Benefits of the FairTax Act

Topics: Tax, Taxation in the United States, Taxation Pages: 5 (1878 words) Published: June 21, 2013
The FairTax Act

Many debates have been waged over the decades on what will be taxed, on who shall be taxed and how taxes are collected. Since the 16th Amendment was ratified in 1913, the debate has intensified, centering on how high to make the income tax rate. Most Americans were not concerned since the Amendment was sold to them as something that would only affect corporations and the rich. With ever increasing fervor these corporations created lobbyists to convince Congress to exempt them from some or all of the income tax. The big breakthrough in this was taxing the worker directly with payroll taxes during World War II. This method of collecting income tax was sold to Americans as temporary, but Congress has extended it indefinitely and the public has become used to it. The next few decades saw the debate revolve around creating tax breaks for individuals in an attempt to modify behavior or spending. This has resulted in over 67,000 pages of tax code and an entire industry devoted to tax compliance and evasion, with the unintended behavioral change of corporations and the rich parking their money outside of the United States in small island nations to avoid taxation. These offshore accounts are estimated to hold $10 trillion dollars, a number approximate to the national debt. The FairTax Act should be enacted because it eliminates all federal income taxes for individuals and corporations, eliminates all federal payroll withholding taxes, abolishes estate and capital gains taxes and repeals the 16th Amendment; thus eliminating the need for offshore accounts.

The FairTax Act will replace these costly, oppressively complex and economically inefficient taxes with a progressive national retail sales tax, which would be levied on the final sale of newly produced goods and services. It will enable workers and retirees to receive 100% of their paychecks and pension benefits. A Prebate to all households each month the federal sales tax they pay on basic necessities, up to an independently determined level of spending (a.k.a., the poverty level, as determined by the Department of Health and Human Services), which removes the burden of federal taxation on the poor and makes the FairTax Act more progressive than the current tax code. The national sales tax will be collected at the retail cash register, on consumer spending on new final goods and services, just as 45 states already do. This will include every retail consumer in the country, whether citizen, undocumented alien or criminal. FairTax Act eliminates the IRS as we know it, and eliminates all filing of individual federal tax returns, greatly reducing the cost of enforcing the federal tax code. Dramatically reduce federal tax compliance costs paid by businesses, which are now embedded and hidden in retail prices, placing U.S. businesses at a disadvantage in world markets.

These are some of the highlights of the plan taken right from the plan itself that are aimed at attracting and keeping corporate business in the United States by reducing tax burden and compliance to zero. No office full of accountants keeping track of the flow of money to comply with taxes. No hiring of tax law firms to consult when a company needs to make a decision in capital investment. Many companies make decisions based on how the tax law will affect profits. Some even see how to take advantage of the conflicting 67,000 pages to run their business as near tax free as they can make it. Close to $350 billion per year is spent in tax compliance and avoidance. With the FairTax Act, corporations will find other productive ways to put these accounts and lawyers to work, and the $350 billion spent in compliance can instead be savings passed on to the consumer, along with the savings from the elimination of payroll taxes.

Opponents of the FairTax Act like to point out the potentially obvious jump in unemployment caused by thousands of corporations cancelling tax accounting...
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