According to the FairTax website, poverty level income for a family of four for 2008 will be $28,000. This figure is higher for Hawaii and Alaska. This represents an annual prebate in the amount of $6440. The median income for 2007 was a little over $48000. This figure will probably be in the neighborhood of $50,000 for 2008. The majority of families who earn $50,000 or less, take a standard deduction which is $10,700 for 2007. With four exemptions of $13,600, their taxable income would be $25,700 ($50,000 less (10,700 + $13,600). The income tax on this amount is $3076.00 for 2007. Add payroll taxes of 7.65% or $3825 and you end up with a total tax of $6901. Under the FairTax if this family were to spend their entire $50,000, 23% or $11,500 will be the amount of consumption tax. Don’t say it is 30% of the $50,000. The tax is inclusive so if the selling price of an item is $50,000, the merchant must send 23% or $11,500 to Uncle Sam. If you take $11,500 less the prebate of $6440 the net tax is $5060. Income tax $6901 ~ FairTax $5060. Plus don’t forget, corporate taxes and compliance costs are included in everything we current purchase. This will not be a cost factor once the FairTax is in place and prices will come down.
Let’s assume the federal government is currently funded by the FairTax system and there is a bill being presented to congress that would replace the FairTax with a system incorporating an income tax, a payroll tax, a corporate tax, and an estate tax. The new tax bill is designed to give power back to government where it belongs. It will no longer be transparent. The government will be able to raise taxes by manipulate the code without you realizing it. Lobbyists will have the opportunity to convince congress to change the code to benefit their special interest. Within a few years the code will be so complicated, no one will completely understand it. You will no longer receive 100% of your paycheck. The government will keep your share before you have a chance to spend it and if you need to take on a second job to fill your family needs, the government will keep a larger up-front percentage. Since you no longer will be paying a consumption tax, you will no longer receive your monthly prebate check. In order for corporations to show a profit, corporate taxes and compliance costs will now be added to the cost of goods and services, but after eliminating the 23% consumption tax and adding back 22% to cover compliance costs and corporate taxes, prices will be reduced by at least 1%. No longer will the earnings from your savings and investments be free from tax; no longer will the money you spend on education be tax free, you will be using after tax dollars for these purposes. Trillions of dollars will leave the American economy to work in foreign markets but you will be able to purchase Chinese products for less than American made products. On April 15th of each year, you will be required to file a complicated tax return. To support your figures, you will be required to keep records of all your financial transactions. Not everyone will be treated equal on these returns. There will be many loopholes which will protect mainly wealthy Americans. Taxpayers who aren’t able to take advantage of these loopholes will be required to make up the difference. A huge portion of your tax dollars will be used to support a new federal department which will be called the IRS. This organization will try to catch cheats by auditing approximately 1% of these returns. Many Americans will take a chance on being audited; they will either not file a return or they will cheat on the ones they do file. All honest people will be required to make up the lost revenue. And here is the best part; illegal aliens, drug dealers and tourists will no longer be paying taxes. Again, you will be required to make up for this loss. Let me ask, would you support this new tax legislation in favor of the FairTax?
