The FairTax Act

In “The Federalist No. 21” Alexander Hamilton addresses the citizens of New York concerning the issue of taxation. Hamilton (1787) writes, “It is a single advantage of taxes on articles of consumption, that they contain in their own nature a security against excess. They prescribe their own limit; which cannot be exceeded without defeating the end proposed, that is, an extension of the revenue.” The advice given by Hamilton in 1787 is the backbone of the FairTax Act. The FairTax or bill H.R. 25 is not a flat tax or a VAT tax. It is a tax on consumption. The FairTax is a twenty-three percent sales tax levied on all new goods and services. The FairTax replaces all current federal taxes imposed on the people of the United States. This includes all personal and corporate income taxes. The twenty-three percent tax is not imposed on old or used items. It is applied only to new items. The FairTax is levied on all services, even on doctor’s visits. Educational institutions are the only exceptions to the rule. The FairTax is revenue neutral, meaning it provides the same amount of federal income as the current system. To prevent the FairTax from becoming an undue burden on the poor, a monthly prebate is paid to every family (Americans For Fair Taxation 1007). The prebate is equal to the amount of taxes a family pays on all purchases up to the poverty level. For instance, if a family was estimated to spend $26,400 a year on basic necessities, based on a 23% sales tax, their annual tax burden would be $6,072. This tax burden is paid to the family in monthly installments at the beginning of each month. With this prebate, all families living under the poverty level will pay no federal taxes (Boortz & Linder 2005). Arguably, the most app...

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...xes the “shadow economy” and brings the offshore accounts back to U.S. banks.

For the past eleven years, opponents from the left and right side of the political spectrum have lambasted the FairTax. Politicians who don’t want to relinquish the power given them by the current tax system are the proposal’s biggest opposition. They don’t want to give up the withholding system. They don’t want to give up the sixteenth amendment. They don’t want to lower taxes. They oppose the FairTax for the sake of their own greed and agendas. Despite all their baseless criticism, the FairTax is continuing to gain support on the grass roots and political levels. The statistical data and scientific analysis, compiled over the last eleven years, is overwhelming proof of the FairTax’s ability to bring transparency to the tax system, broaden the tax base and to fix the U.S. economy.