Tax Reform is becoming a major policy issue in the United States, but since it is mainstream introduction to the public, the FairTax Act has gotten much more attention. The FairTax is a unique tax reform policy as it replaces our current tax code with a 23% national sales tax. It has gained support (and criticism) from all areas of the political spectrum. In fact, Neal Boortz and former Congressman John Linder’s book The FairTax Book published in 2005, was a New York Times #1 Best Seller, and stayed in the top ten for seven weeks. Since the FairTax legislation, H.R. 25, has been introduced in 1999, it has gotten more than 73 co-sponsors in the House of Representatives. Its Senate counterpart, S. 122, has eight. People are getting upset with the abusive power of the IRS, and the complexities of our current tax code. This issue is being brought up in debates, and congressmen have started campaigning on these issues. While debate on the floor may be a few years away, (this will have a direct correlation with the outcome of the 2014 midterm elections, which remains to be seen) tax reform is still an important issue that effects every American, whether they chose to be ignorant or informed.
The FairTax was created in 1995 when businessmen Leo Linbeck and Robert McNair created the Americans for Fair Taxation, a non-profit and nonpartisan grassroots organization created for the sole purpose of tax reform (“About FairTax.org”). The goal was to create a tax plan that would reduce the cost of compliance individuals and small business face as a result of our current tax code, reduce taxes for the majority of Americans while still bringing in enough money to fund the federal government, social security, and Medicare, and make the United States more attractive to business. This plan is the FairTax.
The FairTax is a 23% national sales tax on all goods and services. It abolishes the IRS, and paves the way for the repeal of the 16th amendment (Boortz and Linder, p. 76). The FairTax is a 23% replacement, not an addition. Therefore, it also abolishes the income, estate, payroll, capital gains, alternative minimum, corporate income, social security, and Medicare taxes. Not only that, but goods are only taxed once, so used items are not taxed.
Though payroll taxes are abolished, as well as the double (and triple) taxes on social security and Medicare, the FairTax still provides funding for these entitlement programs. Under the FairTax, employers will still report wages for each employee to the social security administration. Most economists agree that the FairTax is revenue neutral (*remind me to add way more information here*), so the amount of money brought in by the FairTax will be enough to provide Social Security and Medicare. In addition, benefits are not triple taxed as they are now and the regressive payroll taxes are abolished.
As with any major policy change or reform, there are many arguments against the FairTax. Many of these dissenting opinions...