The FairTax Plan, which is HR 2525 in the house right now, replaces the current income tax system with a single, national consumption tax system. The idea behind this is to drastically simplify the tax code, eliminate the IRS, and boost the economy. This will be done by eliminating the enormous compliance costs of filing taxes every year, and doing away with corporate tax exemptions, which are unfair and tend to influence the vote of politicians. The FairTax will also bring into play a nearly 11 trillion dollar overseas banking market, which is currently hiding from the IRS. With the FairTax in control, more people will be outsourcing their goods to us, instead of us outsourcing to China. Another huge change would be in the corporate decision making process, which will no longer consider the tax consequences of every choice made, allowing a quick and efficient decision without the influence of tax loss.

1. The Income Tax

2. Social Security Witholding

3. Medicare Withholding

4. The Self-Employment Tax

5. The Death Tax

6. The Alternative Minimum Tax

7. The Gift Tax

8. Capital Gains Tax

1.       A 23% National Consumption Tax, at the retail level (only new products).

2.       A monthly “prebate” that pays for anybody’s taxes up to the poverty level – in other words, no taxes on poor people.

There are several benefits of the FairTax, the first of which, in my opinion, is the blatant fairness it demands. You can’t favor anybody with a national sales tax. Everyone is either taxed, or not taxed. This would allow our politicians a little bit of free time, since lobbyists couldn’t get tax breaks for their company, no matter how special they think it is, or how much money they donate to a senator’s campaign fund.

Another benefit would be the simplicity of the tax code. No more fooling around every April 15 to keep the IRS happy. And, the tax rate is there, right in front of your eyes. You’ll finally realize how much money the government is taking from you to spend on pork, and if they tried to raise taxes even more, the public would be much quicker to react.

The FairTax would also begin to bring business here, instead of the corporate taxes kicking them out. It’s well known that the United States tax code is not healthy for business. This is why many businesses operate offshore to get better tax benefits. With a fair tax in place domestic businesses would return. Not to mention that even foreign business could even prosper here as well.

Right now, an 11 trillion dollar market is eluding American taxes in offshore bank accounts. The only reason for this is because of the tax structure that drives people away. The FairTax would bring that money back to the US, where it could be used for capital investment.

The 23% figure has often been argued about, and critics say that it would actually be around 30%. Well, they are both right. It’s just in the way you do your math. The 23% assumes that the tax would be included in the price of the product, and the 30% assumes that you are adding on top of the original price. It’s pretty confusing, but each side obviously uses the number that benefits their way of thinking. In my opinion, the 30% is a better number to relate to, because that’s how much it would be if it were treated like a typical sales tax. However, you have to remember that a large portion of an item’s price right now is due to embedded taxes that would disappear with the FairTax

People have said that it would be a mess it institute a national sales tax in all the retailers in the United States, but it really won’t be. Think about the state sales taxes. Every retailer in a state with sales tax is already equipped to take care of this anyway. It couldn’t be easier. Besides, why should that stop us from making a more fair tax code?

In the end, the FairTax is a proposal that does away with income tax that so many corporations and politicians hide behind, and promotes business in the United States. If people could get over the “30% price increase on all goods!” hysteria, and realize that their take-home pay will also increase by the same amount, they will begin to understand why the FairTax is inherently better than the income tax.