FairTax :: FAQs



	Does the FairTax affect all of those taxes on my phone bill? What is the FairTax? Will the FairTax affect my Social Security or Medicare benefits in any way? How much money will I receive each month in my prebate check? Isn’t it a big deal to tax services for the first time? It has never been done before. Why do some people say the rate is 30 percent instead of 23 percent? Does the FairTax repeal the 16th Amendment? The 23% tax rate seems too high. I just did my taxes, and after all of my deductions and exemptions, I only paid 14% of my income in taxes. Why is the FairTax a good deal for me? How can we be sure that the costs associated with the embedded taxes will disappear? How are state tax systems affected, and can states adequately collect a federal sales tax?

Find out what your state is doing to promote the FairTax:

Q:

Why is the FairTax helpful for capital formation in this country?

A:

The short answer is lower interest rates, lower labor costs, and tax-free investment.

“Capital formation” is just a fancy word for investment, and if the FairTax can promise anything, it can promise increased investment in this country.

We have long used the income tax code in this country to manipulate behavior. It provides tax credits for hybrid cars, tax deductions for charitable giving, tax credits for adoptions, tax deductions for home buying, and the list goes on and on. The FairTax abolishes all tax credits and deductions and yet contains the most powerful incentives yet to save and to invest in America.

First, the FairTax abolishes all of the crazy and complicated rules governing business investment today. Unlike today’s tax system which discourages investment through long and difficult depreciation schedules on new equipment and facilities, the FairTax encourages investment by making it all business investment immediately tax free.

As if that wasn’t a large enough of an incentive for new business investment, the FairTax abolishes all taxes on labor, which is good news both for those who labor and those who hire labor. Businesses can be more competitive in world markets with the lower labor costs guaranteed by the FairTax. Any environment that allows business to be more competitive is certain to encourage new capital investment.

Finally, and perhaps most importantly, the FairTax is a tax on consumption. Following the old economic maxim that you get less of whatever you tax, the FairTax will bring lower consumption, which by definition means higher savings. Higher savings, by definition, mean lower interest rates. Lower interest rates have long been our tool in this country for jump-starting capital investment. Rather than having the Federal Reserve lower rates, the FairTax will jump-start savings which will force the market itself to lower interest rates.

Think of the huge sums of money invested offshore—sums invested in jurisdictions with lower taxes and lower labor costs. When the FairTax abolishes all labor and business taxes, America will be the world’s best tax haven. Since we are already home of the hardest working and most efficient labor force in the world, companies will have every reason to build their next plants in America.




	Will the FairTax affect my Social Security or Medicare benefits in any way? How much money will I receive each month in my prebate check? Why do some people say the rate is 30 percent instead of 23 percent? How much do Americans pay each year in Federal income tax compliance costs? Once the FairTax is passed and becomes law, what protection is there against a reinstitution of the income tax at a later date? Does the FairTax repeal the 16th Amendment? Is it safe to base American tax revenue on the sales tax? Isn’t consumption volatile? Isn’t it a big deal to tax services for the first time? It has never been done before. Has anything like the FairTax ever been tried before? Won’t people simply avoid the tax by trading and bartering rather than purchasing? Why is the FairTax helpful for capital formation in this country? Today, employers pay 7.65 percent of their payroll to the Federal government in a payroll tax. Do you expect that when the FairTax eliminates this tax that the employers will reduce their prices by this amount or increase wages by this amount? Does the FairTax affect all of those taxes on my phone bill? The 23% tax rate seems too high. I just did my taxes, and after all of my deductions and exemptions, I only paid 14% of my income in taxes. Why is the FairTax a good deal for me? How can we be sure that the costs associated with the embedded taxes will disappear? Right now I can deduct business lunches and other business expenses. I'm still going to have to take clients to lunch, but now I'll have to bear the entire cost. Does the FairTax have an answer to this problem? How will the FairTax affect charitable giving? How are state tax systems affected, and can states adequately collect a federal sales tax? What is FairTax.org? What is the FairTax? How would the FairTax be collected? What is taxed? What taxes does the FairTax replace? Does the FairTax rate need to be much higher to be revenue neutral?


		Did you know, according to the Internal Revenue Service (IRS), more than $3.5 billion in taxes is owed by almost half a million Federal employees and retirees? Of the nearly half-million Federal employees, 1,000 work on Capitol Hill. How can we expect Americans throughout the country to decipher our complex tax code when those who are helping to legislate the tax code are themselves confused?

Q:

Why is the FairTax helpful for capital formation in this country?

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