Things You Need to Know About The Fair Tax Code

Things You Need to Know About The Fair Tax Code

There is a clear discrepancy in the current federal income tax system. It is unfair, overly complex, and almost impossible for most American taxpayers to understand. But the Congress offers a reasonable nonpartisan alternative that is both easy to understand and fair for everyone. In this system, you are able to keep your whole paycheck and only pay taxes on what you spend.

What is FairTax?

Every person is equal and American businesses are allowed to thrive while earning the same tax revenue as the current four-million-word-plus tax code under the national sales tax or FairTax. Every individual who resides in the United States pays a sales tax when they purchase goods and services except the necessities as a result of the prebate. After necessities, the FairTax rate is 23% compared to when the 15% income tax bracket is combined with the 7.65% of employee payroll taxes under the current system - both of which will go away. FairTax is the only tax plan that is currently being proposed that says payroll tax must be removed.

Here are more of the things you need to know about the FairTax Code:

Keep Your Earnings

This never happened in recent history, but the FairTax Code will be able to keep every single coin they earn. You will also be able to keep what you would've have paid in federal income taxes and payroll taxes. Isn’t it awesome to get an instant raise in your pay?

Funding for Social Security and Medicare

There will be no changes when it comes to the benefits you receive from Social Security and Medicare. However, FairTax will create a more solid funding foundation for these programs. They will no longer be funded by taxes on workers wages which is only a small pool. They will be funded by taxes on the total consumption by all residents instead.

Purchases Made for Basic Necessities Advance Tax Refund

A prebate provided by FairTax is a progressive program that gives every legal resident household an “advance refund” at the start of each month so that poverty level purchases are tax-free. Every family will, therefore, find relief from unfair burden thanks to prebate.

You Pay Taxes Based On How Much You Spend

Because of the FairTax Code, you’ll be able to take control of your financial destiny. The burden that you carry with regards to taxes will depend on you alone. If you don’t spend much, you don’t have to pay high taxes and the opposite happens if you like to splurge. You’ll be tax fairly in this manner.

Everyone Is At The Same Level

There is an additional $2,500 that every taxpayer needs to face due to tax evasion and underground economy every year. FairTax will be taxing new products and services consumed which means everyone in the country will be at the same level at the cash register. You must be a legal resident to be eligible for the rebate.

IRS Will Be Eliminated

All the complicated tax forms, individual audits or intrusive federal bureaucracy will go away. Just like how retailers collect state sales taxes, Fairtax will be collected the same way. The U.S Treasury will receive all the money that was collected and both the retailers and states will be paid a fee for their collection service.

The Effect of FairTax to the U.S Economy

In order to determine how FairTax would affect the economy, it’s important to closely examine the calculations and assumptions of each study. There must be a slow and constant implementation if the FairTax passes through the Congress. It may be best to gradually change from the income tax to the Fair Tax or maybe use a small state to serve as a test market in order to identify possible issues and the ways to resolve them. If FairTax is implemented, the scale of change alone would possibly fail the whole plan unless further research and more calculations are done.

However, supporters insist that FairTax will have a positive impact on available capital, improve U.S international competitiveness, incentives for international business to locate in the U.S., improve economic growth, and less complex tax compliance. It may also increase cost transparency for funding the federal government. Supporters believe it will have a positive impact civil liberties, the environment, and advantages when it comes to collecting taxes on illegal activity and illegal immigrants. 

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