Fair Tax: Helps the Middle and Lower Income Earners the Most
As covered before in my Fair Tax Myth post about 2 weeks ago we have learned that the Fair Tax contrary to popular belief is not regressive but progressive because of the monthly prebate. Remember, a progressive tax is one that taxes those most heavily those that can pay taxes while a regressive tax, like current payroll taxes, which tax those who have the least ability to pay more heavily.
The Fair Tax does other things to help lower and middle income earners versus the current income tax system. A Macroeconomic report performed by Arduin, Laffer, and Moore Econometrics in 2005 indicated that the Fair Tax would increase economic growth in our country significantly. This means that job growth will increase to account for new business opportunities and most of those jobs will likely occur in the lower to middle income range. Low and middle income workers will be the most likely to lose their jobs during and economic downturn. Since the Fair Tax has been shown to increase economic growth job security will increase. In addition, because of increased profits, wages will increase as companies try to retain and compete with other employers for employees.
Additionally, the Fair Tax eliminates income tax withholding, the regressive payroll taxes, and eliminates yearly compliance costs associated with their collection. As mentioned before, because corporations no longer pay taxes on their profit the embedded tax in goods and services, estimate to be around 22%, is eliminated. When replace with the Fair Tax the average increase in the price of goods is 1%.
Don't forget about the prebate. Those with the least ability to pay can pay no taxes if they control spending and spend at or below the poverty level. Even if you choose to spend over the poverty level, lets say twice the poverty level you will only pay an effective tax rate of 11.5% a dramatic increase for many Americans.
Also since investments are no longer taxed, you can put money away for a rainy day without having to worry about punishment for taking positive action to ensure your economic security in the future. The same macroeconomic report mentioned earlier (which I will review more thoroughly for you in an upcoming post) has shown that savings will increase dramatically under the Fair Tax. Since Social Security is quickly going bankrupt this is a net positive for lower and middle income earners who will be able to save for their retirement more effectively without the punishment of taxes for a sound economic decision.
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Over 161,000 signatures have been turned in on the petition for the Fair Tax. The movement is gaining momentum daily and is supported by liberals, conservatives, and libertarians (I'll explain later why each of these groups support the Fair Tax). I urge you to write your congressman about the Fair Tax and ask them for their support.
If you need information you can check my blog or go to FairTax.org to provide evidence in your letter. To figure out how to contact your congressman click here.
