After a recent conversation with my father about taxes, I began to wonder why our tax system has to be so confusing. Now to preface this post, I understand that a tax system such as the fair tax is not really in the realm of possibilities at the moment, but a girl can dream right?
If you had to choose a national tax system my guess is that it would not look like our current system. It would enable Americans to prepare their taxes without an accountant or software program, while also saving the billions of dollars spent each year on tax planning and audits. The fair tax is a plan to replace federal income and payroll taxes, including personal, gift, estate, capital gains, alternative minimum, social/security/medicare, self-employment, and corporate taxes. The fair tax replaces all of these taxes with a proposed 23 percent sales tax on new items and services, which means you could buy that used dream car and pay no taxes! Now I know that the arguments of this plan are formulating in all of your brains right now, but let me try to defend a few.
Many claim that the fair tax would just hurt the poor even, but what many don’t realize is that the fair tax would actually give out a prebate to make sure that no American would be paying taxes on necessities. If you take the poorest members of the generation born in 1990 under the fair tax, they would experience a 13.5 percent improvement in economic well-being, while the middle and upper class would receive a 5 and 2 percent increase. The last worry is what if Americans stop spending? The fair tax research has shown that consumption would increase by 2.4 percent in the first year and 11.7 percent by the tenth year.
Lastly, in these economic hard times, we need a tax system that helps keep jobs in the U.S. The fair tax exports more of our products rather than our jobs. By removing the cost of corporate taxes and compliance costs from U.S. exports, our exports will be on the same level as foreign competitors. This will increase the demand for U.S. exports, which will create a need for more jobs in the manufacturing sectors.
Now this is obviously just a snapshot of the fair tax, but go to the fair tax calculator and see how the fair tax would benefit you!