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clean up & uniformity
[[Image:FairTaxRally.jpg|thumb|350px|A pro FairTax rally in Florida]]
[[Image:FairTaxRally.jpg|thumb|350px|A pro FairTax rally in Florida]]
The '''FairTax''' is a tax proposal that would replace all federal [[income tax]]es — including [[corporate tax]], [[gift tax]], [[estate tax]], [[capital gains tax]], [[alternative minimum tax]], [[Social Security]], [[Medicare]], and [[self employment tax]]es — with a federal national retail [[sales tax]] on personal consumption. The tax would be paid on the purchase of all new [[goods]] and [[services]], and would be collected at the final point of sale.<ref> Americans For Fair Taxation, “About the FairTax,” http://www.fairtax.org/site/PageServer?pagename=about_main</ref> Thus, instead of taxing "income", the FairTax would tax spending. This is known as a [[consumption tax]] — a method for [[income tax|taxing income]] on the back end, when the money is spent, rather than when it is earned.
The '''FairTax''' is a tax proposal that would replace all federal [[income tax]]es — including [[corporate tax]], [[gift tax]], [[estate tax]], [[capital gains tax]], [[alternative minimum tax]], [[Social Security]], [[Medicare]], and [[self employment tax]]es — with a federal national retail [[sales tax]] on personal consumption. The tax would be paid on the purchase of all new [[goods]] and [[services]], and would be collected at the final point of sale.<ref>Americans For Fair Taxation, “About the FairTax,” http://www.fairtax.org/site/PageServer?pagename=about_main</ref> Thus, instead of taxing "income", the FairTax would tax spending. This is known as a [[consumption tax]] — a method for [[income tax|taxing income]] on the back end, when the money is spent, rather than when it is earned.
A consumption tax would have a positive effect on [[Savings rate|savings]] and [[investment]].<ref>{{cite news| url=http://online.wsj.com/article/SB112492381500022421.html| title=A Consumption Tax| work=The Wall Street Journal| last=Auerbach| first=Alan J| date=2005-08-25| accessdate=2008-02-05}}</ref> Supporters state the plan would ease tax compliance, increase economic growth, have incentives for international business to locate in the U.S., and increase U.S. competitiveness in [[Trading|international trade]].<ref>{{cite book| first=Neal| last=Boortz| coauthors=Linder, John| year=2006| title=The FairTax Book| edition=Paperback| publisher=Regan Books| isbn=0-06-087549-6}}</ref> The rate for the FairTax as proposed under current legislation is 23 percent of the total payment including the tax ($23 of every $100 spent in total—calculated similar to income taxes).<ref> "Embedded Taxes Change Fair Tax Analysis",http://www.roanoke.com/editorials/commentary/wb/wb/xp-51569</ref> This would be equivalent to a 30 percent traditional sales tax ($23 on top of every $77 spent—$100 total). Although some critics say it would be higher to be revenue neutral (take in the same amount as the current system).<ref> http://www.factcheck.org/taxes/unspinning_the_fairtax.html</ref> The effective tax rate for a family household would be variable due to the fixed monthly tax rebates.
A consumption tax would have a positive effect on [[Savings rate|savings]] and [[investment]].<ref>{{cite news| url=http://online.wsj.com/article/SB112492381500022421.html| title=A Consumption Tax| work=The Wall Street Journal| last=Auerbach| first=Alan J| date=2005-08-25| accessdate=2008-02-05}}</ref> Supporters state the plan would ease tax compliance, increase economic growth, have incentives for international business to locate in the U.S., and increase U.S. competitiveness in [[Trading|international trade]].<ref>{{cite book| first=Neal| last=Boortz| coauthors=Linder, John| year=2006| title=The FairTax Book| edition=Paperback| publisher=Regan Books| isbn=0-06-087549-6}}</ref> The rate for the FairTax as proposed under current legislation is 23 percent of the total payment including the tax ($23 of every $100 spent in total—calculated similar to income taxes).<ref>"Embedded Taxes Change Fair Tax Analysis",http://www.roanoke.com/editorials/commentary/wb/wb/xp-51569</ref> This would be equivalent to a 30 percent traditional sales tax ($23 on top of every $77 spent—$100 total). Although some critics say it would be higher to be revenue neutral (take in the same amount as the current system).<ref>http://www.factcheck.org/taxes/unspinning_the_fairtax.html</ref> The effective tax rate for a family household would be variable due to the fixed monthly tax rebates.
The proposal includes monthly payments to all family households of lawful U.S. residents as an advance rebate, or 'prebate', of tax on purchases up to the [[poverty level]]. The rebate is meant to eliminate the taxation of household [[necessities]] and make the plan progressive. Used goods, [[exports]], and intermediate business transactions would not be taxed, nor would savings, investments, or [[education]] tuition expenses as they would be considered an investment (rather than final consumption). The tax is voluntary to the extent that individual consumers can choose when to increase or decrease their product buying, unlike now, when income taxes are [[Withholding|withheld]] from the paychecks of most workers.
The proposal includes monthly payments to all family households of lawful U.S. residents as an advance rebate, or 'prebate', of tax on purchases up to the [[poverty level]]. The rebate is meant to eliminate the taxation of household [[necessities]] and make the plan progressive. Used goods, [[exports]], and intermediate business transactions would not be taxed, nor would savings, investments, or [[education]] tuition expenses as they would be considered an investment (rather than final consumption). The tax is voluntary to the extent that individual consumers can choose when to increase or decrease their product buying, unlike now, when income taxes are [[Withholding|withheld]] from the paychecks of most workers.
==Proposal==
==Proposal==
If passed, the Fair Tax would accomplish the following:<ref> American For Fair Taxation, http://www.fairtax.org/site/PageServer?pagename=about_main</ref>
If passed, the Fair Tax would accomplish the following:<ref>American For Fair Taxation, http://www.fairtax.org/site/PageServer?pagename=about_main</ref>
* Abolish the [[Internal Revenue Service]] (IRS).
* Abolish the [[Internal Revenue Service]] (IRS).
* Abolish personal and business [[income tax]]es and replace it with a national retail sales tax.
* Abolish personal and business [[income tax]]es and replace it with a national retail sales tax.
* Repeal of the [[16th Amendment]] through companion legislation.
* Repeal of the [[16th Amendment]] through companion legislation.
* Provide each worker a monthly prebate, equal to the tax on "poverty level" income.<ref> Just how fair is the ‘Fair Tax’ CNN Money, September 2005, http://money.cnn.com/2005/09/06/pf/taxes/consumptiontax_0510/</ref>
* Provide each worker a monthly prebate, equal to the tax on "poverty level" income.<ref>Just how fair is the ‘Fair Tax’ CNN Money, September 2005, http://money.cnn.com/2005/09/06/pf/taxes/consumptiontax_0510/</ref>
* Close many loopholes under the current system.
* Close many loopholes under the current system.
* Enable retirees to receive their full pension, untaxed, until they spend it.
* Enable retirees to receive their full pension, untaxed, until they spend it.
* Enable workers to keep their entire paycheck, untaxed, until they spend it.<br />
* Enable workers to keep their entire paycheck, untaxed, until they spend it.
* Proponents believe the removal of the above will save 265 billion dollars a year in compliance costs under the current tax system,<ref>http://www.fairtax.org/site/PageServer?pagename=about_fairtax_four#neutral</ref> and be more practical than the current system, which includes over 60,000 pages of tax code.<ref> 67,204-Page Code Confounds Taxpayers, Yet Congress Sits By, USA Today, http://www.usatoday.com/news/opinion/2007-04-03-edit_N.htm?csp=34 </ref>
* Proponents believe the removal of the above will save 265 billion dollars a year in compliance costs under the current tax system,<ref>http://www.fairtax.org/site/PageServer?pagename=about_fairtax_four#neutral</ref> and be more practical than the current system, which includes over 60,000 pages of tax code.<ref>67,204-Page Code Confounds Taxpayers, Yet Congress Sits By, USA Today, http://www.usatoday.com/news/opinion/2007-04-03-edit_N.htm?csp=34</ref>
==History==
==History==
===1994-2005===
===1994-2005===
[[Image:FairTax vs. Tax Code 2.jpg |thumb|300px|Congressman [[John Linder]], one of the strongest proponents for the FairTax, illustrates the size of the current tax system vs the FairTax method]]
[[Image:FairTax vs. Tax Code 2.jpg |thumb|300px|Congressman [[John Linder]], one of the strongest proponents for the FairTax, illustrates the size of the current tax system vs the FairTax method]]
The origins of the FairTax began with a group of businessmen from Houston, Texas, who initially financed what has become the political advocacy group Americans For Fair Taxation (AFFT) or FairTax.org, which has grown into a large grassroots tax reform movement.<ref> Just how fair is the ‘FairTax’ CNN Money, September 2005, http://money.cnn.com/2005/09/06/pf/taxes/consumptiontax_0510/</ref>. The Chairman of AFFT, Leo Linbeck, stated that Americans have to pressure the government to come up with a better way of taxation, he said, “It is painfully obvious that [[Washington, D.C.]] insiders so closely linked with the status quo cannot be trusted to overturn the corrupt system of federal taxation. This effort will have to be driven by the American people<ref>Americans For Fair Taxation http://boortz.com/nuze/200510/10132005.html</ref>." The organization hired experts to look into an idea for a better tax system, they spent 23 million dollars in coming up with the idea of the Fair Tax. Their findings were combined into a book, “The FairTax Book: Saying Goodbye to the Income Tax and the IRS,” which Linbeck co-authored with Republican Congressman John Linder<ref> “The Fair Tax Book”,2005, http://www.amazon.com/Fair-Tax-Book-Saying-Goodbye/dp/0060875496/ref=sr_1_1/102-3275846-3467353?ie=UTF8&s=books&qid=1184106196&sr=1-1</ref>.
The origins of the FairTax began with a group of businessmen from Houston, Texas, who initially financed what has become the political advocacy group Americans For Fair Taxation (AFFT) or FairTax.org, which has grown into a large grassroots tax reform movement.<ref>Just how fair is the ‘FairTax’ CNN Money, September 2005, http://money.cnn.com/2005/09/06/pf/taxes/consumptiontax_0510/</ref> The Chairman of AFFT, Leo Linbeck, stated that Americans have to pressure the government to come up with a better way of taxation, he said, “It is painfully obvious that [[Washington, D.C.]] insiders so closely linked with the status quo cannot be trusted to overturn the corrupt system of federal taxation. This effort will have to be driven by the American people.<ref>Americans For Fair Taxation http://boortz.com/nuze/200510/10132005.html</ref>" The organization hired experts to look into an idea for a better tax system, they spent 23 million dollars in coming up with the idea of the Fair Tax. Their findings were combined into a book, “The FairTax Book: Saying Goodbye to the Income Tax and the IRS,” which Linbeck co-authored with Republican Congressman John Linder.<ref>“The Fair Tax Book”,2005, http://www.amazon.com/Fair-Tax-Book-Saying-Goodbye/dp/0060875496/ref=sr_1_1/102-3275846-3467353?ie=UTF8&s=books&qid=1184106196&sr=1-1</ref>
The FairTax became popular among free market [[conservative]]s, [[libertarian]]s, and some economists in recent years. The complication and wasted bureaucracy of the [[Internal Revenue Service]], government pressure on citizens to reveal information and records, and the loopholes in the current tax system created the incentive to look for a new way of taxation in the United States. Some [[Democrats]] also sought a tax system that would rid them current income tax, which they claim to be discriminate.
The FairTax became popular among free market [[conservative]]s, [[libertarian]]s, and some economists in recent years. The complication and wasted bureaucracy of the [[Internal Revenue Service]], government pressure on citizens to reveal information and records, and the loopholes in the current tax system created the incentive to look for a new way of taxation in the United States. Some [[Democrats]] also sought a tax system that would rid them current income tax, which they claim to be discriminate.
===2005-2007===
===2005-2007===
Former Federal Reserve Chairman, [[Alan Greenspan]], called for a federal sales tax to replace the broken income tax in 2005. "Since the exemplary 1986 reform, the tax code has drifted back to be overly complicated and burdened by higher marginal rates and by many special provisions that have undesirably narrowed the tax base," Greenspan stated at a Presidential Advisory counsel<ref>Greenspan: "Consumption Tax COuld Help Economy",http://www.foxnews.com/story/0,2933,149298,00.html</ref>.
Former Federal Reserve Chairman, [[Alan Greenspan]], called for a federal sales tax to replace the broken income tax in 2005. "Since the exemplary 1986 reform, the tax code has drifted back to be overly complicated and burdened by higher marginal rates and by many special provisions that have undesirably narrowed the tax base," Greenspan stated at a Presidential Advisory counsel.<ref>Greenspan: "Consumption Tax COuld Help Economy",http://www.foxnews.com/story/0,2933,149298,00.html</ref>
In 2005 congress created a bill to enact the FairTax (H.R. 25; Senate Bill 1943), it had the support of more then 54 co-sponsors, and both Senate and House minority leaders [[Dennis Hassert]] and [[Tom DeLay]]<ref>“The FairTax: A Trogan Horse For America,” Jews For Preservation of Firearms Ownership, http://www.jpfo.org/fairtax.htm#fn1</ref>. Although the bill received the most support ever for any fundamental tax reform bill, it failed to pass. After the elections of 2004, Georgia Republican Congressman, [[John Linder]], reintroduced the FairTax on the first day of the 109th congress<ref> “Linder Reintroduces FairTax Legislation”, http://www.johnlinder.com/News_Details.asp?NewsID=128</ref>. Congressman Linder stated before congress, “The time is ripe for fundamental tax and a completely new Federal tax regime. I am pleased to reintroduce my Fair Tax proposal today reform, and look forward to the Congress creating a fairer, simpler tax system that advances our core goals of lower taxes and more freedom for our citizens."<ref> “Linder Reintroduces FairTax Legislation”, http://www.johnlinder.com/News_Details.asp?NewsID=128</ref>.”
In 2005 congress created a bill to enact the FairTax (H.R. 25; Senate Bill 1943), it had the support of more then 54 co-sponsors, and both Senate and House minority leaders [[Dennis Hassert]] and [[Tom DeLay]].<ref>“The FairTax: A Trogan Horse For America,” Jews For Preservation of Firearms Ownership, http://www.jpfo.org/fairtax.htm#fn1</ref> Although the bill received the most support ever for any fundamental tax reform bill, it failed to pass. After the elections of 2004, Georgia Republican Congressman, [[John Linder]], reintroduced the FairTax on the first day of the 109th congress.<ref>“Linder Reintroduces FairTax Legislation”, http://www.johnlinder.com/News_Details.asp?NewsID=128</ref> Congressman Linder stated before congress, “The time is ripe for fundamental tax and a completely new Federal tax regime. I am pleased to reintroduce my Fair Tax proposal today reform, and look forward to the Congress creating a fairer, simpler tax system that advances our core goals of lower taxes and more freedom for our citizens.".<ref>“Linder Reintroduces FairTax Legislation”, http://www.johnlinder.com/News_Details.asp?NewsID=128</ref>”
In 2007 support for the FairTax bill grew to include 60 co-sponsors<ref>FairTax Gains Support, http://www.fairtaxblog.com/20070508/record-sixty-co-sponsors-for-fairtax-bill-hr-25/</ref>.
In 2007 support for the FairTax bill grew to include 60 co-sponsors.<ref>FairTax Gains Support, http://www.fairtaxblog.com/20070508/record-sixty-co-sponsors-for-fairtax-bill-hr-25/</ref>
One of the most outspoken supporters of the Fair Tax is Republican presidential candidate, [[Mike Huckabee]]. Huckabee has said that the Fair Tax would "put the IRS out of business, but put Americans in business<ref> Massachusetts For Mike Huckabee, http://massachusettsforhuckabee.blogspot.com/search/label/Tax%20Plan</ref>." <br />
One of the most outspoken supporters of the Fair Tax is Republican presidential candidate, [[Mike Huckabee]]. Huckabee has said that the Fair Tax would "put the IRS out of business, but put Americans in business.<ref>Massachusetts For Mike Huckabee, http://massachusettsforhuckabee.blogspot.com/search/label/Tax%20Plan</ref>" <br />
[[Image:Fairtaxb.jpg|right|thumb|200px| A FairTax bus during a rally at the 2007 [[Republican]] [[Iowa Straw Poll]].]]
[[Image:Fairtaxb.jpg|right|thumb|200px| A FairTax bus during a rally at the 2007 [[Republican]] [[Iowa Straw Poll]].]]
Most of the support for the FairTax comes from the [[Republican Party]] and the [[Libertarian]]s. A significant number of [[Conservative]]s want Republican presidential candidates to support the FairTax, including one Indiana group called ‘Hoosiers for Fair Taxation’<ref>”FairTax Supporters Vent Frustration”, June 2007, http://www.theindychannel.com/news/13651607/detail.html</ref>. <ref>”FairTaxer's continue to “flex their muscles”, July 2007, http://www.fairtax.org/site/PageServer?pagename=news_feature</ref>. Nevertheless, while the number of the members of Congress who have signed on to the proposal has been growing, it still lacks popular support to be close to passage. Former Arkansas governor and presidential candidate [[Mike Huckabee]] made passage of a national sales tax a part of his platform during his recent bid for office. Former Federal Reserve chief [[Alan Greenspan]] also exhibited support for the FairTax in a recent interview.<ref>Greenspan: Consumption Tax could Help Economy, Fox News, March 2005, http://www.foxnews.com/story/0,2933,149298,00.html</ref>
Most of the support for the FairTax comes from the [[Republican Party]] and the [[Libertarian]]s. A significant number of [[Conservative]]s want Republican presidential candidates to support the FairTax, including one Indiana group called ‘Hoosiers for Fair Taxation’.<ref>”FairTax Supporters Vent Frustration”, June 2007, http://www.theindychannel.com/news/13651607/detail.html</ref><ref>”FairTaxer's continue to “flex their muscles”, July 2007, http://www.fairtax.org/site/PageServer?pagename=news_feature</ref> Nevertheless, while the number of the members of Congress who have signed on to the proposal has been growing, it still lacks popular support to be close to passage. Former Arkansas governor and presidential candidate [[Mike Huckabee]] made passage of a national sales tax a part of his platform during his recent bid for office. Former Federal Reserve chief [[Alan Greenspan]] also exhibited support for the FairTax in a recent interview.<ref>Greenspan: Consumption Tax could Help Economy, Fox News, March 2005, http://www.foxnews.com/story/0,2933,149298,00.html</ref>
Of the 2008 Democrat presidential candidates, only Mike Gravel supported the plan. [[Rudy Giuliani]], a one time candidate for President on the Republican side, was hesitant and did not support it.<ref> “Giuliani Jeered For Opposing Flat Tax”, Associated Press, July 2007, http://www.forbes.com/feeds/ap/2007/07/07/ap3891710.html</ref>: "I don't think a Fair Tax is realistic change for America. Our economy is dependent upon the way our tax system operates<ref> “Giuliani Jeered For Opposing Flat Tax”, Associated Press, July 2007, http://www.forbes.com/feeds/ap/2007/07/07/ap3891710.html</ref>
Of the 2008 Democrat presidential candidates, only Mike Gravel supported the plan. [[Rudy Giuliani]], a one time candidate for President on the Republican side, was hesitant and did not support it.:<ref>“Giuliani Jeered For Opposing Flat Tax”, Associated Press, July 2007, http://www.forbes.com/feeds/ap/2007/07/07/ap3891710.html</ref> "I don't think a Fair Tax is realistic change for America. Our economy is dependent upon the way our tax system operates<ref>“Giuliani Jeered For Opposing Flat Tax”, Associated Press, July 2007, http://www.forbes.com/feeds/ap/2007/07/07/ap3891710.html</ref>
Former Republican governor of [[New Mexico]] and current [[Libertarian Party]] candiate for president [[Gary Johnson]] (who also sought the GOP nomination in 2012 before switching parties) is also a supporter of the FairTax. He has said that while there is no such thing as a "good tax", the FairTax is the "best of the worst". He acknowledges that the FairTax is not perfect, but feels it is the best option at the moment.
Former Republican governor of [[New Mexico]] and current [[Libertarian Party]] candiate for president [[Gary Johnson]] (who also sought the GOP nomination in 2012 before switching parties) is also a supporter of the FairTax. He has said that while there is no such thing as a "good tax", the FairTax is the "best of the worst". He acknowledges that the FairTax is not perfect, but feels it is the best option at the moment.
[[Mitt Romney]] wrote in his 2010 book, ''No Apology: The Case for American Greatness'', "One challenge with the fair tax is that the very rich would see their taxes go down--a lot. If Bill Gates makes about a billion dollars a year on his investments, for example, his current taxes would be at least $200 million. Let’s say he spends $50 million on himself and his family every year--which is a huge sum and I doubt he spends that much, but let’s use it for illustration: Under the fair tax, Bill Gates would pay “only” about $17 million in taxes--his tax bill would thus drop from $200 million to $17 million. The Wall Street Journal found that the enormous amount saved by the wealthiest under the fair tax would be made up by a higher tax burden on the middle class."
[[Mitt Romney]] wrote in his 2010 book, ''No Apology: The Case for American Greatness'', "One challenge with the fair tax is that the very rich would see their taxes go down--a lot. If Bill Gates makes about a billion dollars a year on his investments, for example, his current taxes would be at least $200 million. Let’s say he spends $50 million on himself and his family every year--which is a huge sum and I doubt he spends that much, but let’s use it for illustration: Under the fair tax, Bill Gates would pay “only” about $17 million in taxes—his tax bill would thus drop from $200 million to $17 million. The Wall Street Journal found that the enormous amount saved by the wealthiest under the fair tax would be made up by a higher tax burden on the middle class."
William Gale, of the Urban-Brookings Tax Policy Center, has suggested that a pseudo-consumption tax could be implemented under the current American income tax system. In this, all citizens would have an [[Individual Retirement Account]], but one with no restrictions and limitations, into which all income is deposited. A citizen would essentially use this is a check-writing bank account, with funds only being taxed when they are withdrawn (consumed) to make purchases. This system would approximate the FairTax, but without rebates.
William Gale, of the Urban-Brookings Tax Policy Center, has suggested that a pseudo-consumption tax could be implemented under the current American income tax system. In this, all citizens would have an [[Individual Retirement Account]], but one with no restrictions and limitations, into which all income is deposited. A citizen would essentially use this is a check-writing bank account, with funds only being taxed when they are withdrawn (consumed) to make purchases. This system would approximate the FairTax, but without rebates.
==Criticism==
==Criticism==
*Critics contend that the FairTax would have Constitutional issues.
*Critics contend that the FairTax would have Constitutional issues.
* Like an income tax, a sales tax has its own implications with regard to personal [[right to privacy|privacy right]]s.
* Like an income tax, a sales tax has its own implications with regard to personal [[right to privacy|privacy right]]s.
==External Links==
==External links==
*[http://www.fairtax.org/site/PageServer Americans for Fair Taxation]
*[http://www.fairtax.org/site/PageServer Americans for Fair Taxation]
==References==
==References==
{{Reflist}}
[[Category: Taxation]]
[[Category:Taxation]]
[[Category: Economics]]
[[Category:Economics]]
[[Category:Libertarianism]]
[[Category:Libertarianism]]
[[Category:Conservatism]]
[[Category:Conservatism]]
[[Category:Republican Party]]
[[Category:Republican Party]]