On Thursday, for the first time in history, H.R. 25, the Fair Tax Act of 2013, will be voted on in the Ways and Means Committee which is a major hurdle for the Act to move forward. The FairTax would repeal the 16th Amendment to the U.S. Constitution and replace the income tax to a consumption-based federal tax. Some Libertarians are supportive of the switch while others are not. Former Libertarian Party presidential nominee Gary Johnson was supportive of the measure during his 2012 campaign.
15 years ago, three Houston businessmen decided something had to be done about America’s inequitable tax code and the IRS’ abusive system of enforcement. These men raised $20 million in private donations and invested it in scholarly research to determine what tax system would raise revenue for the government while being the most advantageous for the people and and U.S. economy. Extensive focus groups followed and what emerged was the revolutionary tax plan – the FairTax®.
Since then, the FairTax Plan has emerged as the largest grassroots tax reform initiative in the nation. Thousands of FairTax supporters have toiled in the trenches educating friends, family and neighbors about the FairTax and why it is the best tax plan for jobs and economic growth.
There are now 72 co-sponsors in the U.S. House and nine in the U.S. Senate supporting the legislation. The tax reform debate and vote is expected sometime within the next 45 days. I is unknown however what impact the current budget battle and potential government shut down will have on the Committee’s work and schedule.
Under the FairTax, Americans would no longer have federal taxes taken out of their paycheck and instead would pay taxes to the federal government only when they purchase new items. It replaces federal income taxes including personal, estate, gift, capital gains, alternative minimum, Social Security, Medicare, self-employment, and corporate taxes.
Under the FairTax Plan, poor people pay no net FairTax at all up to the poverty level! Every household receives a rebate that is equal to the FairTax paid on essential goods and services, and wage earners are no longer subject to the most regressive and burdensome tax of all, the payroll tax. Those spending at twice the poverty level pay a tax of only 11.5 percent -- a rate much lower than the income and payroll tax burden they bear today.
Under the federal income tax, slow economic growth and recessions have a disproportionately adverse impact on lower-income families. Breadwinners in these families are more likely to lose their jobs, are less likely to have the resources to weather bad economic times, and are more in need of the initial employment opportunities that a dynamic, growing economy provides. Retaining the present tax system makes economic progress needlessly slow, thus harming low-income people the most.
In contrast, the FairTax dramatically improves economic growth and wage rates for all, but especially for lower-income families and individuals. In addition to receiving the monthly FairTax prebate, these taxpayers are freed from regressive payroll taxes, the federal income tax, and the compliance burdens associated with each. They pay no more business taxes hidden in the price of goods and services, and used goods are tax free.
Wealthy people spend more money than other individuals. They buy expensive cars, big houses, and yachts. The FairTax taxes them on these purchases. If, however, they use their money to build job-creating factories, finance research and development to create new products, or fund charitable activities (all of which help improve the standard of living of others), then those activities are not taxed.