How to Decide if the Fair Tax is a Good Idea

The Fair Tax is a comprehensive legislative proposal to eliminate the Internal Revenue Service(IRS), federal and payroll taxes in favor of a retail tax on every item you purchase. In addition to getting rid of the IRS, the Fair Tax will ensure that no American pays taxes up to the poverty level to prevent further debt by those with a low income. Although this legislation has many detractors, the basic ideas are believed to help economic growth in the United States.

Instructions

Difficulty: Moderately Challenging

Things You’ll Need:

• Job
• The Fair Tax Book

1. Read the Fair Tax Act. Reading the specifics of the legislation will help you decide for yourself if the Fair Tax is an acceptable alternative to federal, payroll, corporate and gift taxes just to name a few. The legislation outlines in detail how the tax would be applied and how you will be affected, if at all.
2. Consider production costs. A major argument in favor of the Fair Tax is that it would lower production costs for many corporations because they would no longer have to pay fees for compliance and doing business. Some costs involved with running and operating a business affect the price of products and many argue that eliminating certain taxes would make items more affordable.
3. Evaluate how much you buy. Since the Fair Tax would only tax what you buy, if you are a compulsive shopper this may not be good for you. However if you're more inclined to save and invest your money, not only will you not be taxed but your money will work for you. Essentially the Fair Tax is a consumption tax; the more you buy the more you pay.
4. Look at the numbers. Under the Fair Tax, you would pay $.23 on every dollar you spend, which is similar to the 30% sales tax already in existence. Currently Americans "give" payroll taxes, which pay federal and state taxes as well as sales tax on items purchased. In the most basic terms you would ultimately pay fewer taxes, with that number declining depending on how much you spend.
5. Consider illegal activities and illegal immigrants. Many tax experts claim that the Fair Tax will provide additional revenue because illegal activities can be taxed, but more importantly even illegal immigrants would be subject to the tax. Elements that have typically provided an economic burden could ideally "carry their own weight" under the Fair Tax.

Tips & Warnings

• The Fair Tax would reward saving and investing.
• The more you spend, the more taxes you pay.