A sales tax would harm young couples with growing children.
Not at all, in the manner HR2525 is constructed, each legitimate household receives a prebated monthly cash payment to cover taxes up to the HSS povertyline.
In that manner, no person is burdened by tax on the necessity level of expenditure, yet all are made aware of the cost of government by virtue of having actually pay the tax at the retail register.
How will the Family Consumption Allowance [FCA] work?
All legal residents will receive a FCA equivalent to the FairTax paid on essential goods and services. The FCA will be paid in advance, in equal installments each month. The size of the monthly FCA will be determined by the government's Poverty Level for a particular family size, multiplied by the tax rate.
Every year, the Department of Health and Human Services [HHS] determines the "poverty level" for each family size.
|
The 2001 "FairTax" Family Consumption Allowance Figures |
|||
|
Family Size |
HHS Poverty Level |
Annual FCA |
Monthly FCA |
|
One |
$8,590 |
$1,976 |
$165 |
|
Two |
$17,180 |
$3,951 |
$329 |
|
Three |
$20,200 |
$4,646 |
$387 |
|
Four |
$23,220 |
$5,341 |
$445 |
|
Five |
$26,240 |
$6,035 |
$503 |
|
Six |
$29,260 |
$6,730 |
$561 |
|
Seven |
$32,280 |
$7,424 |
$619 |
|
Eight |
$35,300 |
$8,119 |
$677 |
1) Federal Register: February 16, 2001, Pages 10695-10697).
[ The monthly FCA for each adult is .23 * (HSS poverty level for a single person)/12 to assure no marriage penalty due to the manner in which the poverty level is dependant on family size. The monthly FCA for each child is .23 * (the incremental increase of HSS poverty level for a family with one child over no child) ] A. Geezer
A family of four, for example, could spend $23,220 per year free of tax because they will have received over the course of the year rebates totaling $5,341. $5,341 is the amount of sales tax paid on $23,220 in expenditures. A family spending double the "poverty level" or $46,440 per year will effectively pay tax on only half of their spending and, therefore, have an effective tax rate of 11 ½ percent or half the FairTax rate.
The beauty of the FairTax is that you have some control over how much you pay in taxes. If you happen to save, invest or spend a portion on used [previously taxed] items, you can get your effective tax rate below 9%.
In fact, due to the structure of the NRST in that it only taxes once, at the retail level, the base price of goods and service can be expected to fall by 20 to 30%. One study of producer prices suggests 22.5% as a average value for the drop in producer prices. After list prices have settled, the NRST plus the new price level of goods and services would be nearly the same as expenditures now, with the advantage that one would receive their full gross paycheck instead of the after tax check we receive now, plus the FCA paid out for every person in a household each month.
People just starting out, buying a home, or moving to a larger apartment would be severely punished by a sales tax.
Goods are taxed once but only once, thus the NRST would not be charged in resale markets such a first time buyers of older homes. That coupled with the increase in disposable income available to families, earnings and investment not being taxed, make the potential for home buyers and people just starting out substantially better.