Although the FairTax® — H.R.25/ S.155 — is a national consumption tax on new goods and services and government spending and will eliminate all federal taxes on income and investment, it also features a ‘rebate in advance’ also called a prebate, which is based on family size.
Additionally, this column will explain the dynamic-positive effect it will have on manufacturing jobs, trade and government spending.
Having the highest corporate income tax rate has resulted in Americans losing jobs as U.S. companies have relocated to tax-friendlier countries —inversions — because the corporate income tax is a “reverse tariff” on our businesses.
The FairTax ends the triple taxation of American multinational firms, i.e., profits being taxed – (1) abroad, (2) when dollars come home, & (3) when corporations pay dividends.
Trade with foreign countries will boom under the FairTax as American made products leave our shores without embedded corporate income & payroll taxes, thus, allowing U.S. goods to compete equally with foreign products. American companies will return home as will the jobs lost; and foreign companies will see the U.S. as a tax haven, and build their next job-creating plant here.
With an estimated 10 percent embedded taxes removed by the FairTax, the prices of American made products will rise about 17 percent, whereas the cost of foreign goods sold here will rise about 30 percent.
“Made in America” will appear on many more labels.
The rise in prices will have no effect on our purchasing power as there will be no deductions of federal income and payroll taxes from our paychecks and pensions and social security benefits will be indexed due to inflated prices. All families will receive the prebate, which untaxes citizen families on their spending up to the poverty level, while millennials and low and middle income earners can purchase FairTax-free used automobiles, buy homes on resale, save more, or invest their additional cash.
The FairTax will tax governments on all levels for their purchases of new items so that private companies can compete with governmental agencies on a “level playing field” in areas such as garbage collection and utilities – i.e. ,water, gas, electric. Otherwise, a town council could float a bond or impose a tax to fund a purchase or project, whereas, a private enterprise would unfairly bear the cost of raising equal revenues to provide a similar service for the town.
Government enterprises such as the United States Postal Service or Amtrak will not pay the FairTax on their purchases since customers will pay the sales tax when they mail a package or buy a train ticket.
By seeing the cost of the federal government on every retail sales receipt, citizens can hold elected officials accountable for the priorities that they choose. Also, the FairTax will eliminate the IRS as we know it.
It’s time to end the notion that our paychecks, pensions, and social security benefits belong first to the federal government and then, after income and payroll taxes are withheld, to us. Our sons, daughters and our grandchildren should inherit our total estates.
The FairTax would end these taxes along with the capital gains, alternative minimum, and gift taxes.
For additional information, visit www.fairtax.org .
John O’Rourke, Brick, NJ
Volunteer – FairTax® New Jersey