What Is The Fair Tax And Why Should You Care?
The U.S. Federal Income Tax Code is a tax on the income of American companies and citizens enacted by the government. The U.S. Constitution gives Congress the power to impose taxes, duties, imposts, and excises. The purpose of the Tax Code is to provide income for the operation of the government. The Tax Code is found in Title 26 of the U.S. Code of Federal Regulations (CFR). Any U.S. citizen who has filled out a federal tax return knows how confusing the current U.S. Tax Code is. Additional layers of complexity appear if the taxpayer itemizes deductions, deducts home business expenses, or has a profit or loss due to investments. When the convolutions of corporate tax law are considered, it is no wonder that companies hire teams of accountants to prepare their income tax returns. What Is The Fair Tax? The Fair Tax is a proposed income tax system intended by its founders to replace the current Tax Code. The Fair Tax Bill was proposed by Representative John Linder (R-GA) in July 1999 to the 106th Congress. One definition of the Fair Tax is “a proposed change in United States tax laws to replace all federal personal income taxes, payroll taxes, corporate taxes, capital gains taxes, self-employment taxes, gift taxes and inheritance taxes with a national retail sales tax and monthly tax rebate to all households.” At the time of this writing, the Fair Tax proposes to apply a tax of about 23% on purchases. This purchase tax would replace the current income tax paid by Americans. Generally, those who spend or purchase more would pay more taxes. Conversely, those who spend less would pay less or even nothing. Differences Between The Tax Codes The current Tax Code is based on the income of a person or corporation. The proposed Fair Tax would be based on the purchases of a person or corporation. The expectation of the proposed Fair Tax is that those who are more wealthy generally purchase more, and will therefore would likely pay higher taxes than they do now. Another major difference is the complexity of the two Tax Codes. As the Fair Tax Bill sponsor Representative Linder states on his website: “I would also encourage everyone to review the Fair Tax, as it is only 132 pages, which stands in stark contrast to the more than 50,000 pages of tax code laws and regulations currently in effect.” Furthermore, the proposed Fair Tax Code would be administered by the States. Most states already enact a state income tax, and therefore have the infrastructure in place to collect the Fair Tax revenues. This would also mean greatly reducing, or even eliminating, the Internal Revenue Service (IRS)! Monthly Tax Rebate Checks Under the Fair Tax plan, each household would receive a monthly tax rebate check, paid in advance. The amount of the check would be estimated as the amount of Fair Tax owed on poverty level spending. The goal of the monthly rebate check is to prevent anyone from being taxed on household necessities, especially those under the poverty level. Will The Fair Tax Provide Enough Government Income? The feasibility of the proposed Fair Tax is the topic of endless discussion. On one hand, the entire taxation process would be greatly simplified. Wealthy persons and corporations would pay a greater share of taxes. On the other hand, a Tax Code change of this magnitude will require massive reeducation of the public. People are resistant to change, and would no doubt cry foul at being denied many of their usual tax deductions. Finally, the only way to accurately assess the effectiveness of the proposed Fair Tax Code is to see it in action over a period of years. That does not look likely in the very near future, although the Fair Tax proposal is gaining support. Tax Your Brain Whether you are for it or against it, you must agree that the proposed Fair Tax would represent a dramatic shift in U.S. taxation policy if enacted. Proponents and opponents of the Fair Tax Bill will no doubt continue to generate tax estimates that are supportive of their arguments. It is up to you as an American taxpayer to become educated on the Fair Tax Bill. Determine whether the proposed changes and tax payment methods would benefit you and the country more than the current system. Once you’ve made a decision about the proposed Fair Tax, contact your Senators and Representatives and tell them how you feel about it. Regardless of the tax system in place, you are still paying their salary. The website below provides free information about income tax preparation tips and tax assistance articles and resources. What Is The Fair Tax And Why Should You Care?
Posted Articles Title : What Is The Fair Tax And Why Should You Care?
Posted by : Personal Finance & Financial + Banking Global Articles WebSite.WS | GVMG - Global Viral Marketing Group Last update date : 26-01-2022
Last update date : 26-01-2022
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