Letter to the Editor: Understanding the FairTax

Want a monthly tax refund? Well it’s not a tax refund exactly; it’s even better. It’s called a Prebate. It’s what makes the FairTax truly progressive. The Prebate comes to every resident “head of household” having a valid Social Security number. The FairTax Prebate is determined only by “size of household.” The 2013 figures for a 2 adult family are shown in the table at the right.

“Does everyone receive this Prebate; even the very rich?” The answer is, yes! The FairTax treats everyone exactly the same. Some haven’t given the FairTax serious consideration. It’s often thought of as an ordinary sales tax which weighs heavily on the poor. But the FairTax is not just a sales tax. It has a Prebate which is important for two reasons. (1) The rebate, more properly called a Prebate, makes the FairTax a progressive tax system. (2) The Prebate shows compassion for the poor and economically challenged.  The FairTax eliminates the direct taxation of income from wages which is very hard on the working poor. Any income tax withheld from their paycheck might be returned as a refund next year.

Not so with the 7.65% FICA payroll tax. This is also withheld from their paychecks. Most workers, including all the working poor, will realize an immediate 7.65% increase in disposable income. The federal government will no longer deduct any money from any worker’s paycheck. Plus, economists predict lower prices of U.S. produced goods because the FairTax eliminates hidden and embedded taxes estimated to be an average of 22 cents per dollar. With the Prebate, no individual or family pays federal taxes on purchasers of goods and services up to the poverty level. Disposable income of the entire working class will improve substantially under the FairTax.

The second table below shows the yearly taxes paid (as a percentage of spending on new good and services) by a family of 2 adults with 2 children under the FairTax system. From table above it, the poverty level for this family of 4 is $31,020. If the family spends exactly this figure on new goods and services, no money they have earnesd goes to fund the fedeal government. Very low spenders may realize a net gain with the Prebate being more than the FairTax tax they pay. Another benefit: the tax punishment for working hard and saving has been removed. The FairTax also removes the reward for one’s debt. With the FairTax, working families could earn and taxably spend $46,000 and still pay less in federal taxes than the 7.65% FICA tax alone under the existing income tax! Disposable income will increase with the Prebate and the elimination of pay deductions for income and payroll taxes. Consider too, with lower prices resulting from removal of hidden taxes, the increased disposable income will purchase even more with the FairTax.

You’re thinking, “This is just too good; it can’t possibly be true!” but it is true; in part because now tourists, those in the country illegally and the over $1 trillion undergound economy (which pays no tax with the income tax system) will pay taxes just like you.

Call your representative and senators. Ask them to cosponsor the FairTax Act. Learn more at www.fairtax.org and join this non-partisan, grass roots effort for real/true tax reform.

Glen Terrell

Arlington, TX