A Newly Proposed Taxation Policy: The Fair Tax Act of 2007
Americans For Fair Taxation is a private, non-profit research and advocacy group that assembled a group of American economists to work on a federal tax code that would be “simpler,” “fairer,” and “more progressive” than before.
The objective of the team was to design a new tax system that would be “revenue-neutral” and capable of truly unleashing the potential of the economy. The new tax system was also meant to help in the ““new wealth creation for every working American.” The result was the H.R. 25: The Fair Tax Act of 2007 (“Executive Summary,” 2007).
The Fair Tax Act of 2007 is today a proposal with the Congress. As of the last day of the year 2008, the Act is meant to repeal both income taxes as well as payroll taxes. According to the proposal, no individual’s income will be taxed after the implementation of the new Act. “Capital gains taxes” in addition to the “alternative minimum tax” would also be repealed.
The Act includes payroll taxes of individuals as well as employers. Medicare, federal unemployment taxes, and Social Security, would similarly be repealed when they are a part of the payroll taxes.
The Fair Tax Act of 2007 further mentions corporate income taxes, gift and estate taxes, and the self-employment taxes to be repealed, thereby making it easier for Americans to enjoy their earnings and their wealth without paying the price of prosperity in taxes (“The Fair Tax,” 2007).
The Fair Tax has been proposed as a replacement for the above mentioned taxes as of January 1, 2009. The new tax is actually explained as a “national retail sales tax on all goods and services sold at retail.”
The fact that it is still a tax for the government to generate revenues through, the new tax is meant to be “revenue-neutral,” which suggests that the new tax would have to be set at a level that is necessary to generate government revenues the present sources of which would have to be replaced through it (“The Fair Tax”).
The new tax would act as a 23 percent sales tax on all goods and services bought through retailers for personal consumption. The exports of the United States will not be taxed on the principles of the Fair Tax.
Similarly, business purchases of inputs are not to be taxed under the newly proposed taxation policy. Other items exempted include used or old goods, investments, savings, plus education expenses including tuition fees (“The Fair Tax”).