FairTax FAQ's / Basic Facts

What will be taxed?

A single rate, single-stage tax will be applied to the sale of all new consumer goods and services at the final point of consumption. This will result in 23% of a purchase being represented by tax. (See the discussion of Tax Inclusive vs. Tax Exclusive Rate.) Used items will not be taxed. Business-to-business purchases for the production of goods and services will not be taxed. Most importantly, you will keep 100% of your paycheck—there will be no more income, payroll, capital gains, self-employment, gift or corporate taxes.

 

Isn't a sales tax regressive and harmful to low-income Americans?

Under the FairTax, every household will also receive a monthly rebate check, so no American will pay taxes on necessities. The rebate will be equivalent to the tax paid on essential goods and services (determined by the federal poverty level). The rebate will be mailed before the tax is actually paid (so, it is sometimes referred to as a "pre-bate"), and will be paid in equal installments at the beginning of each month.

 

How will the FairTax affect the various income brackets?

The FairTax is fairly distributed amongst all income brackets and in fact, much fairer than the current income tax system.


The FairTax is the only plan that can legitimately claim to “untax” the poor. It empowers those with low incomes because: 1.) Under the FairTax plan, no American will pay taxes on necessities. 2.) Wage earners will keep 100% of their paycheck. 3.) Used items will not be taxed, and 4.) prices will go down by 20–30% because the hidden taxes, which are especially hard on the poor, will be eliminated.

Middle-income earners will also benefit from the monthly rebate checks, the lower costs of goods as services as hidden taxes disappear, and on bringing home their entire paycheck to spend, save or invest. They can control how much tax they pay and when they pay it by chosing how much they will consume, and whether they purchase new or used items. Education costs will be reduced by as much as 50%. Small business owners will benefit from compiance costs that virtually disappear.

The wealthy also benefit from the same advantages of that low- and middle-income Americans will. In addition, there will be no more corporate taxes, business-to-business taxes, self-employment taxes, taxes on investment or savings, and no more estate taxes. Whentheir money is spent on the development of job-creating factories, financing of research, education, savings or investment, these expenditures will not be taxed. But wealthy individuals also spend more money than others. When they chose to purchase new goods and services, the FairTax will tax them.

 

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