The Fair Tax Act - H.R. 25 -
The FairTax Act of 2003

By Terry Rigg   Visit the Authors Website

Originally published in The Budget Stretcher newsletter.
Week Of August 16, 2004 - subscribe at author's website.

Grandpa Terry's Tip of the Week

The Fair Tax Act - H.R. 25 - The FairTax Act of 2003

I guess one of my pet peeves is the current tax system we use in this country (US). I have been filing tax returns for over 40 years and the current system is unmanageable.

I know many of you are reading this and wondering why I would be writing about taxes now when most of us won't even start thinking about it until January.

The answer is simple. All of us are taxed by the federal government everyday of our adult lives. All you have to do is look at your check stubs to realize this.

It does take money to run our country although much of it is wasted in my opinion. I believe the system of mandatory withholding from our paycheck and requiring us to fill out forms each year is ridiculous. There has to be a better system.

There is currently a bill before congress that will completely change the way we pay our taxes. H.R. 25 - The FairTax Act of 2003 would abolish the Internal Revenue Service and repeal the 16th Amendment to the Constitution which established our current system of withholding taxes to ensure individuals could pay their taxes. The current system would be replaced with a National Retail Sales Tax.

The benefits of The FairTax Act are endless. The first thing you would see is a much larger paycheck because Federal Income Tax Withholding and Social Security and Medicare taxes would no longer be coming out of your paycheck.

Instead you would start paying a 23% Sales tax on any new items you purchase. Used items would not be taxed. This sounds pretty steep to most of us. But there are several things that would make this much easier to pay.

First, you will be paying that tax with a your complete paycheck. Second, every taxpayer in this country will receive a check to cover the taxes you would be expected to pay on essential items. I heard one estimate of how much this check could be. For a family of 4 it would be considered that they would receive around $400+ per month. This is based on the poverty level of $25,000 per year times the sales tax rate of 23% which equals about $5700. Divide this by 12 to come up with about $470 that they would receive per month.

When you couple this with the fact that you will never have to file a tax return again or maintain any files for taxes it starts looking pretty good.

But, that's just the beginning. You will be able to invest or save without any taxes at all until you spend the money. Again, this is only at the retail level.

I believe that what I've told you so far is well worth passing this bill and relieving our citizens of the current system.

However, there is one other part of this bill that would greatly benefit us all. Currently, corporations pay about 20% of their income in taxes which includes the cost of maintaining records so they can pay their taxes. This would be eliminated entirely.

The result of this would be that the cost of their goods could be reduced by that 20%. You may be thinking that the corporations would wind up keeping that money to increase their profits. The market doesn't work that way.

First, competition is the biggest part of how goods are priced. All it would take is one company reducing their cost on an item and the others would be bound to follow or be left behind.

Second, every citizen will know that the costs of everything has been reduced and will demand that at least some of those savings be passed along to them. Remember, we as consumers decide what we are willing to pay.

I've only covered a small part The Fair Tax Act. This new system will keep government revenue at the same level it is now and no programs or benefits will be cut.

If you would like to find out more about The Fair Tax Act I have provided a link to their web site below:

www.fairtax.org

Also, I wrote an article a couple of years ago that may help you better understand how this new tax system would affect you. Just visit:

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Terry Rigg is the author of Living Within Your Means - The Easy Way and editor of The FREE Budget Stretcher Newsletter and Budget Stretcher web site www.homemoneyhelp.com. He has 25 years of experience counseling individuals and families concerning their personal finances. Use this email link to get a list of all of Terry's articles by autoresponder at: articlelist@budgetstretcherpremium.com

By the way... I got a copy of that ebook (Living Within Your Means - The Easy Way) about a year ago - I gotta tell ya, I really wish I'd gotten it sooner - it's full of good ideas and tips for doing it all the easiest way, just like the title says. -Abby