WHAT IS THE FAIR TAX?
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WHAT IS THE FAIR TAX?
H.R.25 is getting a lot of attention this week.
There’s a lot of talk about the Fair Tax this week so we thought it would be a good idea to discuss what it is in basic terms so you have a general understanding. The “FairTax Act of 2019” is known technically as H.R.25
The Fair Tax concept has been around since 1999 and, in the most basic terms, is a 23% sales tax on every NEW purchase in the United States.
The sales tax completely replaces income and payroll taxes and you keep every penny of your paycheck. The tax on new purchases applies to everyone equally.
The criticism of the Flat Tax often goes something like, “This hurts the poor and benefits the rich”. Everyone receives a “PREBATE” monthly that covers the tax on basic goods and necessities essentially eliminating ALL tax on basic goods for everyone.
A prebate is a monthly check that is sent to everyone. The amount depends on how many people in your household. This money covers the sales tax increase on your basic necessities.
The prebate means no American citizen will pay tax on food and basic necessities - potentially eliminating virtually all tax on every person below the poverty line. (If you purchase used you pay zero tax) People who choose to spend more will end up paying more in taxes and there is zero way to avoid it.
ADVANTAGE
Keep 100% of every paycheck.
IRS ceases to exist.
Zero tax on used goods.
No more write-offs, no more deductions, if you spend more, you pay more.
No tax filing annually.
Businesses - eliminates tax on goods used for production.
DISADVANTAGE
Possible higher affective tax rate for the middle class.
Eliminates the tax credits and complicated calculations that (sometimes) can reduce the affective tax rate for families.
Tax would apply to services and housing rents
We will be updating this thread as we learn more. Please leave your comments and email for corrections!
An interesting breakdown of more pros and cons can be found over on Money Crashers.
