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[[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 &mdash; including [[corporate tax, [[gift tax]], [[estate tax]], [[capital gains tax]], [[alternative minimum tax]], [[Social Security]], [[Medicare]], and [[self employment tax]]es &mdash; 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]] &mdash; 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 &mdash; including [[corporate tax]], [[gift tax]], [[estate tax]], [[capital gains tax]], [[alternative minimum tax]], [[Social Security]], [[Medicare]], and [[self employment tax]]es &mdash; 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]] &mdash; 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.

[[Category: Taxation]]

[[Category: Taxation]]

[[Category: Economics]]

[[Category: Economics]]