Americans for Fair Taxation and The Fair Tax Act

The latest spate of scandals and cover-ups within the IRS has rekindled the cry by many for its replacement. Our current tax code is also hopelessly riddled with contradictions, loopholes and inconsistencies. One of the loudest voices calling for replacement and reform is the Americans for Fair Taxation, a group that advocates replacing the IRS with a consumption-based tax system that would assess a flat tax for citizens who purchase goods and services. This fledgling movement is known as the Fair Tax Movement, which has grown from grass-roots advocacy in 2003 to become a major lobby group that has also gained support at the state level.

If it is enacted, the Fair Tax will effectively sweep away our entire current tax system and bring an end to the IRS. The Fair Tax will completely replace all income, gift, estate, trust, corporate, inheritance and partnership taxes with a single sales tax at a uniform 23% rate that will be assessed on the purchase of goods and services which will be collected by retail merchants in the same manner as state sales taxes and administered by a new governmental agency. However, the tax does not apply to all types of goods and services; used goods and anything that is used to produce other goods will be exempt. Goods that are imported from outside the U.S. are also excluded from this levy. And while the rate of tax is uniform for all payers, the systems aids those who live at or below the poverty level by giving each household a “prebate” check each month that is equivalent to a twelfth of the amount that the government determines a family or person at that income level spends each month. This money is designed to reimburse the poor for what they will pay in taxes on the goods and services that they must buy in order to survive.

This is the first part of our look at this particular tax issue. Check back next week for more about Americans for Fair Taxation and The Fair Tax Act. We’ll be discussing a few of the pros and cons of this once upon a time grassroots movement. Remember Huddleston Tax CPAs are Bellevue CPAs. Get in touch with us!