congress will tell you about right off is that the retail price of everything you buy will increase by 23%. However this is not true. What most Americans don't know is that there is, included in the price you are already paying, a series of embedded taxes that equate to roughly 22% percent of the total price. These are embedded taxes, which means they are not listed separately like a local sale tax is on the receipt, so most Americans remain blissfully ignorant of the fact that they just paid taxes when they bought something. The Fair Tax will eliminate those taxes the minute it is passed and retail prices will drop. At the same minute the embedded taxes are subtracted, the 23% Fair Tax will be added and retail prices will return to roughly what they were prior.

But the Fair Tax is unfair to those who live near or at the poverty level you say. Not so. The Fair Tax Act allows for a prebate to ensure that the basic necessities of life are not taxed out of reach for anyone. Based on levels set by the government, taking into account family size and cost of basic necessities, each family in America will receive the prebate regardless of their current financial situation. Hence the fair in Fair Tax.

The Tax is only applied to NEW goods and services. If you decide to buy a used washing machine for your house, then you pay no tax on it. You decide when to pay taxes and how much you will pay based on your lifestyle/spending choices. The Fair Tax allows for a much more visible reference to how much you are contributing to the federal tax fund.

The benefit to the individual will be manifested by more indirect means as well, as we will see in the next post relating the Fair Tax to businesses and industry. You'll also see how corporations do not pay taxes!