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| Budget Stretcher's Articles |
Fair Tax Sends Checks
By Terry Rigg
All We Have To Do Is Get It Passed. We Need Your Help!
| DISCLAIMER: Since the Fair Tax Act (House Bill (H. R. 25)) and (Senate Bill (S. 25)) are pending in congress, the final version including the proposed rebate numbers are not finalized. All information in this article is based on the current proposal and strictly speculation at this time. |
I'm not kidding. Every individual or family will receive a check from the Federal Government every month if the Fair Tax is passed. In addition, the Federal Withholding Tax, Social Security Tax and Medicare Tax will no longer be withheld from your paycheck. This will mean several hundreds of dollars every month that you don't have now.
Great deal, huh! Yes it is, but you will still have to pay taxes, they just won't be deducted from your paycheck anymore.
The income taxes will be replaced by a National Retail Sales Tax (Fair Tax). The proposed rate is 23% on everything you buy new. Used items will not be taxed in any way. If you buy a new car you will pay a 23% sales tax based on the price of that car. If you buy a 1 year old preowned car you won't pay any sales tax. It's that simple.
Sounds pretty steep right! There are a number of factors that will make paying this 23% sales tax a little easier to swallow.
The first and most important factor is that you won't be paying as much for anything as you are now. The reason for this is that manufacturers, distributors and other companies will no longer have to pay income taxes either.
- It is estimated that about 20% of the cost of all goods and services are the result of the companies expenses involving the taxes they have to pay. Remember, all expenses for a company to make a profit must be passed on to the consumer, even taxes.
- Since the company will be paying about 20% less to do business, these savings will be passed on to the consumer. An example would be a new car that currently costs $20,000 would sell for around $16,000 if the Fair Tax were enacted. Any company resisting this will feel the wrath of a competitive market and a consumer that knows they are paying less to produce their products. They can't win!
Now, what if you had more money to pay those lower prices? That's exactly what will happen. Since all of your Federal Deductions will be eliminated, your paycheck will be bigger. A lot bigger. On top of that you will receive a monthly check from the Federal Government to cover the sales taxes you will pay on necessary items.
I have reprinted the table that shows estimates of what the payment would be for an individual or family if the Fair Tax were passed. You will find a simple form at the end of this article to figure your extra income. (Sorry, it does not calculate). If you would like to download a calculating form to figure your additional income please click the link below. When you download this ZIP file you will receive the calculating forms and a copy of this article.
http://www.homemoneyhelp.com/fairtaxcharts.zip
- In the first table you will need to find the number of members in your family in the left column. Then go to your right in that row to find out what the size of your monthly check is expected to be. There are two separate areas in the form, one for Single (5th column) and the one on the far right (8th column) is for a Married Couple. Enter this figure in line 1 of the "Figure Your Extra Income" form.
- The next step is to enter your Income Tax Withholding. To do this you will need to get your latest pay stub and find the amount your company withheld for "FITW" and enter this number in the space in the first column (Payday). Here is how to compute the figure to be placed in the second column (Monthly):
- Paid Monthly - Enter the amount from your pay stub directly into the second column
- Paid Weekly - Multiply the amount in the first column by 4.33. Enter the result in the second column.
- Paid Every Two Weeks - Multiply the amount in the first column by 2.14. Enter the result in the second column.
Paid Twice a Month - Multiply the amount in the first column by 2. Enter the result in the second column.
- Next, find the amount on your pay stub that shows your "FICA" (Social Security Tax) and Medicare Tax Withheld. Add these two numbers together and enter in the space in column 1 (Payday). Then use the same method to calculate your monthly payments as you did for your (FITW).
- Finally, add all of the figures in the (Monthly) to find out how much more money you will have if the Fair Tax Act is passed and enacted and enter it in the Monthly column for "Total Additional Income Under Fair Tax".
Several other important things would happen if the Income Tax were replaced by the Fair Tax. I've listed just a few below that I believe you can relate to:
- Elimination of the Internal Revenue Service, saving an estimated $420 billion annually
- April 15th would be just another day
- You would not have tax records to keep BECAUSE YOU WOULD NOT HAVE TO FILE AN INCOME TAX RETURN
- And, no forms, no deadlines, no prepayments, no penalties, no audits, and never again an abusive IRS that can claim your assets without due process!
- Even illegal income would be taxed when it is spent
- Only new items will be taxed
- No American will pay taxes on necessities
- Cost of goods and service are estimated to decrease by 20% to 30% because manufactures and other companies will not be required to pay taxes (TAXES WILL ONLY BE PAID ON NEW MERCHANDISE AT THE RETAIL LEVEL)
- No tax on ANY investments
- Each taxpayer will receive a rebate equal to the taxes paid on necessities such as groceries and medicine, in advance of those purchases
- Seniors and low income families would be protected
This list could go on and on about the advantages of a National Sales Tax. The truth is that our current system of taxation is totally out of control. The 10s of thousands of pages of tax laws have even the best tax minds confused.
To learn more about the Fair Tax please visit their web site at www.fairtax.org. You can also find out how the Fair Tax will work by visiting their Frequently Asked Questions.
National Retail Sales Tax
2007 Rebate Calculation |
One-Adult Household | Two-Adult Household |
Family
size |
Annual
consumption
allowance |
Annual rebate
|
Monthly
rebate |
Family
size |
Annual consumption allowance
|
Annual
rebate |
Monthly
rebate |
| 1 Person
and 1 child
and 2 children
and 3 children
and 4 children
and 5 children
and 6 children
and 7 children |
$10,210
$13,690
$17,170
$20,650
$24,130
$27,610
$31,090
$34,570 |
$2,348
$3,149
$3,949
$4,750
$5,550
$6,350
$7,151
$7,951 |
$196
$262
$329
$396
$462
$529
$596
$663 |
NA
couple
and 1 child
and 2 children
and 3 children
and 4 children
and 5 children
and 6 children |
N/A
$20,420
$23,900
$27,380
$30,860
$34,340
$37,820
$41,300 |
N/A
$4,697
$5,497
$6,297
$7,098
$7,898
$8,699
$9,499 |
$196
$391
$458
$525
$591
$658
$725
$792 |
This chart gives you an example of how to fill out your "Figure Your Extra Income" form:
| adfd | adfd | Payday | Monthly |
| 1. | Monthly Rebate Under Fair Tax | jkl; | $418.00 |
| 2. | Income Tax Withholding | $25.10 | $108.68 |
| 3. | Social Security and Medicare Withholding | $34.43 | $149.08 |
| 4. | Total Additional Income Under Fair Tax | ;ll | |
"Figure Your Extra Income"
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Terry Rigg is a strong advocate of the National Retail Sales Tax (Fair Tax). He believes the current system of taxation severely limits our economies growth and penalizes individuals and corporations for hard work and great ideas. He is also the Editor of the Budget Stretcher web site. |
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