Money
Fair Tax or Flat Tax Which System Would You Choose?
T
here has been much discussion the past few years over whether or not our current tax system should be reformed. As a
matter of fact, most Americans are of the opinion that it should be completely eliminated and replaced with a far
by Pam Smith
work, and creates opportunity for Americans of all income levels to succeed? There are currently two proposals for changing the US tax system that have gained popularity and support, the Fair Tax and the Flat Tax. To help in understanding this debate, here is a brief overview of what each of them mean and how they differ.
more efficient and equitable system. The consensus is
Fair Tax – Tax on Consumption
that our tax policies have failed the vast majority of
In place of all current federal taxes, the Fair Tax would place a 23 percent tax on the final sale of all goods and services. Exports and business inputs (i.e. intermediate sales) would not be taxed. Individuals would file no tax return at all. Businesses would only need to deal with sales tax returns. No federal taxes would be withheld from employees' paychecks. Social Security and Medicare would be funded by sales tax revenue. The Fair Tax would provide every family with a rebate of the sales tax equal to spending up to the federal poverty level. The rebate would be paid in advance and updated according to the Department of Health and Human Services poverty guidelines. Based on the 2003 guidelines, a family of four would be able to
taxpayers and our country, for the benefit of a few. The structure we have in place today is extremely complex and costly to maintain. With our present tax code at well over 60,000 pages, it is no wonder that American citizens, businesses, and nonprofits spend over 6 billion hours and $300 billion annually to stay in compliance with the IRS. To put that in perspective, that's a 20% levy on top of the approximately $1.5 trillion in total taxes that will be paid. In addition, over 110,000 people work for the IRS at an annual cost that exceeds $11 billion. Is it time for a fairer and simpler tax system? One that reduces the massive deficits created over the last four years, strengthens the middle class while honoring their
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