Posts Tagged ‘Tax’
Fair Tax supporters come together on Tax Day
This April 15 was different from previous years as thousands of protesters came together at Tax Day “Tea Parties” in several cities from Atlanta to Anchorage to lend their voice to the growing outrage over recent government spending. It seems the American people’s animosity towards IRS is raising the tide of Fair Tax proposal. It is believed that the taxpayers view the passing of Fair Tax as a channel to vent their anger at the federal spending.
I find it hard to be on top of things when it comes to Tax Day and especially the Fair Tax proposal. I find graphs, charts and complicated tax reports to be a tad more baffling than plans to find “Weapons of Mass Destruction”. So, I’ve made four 60-second lists to keep you in the loop and ahead of the times…
Five things to know about Fair Tax:
1) It has been introduced by Georgia Republican John Linder in the House and by Georgia Republican Senator Saxby Chambliss in the Senate.
2) It is a proposal to replace all federal income taxes with a single national retail sales tax.
3) The tax would be levied once at the point of purchase on all new goods and services meant for personal consumption.
4) The sales tax, as stated in the legislation, is going to be 23 % of the total payment including the tax.
5) All family households of lawful U.S. residents would receive a monthly payment known as “Family Consumption Allowance” (FCA). It would be a ‘prebate’ or an advance rebate on purchases up to the poverty level.
Why people support it?
1) It would decrease tax burdens by broadening the tax base and effectively taxing wealth.
2) With the advance rebate of “Family Consumption Allowance”, the Fair Tax would be progressive on consumption.
3) An individual spending at poverty level, as per the proposal, would have a 0% effective tax rate. Whereas a person spending twice the poverty level would have an effective tax rate of 11.5%
4) It would enable the federal government to reduce the size of federal tax administration by 73%, by cutting the IRS budget to $8 billion from $11.01 billion (figure for 2007).
Why people stand against it?
1) It would decrease tax burden on high-income earners and increase it on the middle class.
2) The size of such a consumption tax makes it very complex to collect and may lead to widespread tax evasion.
3) It would cause an increased budget deficit as the new tax rate would raise less tax than its predecessor.
4) Imposing a national retail sales tax would force transactions underground and lead to an extensive underground economy.
What happens next?
1) The proposal, introduced in 1999, has not since moved from committee and is yet to have any say on the present tax system.
2) An advisory panel on tax reform, established by President Bush in 2005, had deemed such a tax system as undesirable to recommend in their final report.
3) President Barack Obama does not back the bill, arguing instead for more progressive reforms to the payroll and income tax systems.