Before discussing the disadvantages about Fair Tax, what exactly is the Fair Tax? The Fair Tax Act started in 2003 by a group named Americans for Fair Taxation.
The fair tax would abrogate all federal and corporate income taxes, gift, estate, capital gains, Social Security, Medicare, and self-employment taxes.
Instead, the fair tax would replace them with a federal retail tax of 23%.
The retail sales tax of 23% would not be applied to imports, goods to make other goods, or used goods.
Sounds good doesn't it? But what are the disadvantages to this? The first one that comes to mind is who will make sure that the taxes are being regulated and collected correctly? The plan for the tax states that the IRS would not be needed once all income taxes are abolished.
The people of the United States would need a whole new agency that would need to handle the new tax system so it can be regulated, and make sure that corruption does not start.
Another disadvantage is that the tax could be unfair to people who are not earning an income.
A good example of this would be seniors.
The senior citizens who paid income taxes all of their lives would be taken advantage of.
How would the United States government compensate for those who have paid taxes before the Fair Tax is added? How would this impact the poor? When just thinking about retailed goods being taxed 23%, the poor would have a difficult time when buying the goods they need.
Would the 23% be applied to food and drinks to sustain daily life needs? If so, then the poor will have a worse time adapting to this new system and will be in debt.
What would the government do once the tax is in place? My concern here is that once the tax is in place, the government can just change it around all the time if they like.
For example, the tax might start out at a 23% on all goods and services.
But what if the government decides to change how much tax is on those goods? This would be one of the downfalls with the Fair Tax.
If at any time the US government feels like they are not getting enough money for taxes, they could easily just raise the percentage at their leisure.
The Fair Tax does sound like a very good idea and promising one.
But we the people need to look at how it can affect us in a bad way in the long run.
If we don't, we could end up in a worse situation than before.
The fair tax would abrogate all federal and corporate income taxes, gift, estate, capital gains, Social Security, Medicare, and self-employment taxes.
Instead, the fair tax would replace them with a federal retail tax of 23%.
The retail sales tax of 23% would not be applied to imports, goods to make other goods, or used goods.
Sounds good doesn't it? But what are the disadvantages to this? The first one that comes to mind is who will make sure that the taxes are being regulated and collected correctly? The plan for the tax states that the IRS would not be needed once all income taxes are abolished.
The people of the United States would need a whole new agency that would need to handle the new tax system so it can be regulated, and make sure that corruption does not start.
Another disadvantage is that the tax could be unfair to people who are not earning an income.
A good example of this would be seniors.
The senior citizens who paid income taxes all of their lives would be taken advantage of.
How would the United States government compensate for those who have paid taxes before the Fair Tax is added? How would this impact the poor? When just thinking about retailed goods being taxed 23%, the poor would have a difficult time when buying the goods they need.
Would the 23% be applied to food and drinks to sustain daily life needs? If so, then the poor will have a worse time adapting to this new system and will be in debt.
What would the government do once the tax is in place? My concern here is that once the tax is in place, the government can just change it around all the time if they like.
For example, the tax might start out at a 23% on all goods and services.
But what if the government decides to change how much tax is on those goods? This would be one of the downfalls with the Fair Tax.
If at any time the US government feels like they are not getting enough money for taxes, they could easily just raise the percentage at their leisure.
The Fair Tax does sound like a very good idea and promising one.
But we the people need to look at how it can affect us in a bad way in the long run.
If we don't, we could end up in a worse situation than before.