Friday August 12, 2005

Here are the main points of the Fair Tax:

The goal

• Simplifying tax collection
• The sytem is designed to provide the same amount of revenue to the government as the previous system
• It is not aimed at reducing government spending - only focusing on changing tax collection

• The IRS and tax returns are history == no more invasion of privacy
• Income taxes, social security taxes and medicare tax for individuals and businesses in eliminated
• Capital gains taxes, Estate taxes, Alternative Minium Tax - gone
• Special interests who lobby for tax breaks are out of work
• The huge burden of income tax preparation is gone from the economy
• Businesses no longer need to waste time considering tax consequences before entering new lines of business
• Tax law compliance costs are stripped out of the economy
• Every American citizen no longer faces breaking the law every April 15th.

• A 23% sales tax is added to every retail purchase of goods and services sold anywhere including the internet. (currently all products average a 22% embedded tax burden in their price - so the price of goods is projected to remain flat with today's current prices)
• Every month, every household is sent a check equaling the amount that would be spent on the tax for necessities for a poverty income lifestyle. (This is the hardest point to understand, but it is meant to elimniate the impact of the sales tax on the poor.)

• The economy will flourish as the US becomes a tax haven for capital investment
• Individuals keep 100% of their paycheck.
• Businesses return to the United States since they no longer have to pay taxes on their labor
• The tax is extremely progressive - you pay tax when you spend money - if you spend alot you pay alot.
• Taxation is not a penalty for hard work. You can earn and save and not pay any tax.
• No such thing as being paid under the table anymore - since income is not taxed

• Market for used goods (which are not taxed) will be insanely hot. (I will be buying stock in EBAY if the Fair tax passes)
• Looks like state income taxes will be left alone - which means the burden of paperwork and invasion of privacy is not elimintated for a majority of the states. (Gob bless Texas!, and Florida and Washington state, etc all Bob Brinker listeners are supposed to have the list of income-tax free states memorized)
• Looks like existing sales tax for state and local governments would remain in addition to the 23%.
• New homes would be taxed - but supposedly again there is already 22% embedded tax in home construction, so this is supposed to be neutral on the impact of a new home price....

• Black market sale of new goods
• People registering ficticious/bogus head of household information to get extra refund checks.