The fairtax in a consumption tax that would attempt to distribute the Unites States tax burden more evenly among all citizens. As it stands now, the Federal income tax is often thought to place a burden on the poorest Americans.
The fairtax would tax individuals on the basis of their consumption of consumer goods and would include rebates for those that fall below the poverty level. The tax would be imposed at the point of purchase of specific items. Percentage wise, the rate of the fairtax would be the equivalent of income tax. A tax rate of approximately twenty three percent would be added to all purchases with that rate being adjusted every year, based on overall revenue from the previous year.
There has been a movement across the country in which taxpayers wish to abolish federal income taxes and replace them with a tax burden that would be distributed more evenly.The fairtax bill was proposed in order to impose a national sales tax and abolish the Internal Revenue Service. The fairtax bill was carefully examined by President Bush whom did not see the fairtax as feasible. There were a myriad of problems with the fairtax bill. There was no way to estimate what the revenue would in fact be if the fairtax bill was passed. In addition, the fairtax bill was not clear in describing the manner in which the tax would be collected and how it would be enforced when taxpayers were in noncompliance.
There are several arguments that support the fairtax as a feasible means of equally dispersing the tax burden. First, the wealthy are more likely to make large purchases, thereby increasing their tax burden. Conversely, there is the argument that consumption decreases as wealth increases, which would actually increase the tax burden for the middle class. In addition, the fairtax would encourage savings and investments because there would be no tax on items such as capital gains.
If taxpayers are able to save more money, they will likely have more money to spend later, which increases their tax burden as their wealth increases. The fairtax would be imposed on anyone making purchases, which would include tourists and individuals that live in the country absent of a legal citizenship. In this manner, taxes are paid by any individual that enjoys benefits that are paid for through tax revenue.
The tax reform movement has struggled to propose tax ideas that would equally distribute the tax burden based on each taxpayers financial standing. The tax reform movement focuses on making sure that the lower and the middle class are able to sustain or increase their financial standing, by avoiding an unfair tax burden responsibility.
The fairtax bill proposed ideas that would have made it almost impossible for taxpayers to avoid shouldering some of the responsibility of the tax burden.