The biggest problem people have with the FairTax is the fact that they try to compare the effects on poor and rich folks by using percentage of income affected by the tax. This is not relevant because the same is true with the income tax poor people are used to spending all their money and rich people having more money to save this will never change, a better comparison is how will the FairTax affect the poor person’s bottom line. I believe that this is the only comparison that matters. The example I gave in my Top 10 list comparing the average person and the rich person proves that the rich will still pay more so who cares if they have more to save.
Here is what the average worker is interested in:
If I earn $100 how much of that money will I see in my check? With the income tax about $70-$75. With the FairTax $100.
If I work overtime will I take home less because of taxes? With the income tax that is a possibility. With the FairTax you still keep every $ you earn.
Will I have to pay taxes on essentials like food and clothes? Yes everything will be taxed, you don’t want the rich guy to get all the lobster and designer clothes he wants tax free do you? Everyone including the rich guy will never pay taxes on all purchases up to the poverty level because of the FairTax Prebate, which means your Prebate covers the taxes on everything you spend up the the poverty level and how you spend it is up to you whether its on lobster, ground beef, or cigarettes it’s your choice.
How will the FairTax affect a home purchase? There are several differences the first is when saving for a down payment under the FairTax you will need to earn $100 to save $100, with the Income tax you need to earn $133 or more before you can save $100. The second difference is with the FairTax you will have a higher net income making it easier for you to qualify for a mortgage. The third change is that all mortgage payments are made with pretax money which means that you will never pay taxes on principle or interest payments. The only taxes paid on home purchases will be on new homes and any misc services that are used during the process like surveys, inspections, mortgage brokers, real estate agents etc.
What will a new $100,000 home cost me on each of the tax systems if I had to pay cash? With the FairTax A home that Currently costs you $100,000 will still cost you $100,000 and you will need to earn and save $100,000 to buy the new home. Under the Income tax you will still have to save $100,000 to buy the new home; however you will have to earn over $133,000 in order to be able to save $100,000 after taxes. For those people that think that prices will increase the amount of the FairTax(they won’t), you will still be better off with the FairTax because that would mean you would need to earn only $130,000 to purchase the home.
Nothing is perfect; however, when viewed objectivly there are very few negitive things about the FairTax.
Tags: Bortz, FairTax, flat tax, Huckabee, IRS, Linder, tax reform
