Today is April 15, also known as tax day, and we thought it would be a good idea to talk about a consumption tax. The Fair Tax Act (referred to as “FAIRtax”) was introduced to the U.S. Congress in 1999 by former Rep. John Linder (R-Ga.), and it stands as the foremost tax reform plan in the nation.
The Fair Tax Act has been proposed as a bill in the United States Congress regularly since 1999. It was last proposed as H.R. 25 in January of 2023, by Rep. Buddy Carter (R-Ga.) with co-sponsors Reps. Andrew Clyde (R-Ga.), Jeff Duncan (R-S.C.), Kat Cammack (R-Fla.), Scott Perry (R-Pa.), Bob Good (R-Va.), Thomas Massie (R-Ky.), Ralph Norman (R-S.C.), Bill Posey (R-Fla.), Gary Palmer (R-Ala.), Jim Banks (R-Ind), and Barry Loudermilk (R-Ga.).
This Fair Tax Act imposes a national sales tax on taxable new property or services instead of the current income taxes, payroll taxes, and estate and gift taxes.
If the FAIRtax becomes law, that means income, payroll, estate, and gift taxes will be erased forever.
With the FAIRtax consumers would pay almost 30 cents (plus applicable state and local sales taxes) per $1 purchased over the applicable prebate for each consumer; however, this is greatly offset by the fact that no federal taxes would be levied on earnings.
How does this affect low-income and middle-income households?
The FAIRtax includes a provision for a monthly rebate, commonly referred to as a “prebate,” allocated to each household according to its family size.
This prebate is designed to offset the taxes incurred on goods and services, ensuring that households are not taxed below the poverty threshold. The prebate is delivered each month, not annually.
Here’s a visual on the prebate:
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