This idea has gone out of style and I haven’t read much about it lately, but it could save our economy. Very broadly you would eliminate all Federal taxes, including personal income tax, corporate tax, and payroll taxes, and replace them with a national sales tax on retail goods and services. Import duties, road tax, and mineral extraction taxes would remain. What differentiates the Fair Tax from a generic sales tax is you also pay a rebate. This is to protect the poor people.
Here’s a quick example. You would have a national sales tax of 20%. Let’s assume a poor family pays $10,000 a year in expenses. Therefore you would pay out a rebate of $2,000 to everyone over 18 years old.
This tax has many interesting features. A very important one is that if utopians were in power and wanted to hand out loot, they’d have to raise the tax on EVERYONE, so everyone would feel the pain. This is a big advantage.
US companies would be the big winners. They would not pay a penny in tax and would not need anymore tax accountants and tax lawyers. They would just run their business to produce a profit, and that is all you would worry about.
Imagine the advantage to US businesses over European businesses. The Euro’s would have to pay all sorts of taxes, and then whatever import duty we have. This would be a huge advantage for US based businesses, and in fact your would be insane to build a manufacturing plant anywhere but the US.
Foreigners would also pour their money in the US. The gains on investments would be tax free. So not only would their be a huge incentive to expand US production, jobs, and wages, there would be plenty of funds looking to invest.
And on a personal level, you would not fill out any tax forms ever again. You would pretty much break even (the middle class would actually come out ahead), as you would get a 14.7% raise from your payroll taxes, plus any income tax you now pay would go in your pockets. Of course this would be offset by the new sales tax, but it would be much easier to deal with.
Another big winner will be small businesses. If you run a small business your mouth is already watering. Imagine an environment where you no longer have monthly and quarterly IRS forms to fill out, and you don’t have to live in dread of the IRS coming to pick your pocket.
This tax change makes so much sense it doesn’t have a prayer of passing. Especially because the biggest loser of all would be lobbyists. Since there would be no income taxes, there would no longer be a need to hire lobbyists to create loopholes for big businesses to cut their taxes.
Still, check it out. Just google the FAIR tax and maybe talk to your congressman about it.