We love getting article ideas from Investment U readers. That’s why we pick almost every Stock Grader using the comments from the previous Stock Grader. Recently, we’ve started to see a lot of talk about the Fair Tax movement in our comment sections.
We hear you – that’s why we’re analyzing the Fair Tax movement today. It’s a unique proposal for comprehensive tax reform, abolition of the IRS, and the creation of a modified flat tax, among other things.
If implemented, the plan could have a variety of positive effects on our economy. However, critics have also pointed out how it could worsen some of our economic problems. Let’s look at the details and potential upsides and downsides below.
What Is the Fair Tax?
The Fair Tax is a proposal and grassroots movement that seeks to reform the federal tax code. It would replace the entirety of our current system with a single consumption tax on all retail sales. In the process, it would eliminate all other taxes, repeal the 16th Amendment and abolish the IRS.
The Fair Tax could be called a flat tax, but it has one progressive component. Another part of the plan involves sending every American household a monthly “prebate” check. This check would reimburse households for all consumption tax spending up to the poverty level. Thus, Americans living at or below the poverty level would effectively pay no federal taxes.
Finally, the system would involve state collection and supervision of taxes rather than federal taxation. The 16th Amendment gives Congress the right to levy an income tax. Thus, a full and permanent implementation of the Fair Tax scheme would require repealing it.
In short, it would represent an absolutely massive change to the way we think about taxation. Supporters and critics of the movement agree that it would have some dramatic transition effects.
We hear you – that’s why we’re analyzing the Fair Tax movement today. It’s a unique proposal for comprehensive tax reform, abolition of the IRS, and the creation of a modified flat tax, among other things.
If implemented, the plan could have a variety of positive effects on our economy. However, critics have also pointed out how it could worsen some of our economic problems. Let’s look at the details and potential upsides and downsides below.
What Is the Fair Tax?
The Fair Tax is a proposal and grassroots movement that seeks to reform the federal tax code. It would replace the entirety of our current system with a single consumption tax on all retail sales. In the process, it would eliminate all other taxes, repeal the 16th Amendment and abolish the IRS.
The Fair Tax could be called a flat tax, but it has one progressive component. Another part of the plan involves sending every American household a monthly “prebate” check. This check would reimburse households for all consumption tax spending up to the poverty level. Thus, Americans living at or below the poverty level would effectively pay no federal taxes.
Finally, the system would involve state collection and supervision of taxes rather than federal taxation. The 16th Amendment gives Congress the right to levy an income tax. Thus, a full and permanent implementation of the Fair Tax scheme would require repealing it.
In short, it would represent an absolutely massive change to the way we think about taxation. Supporters and critics of the movement agree that it would have some dramatic transition effects.