The FairTax and State Sales Taxes

Concern: A 23% Federal Sales Tax (FairTax) added to my State Sales Tax (SST) is much too high.

That is an understandable concern that I’ve heard many times, but it appears you’re either missing or ignoring the fact that you’re currently paying Federal Income and Payroll Taxes on top of your State Sales Taxes; both of which the FairTax will eliminate.

For those of you who still don’t see what I’m talking about follow along:

A. What is your State Sales Tax? _____ (Mine is 8.25%)
B. What is your Federal Income Tax Bracket? _____ (Mine is 15%)
C. What is your Payroll Tax Rate? _7.65%_
D. What is the FairTax Rate? _23%_

Calculate your Tax Burden Based on each of the equations below.

1. Current Tax Burden = A + B + C

Mine: 8.25 + 15 + 7.65 = 30.9%

Yours: ____ + ____ + ____ = ____

2. FairTax Tax Burden = A + D

Mine: 8.25 + 23 = 31.25%

Yours: ___ + ___ = ____

Difference = (2) – (1)

Mine: 31.25 – 30.9 = 1.35%

Yours: ____ – ____ = ____

But wait! I’d be paying more, or would I!?

There is much more to the FairTax than just what I’ve shown you here. The above exercise was only to show you that the FairTax won’t directly make as much difference as you think it would. Once you add in the Prebate you’re afforded each month, and eliminate the other Income based taxes (including personal, estate, gift, capital gains, alternative minimum, Social Security, Medicare, self-employment, and corporate taxes). But best of all, the FairTax will Abolish the IRS and it will take the Federal Government out of your wallet.

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I'm the grandson of an Underwood and have been mapping my Underwood Family Tree for a couple years now.

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Posted in FairTax, Income Tax, Prebate
One comment on “The FairTax and State Sales Taxes
  1. Yup, once one factors in the prebate and calculates their *effective* rate under the FairTax based on presumed consumption levels, nearly everyone ends up benefiting using that simple comparison alone (with the exception perhaps of a few big earners/spenders).

    But even the important adjustment of factoring in the prebate doesn’t factor in any price drops that will result from the removal of corporate income taxes making the numbers weigh even more heavily in favor of the FairTax :-).

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