Facts about Fair Tax Plan

The FairTax plan is devised to be revenue-neutral for the first year of operation. It will raise the same amount of revenue as is raised by current law. After the first year, revenue is expected to rise because of the growth generated by this plan. At that time the American people, Congress, and the President will have to decide whether to lower the tax rate or to spend the additional revenue.


When it comes to the IRS, whatever replaces the IRS under the Fair Tax would not resemble one another much at all. Any tax collection scheme must necessarily have collectors who collect the tax, and it will almost necessarily have auditors to determine who didn't pay the amount levied against him. The only alternative is to have NO taxation whatsoever, which would either rely on voluntary funding of government, or no government. The Fair Tax is designed to simplify the tax code, increase compliance, and make the government more efficient at collecting taxes. It is not about reducing the overall tax burden one cent. First, greater efficiency in tax collection implies lower costs. Therefore, almost the entire budget of the IRS could be reallocated to other areas or returned to the People.

Although the Fair Tax Plan would eliminate Social Security and Medicare taxes, it would not eliminate the programs. The Fair Tax will ensure funding of Social Security and Medicare, under the Fair Tax, Social Security will operate exactly as it does today, except that its funds will come from the Fair Tax. And, research shows that consumption is a more stable revenue source than income.


With Fair Tax a single rate, single-stage tax will be applied to the sale of all new consumer goods and services at the final point of consumption. This will result in 23% of a purchase being represented by tax. you will keep 100% of your paycheck-there will be no more income, capital gains, self-employment, gift or corporate taxes. Under the Fair Tax, no American will pay taxes on necessities., this leads us to prebate.


With the prebate it functions the same as the standard deduction and personal exemptions do under the current income tax. The prebate is not a “handout”. It is the refund of taxes paid (albeit, in advance). The Fair Tax has no exemptions so the prebate funds the tax on spending up to the poverty up front. Everyone believes that life’s necessities should not be taxed. The prebate is a more efficient method of not taxing necessities than having complicated rules about what constitutes a necessity. The prebate makes the Fair Tax a progressive tax because it untaxes the poor. While everyone pays the same tax at the retail counter, when you take into account the prebate, the effective tax rate is 0% for those at the poverty level ($26,400 for a two adult/two children family), 11.5% for the same family at twice the poverty level ($52,800), and 17.3% for the same family at four times the poverty level ($105,600). Only legal residents of the United States can qualify for the prebate; illegal immigrants cannot, but they will not be exempt from paying taxes under the Fair Tax. The gross revenue raised by the Fair Tax would supposedly remain neutral, however, each taxpayer would see his percentage reduced because of the addition of new taxpayers such as prostitutes, drug dealers, those who work 'under the table' and the illegal aliens who work with fraudulent or non-existent identities. Currently these people do not pay federal taxes because there is no record of their incomes.

Ok I have went on enough and even though I have tried to keep to only the facts I'm sure I have injected my personal thoughts in this matter so I will try to do a quick review of most points of the Fair Tax:

A single rate, single-stage tax will be applied to the sale of all new consumer goods and services at the final point of consumption. This will result in 23% of a purchase being represented by tax. you will keep 100% of your paycheck-there will be no more income, capital gains, self-employment, gift or corporate taxes. Under the FairTax, no American will pay taxes on necessities.

The Fair Tax empowers those with low incomes. Under the Fair Tax plan, no American will pay taxes on necessities. Every household will receive a rebate that is equal to the Fair Tax paid on essential goods and services, and wage earners will keep 100% of their paycheck.

Middle-income earners will benefit greatly under the Fair Tax. They will receive a rebate based on household size, just as will those in all other income brackets.

The wealthy will get a rebate based on household size, just as those in other income brackets will

It lets every worker keep their entire pay check-no payroll or income taxes

It allows those at/below the poverty level to have zero or negative taxes

It lets retirees keep their full pension or Social Security checks-untaxed

It lets everyone keep their capital gains and investment income-untaxed

It eliminates gift and inheritance taxes

It taxes spending of gifted and inherited wealth more fairly

It has a lower cost of enforcement

It makes the federal tax rate very visible, and therefore, politically risky to increase

It ends all personal and corporate income tax filings

It frees the $250 Billion tax accounting/law industry for more productive employment

It eliminates tax loopholes-no filings, no exemptions, no loopholes

The Fair Tax will allow people to make charitable contributions out of pre-tax dollars.


The Fair Tax will dramatically reduce the costs of goods and services by as much as 20 to 30%. All goods and services already contain the embedded costs of the current tax system in their prices. When these embedded taxes are removed, prices will come down.

The Fair Tax will ensure funding of Social Security and Medicare.

Retail businesses will collect the tax from the consumer-45 states already have a sales tax system, and the Fair Tax will simply be an additional line on the current sales tax reporting form. In rare cases, businesses that produce products or services that are not currently taxed under state sales tax codes will have to begin collecting the Fair Tax for the first time

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The focus of the Fair Tax concept should not be its supporters, but the idea itself, and as a side point, the Fair Tax did NOT begin as a project of the Church of Scientology at a time when it was seeking tax-exempt status.

Hope I did semi-justice to explaining Fair Tax Plan.