One of the first criticisms heard about the FAIRtax is that it is “regressive.” The Oxford English Dictionary defines a regressive tax as, “taking a proportionally greater amount from those on lower incomes.” Many taxes fit this definition.
The state and federal gasoline taxes take a proportionally greater amount from lower income drivers. State sales taxes take a proportionally greater amount from lower income residents.
Regressive taxes do not provide any relief to a lower income households. Single people and people with families are all taxed the same. The most regressive federal taxes on workers are the Social Security and Medicare taxes. They tax all workers at the same percentage and the Social Security tax does not apply to people making more than $127,200 in 2017.
The other definition to be defined is “consumption tax.” All taxes are consumption taxes. The present income/payroll tax takes money prior to consumption leaving less to use for consumption. The FAIRtax taxes consumption at the time of consumption. FAIRtax taxes the same dollar only once unlike other existing income/payroll/investment taxes.
This is because they don’t realize that, under the present system, they have to earn $1.25 to $1.90 to net $1.00, pay their taxes and then make the food or medical purchase with the net amount remaining.
The FAIRtax gives the worker his/her entire paycheck. They then make the purchases. However, the FAIRtax goes further and has a “Prebate” that materially makes the FAIRtax not a regressive tax and in fact more progressive than the present income/payroll tax system by a standard deduction refund per household in advance on spending up to the poverty level.
Please watch this White Board explaining the Prebate.
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