1. The FairTax Plan

2. Our Current Tax System Federal government gets most of its money through income tax.Federal government gets most of its money through income tax. –16 th Amendment, ratified in 1913. In 1943, started “withholding”:In 1943, started “withholding”: –Process in which money for income tax is taken out of your paycheck before you receive it. –Many workers don’t know how much they make, only what they “take home”.

3. The FairTax The FairTax is a proposal to replace this income tax, as well as many other taxes used to fund the federal government.The FairTax is a proposal to replace this income tax, as well as many other taxes used to fund the federal government. Designed to be “revenue-neutral”, which means it will bring in the same amount as the current tax system: no more, no less.Designed to be “revenue-neutral”, which means it will bring in the same amount as the current tax system: no more, no less.

4. The FairTax The FairTax is, in essence, a sales tax that will be levied nationally.The FairTax is, in essence, a sales tax that will be levied nationally. The rate of this tax is going to be 23%.The rate of this tax is going to be 23%. –Based on research done by the Harvard Economics department. –“Embedded costs”: For every dollar spent, 23 cents is marked-up specifically to cover income taxes. –By removing income tax and levying the FairTax, prices remain the same.

5. Prebates FairTax supporters feel it is unethical to tax necessities, such as food. They hope to remedy this with a prebate system.FairTax supporters feel it is unethical to tax necessities, such as food. They hope to remedy this with a prebate system. –Every household will register with the number of people living there. –The government calculates about how much money that family will spend on necessities. –The family receives a check for 23% of this cost monthly; or, the tax they pay on their food.

6. Benefits of the FairTax Supporters claim the following will occur if the FairTax is adopted:Supporters claim the following will occur if the FairTax is adopted: –More money for every worker on every paycheck. –Expanded tax base: Everyone who buys something in US is paying taxes. –Business expansion: With no corporate income taxes, businesses will no longer outsource, but expand in the US.

7. Problems with the FairTax The 16 th Amendment:The 16 th Amendment: –In order to prevent double taxation, the 16 th Amendment must be repealed. –Only another Constitutional Amendment can do this.

8. Problems with the FairTax Some additional criticisms of the FairTax are:Some additional criticisms of the FairTax are: –How can we test the FairTax before we implement it? –Why should retailers be our new tax collectors? –Who will write all these prebate checks, and how will the records be kept? –How can we assure that the tax will be revenue-neutral?

9. Your verdict On a sheet of paper, write a short essay (1-2 paragraphs) in which you tell whether or not you like the FairTax plan and whether or not you believe that this plan would be workable in the United States.On a sheet of paper, write a short essay (1-2 paragraphs) in which you tell whether or not you like the FairTax plan and whether or not you believe that this plan would be workable in the United States. Turn this in at the end of the period.Turn this in at the end of the period.