What is a Fair Tax Code and its anticipated outcomes?

The bicameral law making body of the federal government of United States have issued a bill that caters towards altering the taxation laws to replace the bureau of the national treasury of United States, the Internal Revenue Service. So, in essence, what is fair tax code exactly? Through this code, the taxation department of the federal government of United States aims to replace:

• Income tax laws that are determined by an apply tax rate which increases simultaneously with the rise of income. Under this, supplemental income tax is also included
• Taxes imposed on employers and employees and are calculated through the percentage of salaries that employers pay their staff.
• Tax on the profits that are generated through the sale of a non-recorded resource that is far more than the original amount that is predicted before sale.
• Inheritance tax on items that a person receives through the will of his deceased relative
• Corporate tax
• Tax on the transferred of estate of a deceased individual.
• Tax on the sale of goods or services that should only be imposed on their purchase

Moreover, the fair tax code also requires that on a monthly basis, payments should be made by the citizens or legitimate foreign residents in the form of a beforehand partial fund on the procurements up to the poverty level.

What is fair tax code? Or what are the benefits of this code?

Those people who are staunch proponents of fair tax code, also called as consumption tax, are of an opinion, that this code has constructive impact of the economic wellbeing of United States. Some of positive impacts are:

• Fair tax code propagates tax deferral on investment whereby a taxpayer can benefit from the delaying taxes for a certain amount of time. In this way, the available asset or capital og the business can be positively impacted.
• As far as international trade is concerned, the fair tax code can limit tax regulation. This will enable United States to achieve competitive edge over other countries in terms of trade.
• In the United states, there will be an increased scope of international business through the fair tax code
• Fair tax code also caters the rise in the inflation-adjusted market value of goods and services produced in United states economy over a specific time period
• Tax amenability can be easily fostered through the fair tax code

Through the fair tax code, there will be a rise in the levels of funding the federal government of United States provides to the public sector through cost transparency. Moreover, the proponents of the fair tax code also adhere to the fact that this code will definitely contribute towards to propagation and safeguarding of civil rights and protect the ecological framework of the United States. Most importantly, through this code, the federal government will enjoy the benefit of taxing the illegal criminal activities and illegitimate migration of people.

It should be noted that as the code tends to eliminate the levied taxes on income, in this respect tax deductions would cease to have any meaning. This is the leading concern among the policy makers of US because the additional income earned by individuals would not be taxed and the motive of social incentive will be lost.

In addition to that, the code also arises concerns regarding the annulment of the Sixteenth Amendment, the impact the code might have on the income tax framework, after-tax saving and enticements for credit use. Due to this code, the state and municipal bonds would no longer enjoy any sort of advantages from taxations.

The point of conflict

The main point of debate arises when the relationship between fair tax code and the distribution of tax burden is taken in to consideration. So, if the question arises that what is fair tax code and how it will benefit the taxpayers, the cohorts of this plan would argue on these points:

• Fair tax code aims to alleviate the burdens of tax
• Enlarge the foundation of tax
• Becomes progressive in nature so that the taxpayer’s average tax rate is significantly lower than the individual’s marginal tax rate
• Exacerbates a person’s purchasing ability
• Contribute profoundly to the tax abundance

However, the individuals who are totally against the plan would claim that the Fair tax code increases the taxpayer’s average tax rate over the marginal tax rate. And as a result, the tax burdens on high income bracket individuals would be reduced.