Taxes are an important part of the American economy. Federal income taxes support the national government. Some states also have an income tax in addition to the federal tax requirement. State and local taxes support state and local government programs and initiatives. States, in some instances, have instituted their own sales tax to gain additional operational funds. All of these taxes are mandatory. There are penalties if an individual does not pay the mandatory taxes.
Federal tax rates are based on how much money a person makes. The levels of taxation are called tax brackets. The more money an individual makes, the more they are required to pay in income taxes (or the higher bracket they are put in). If a person pays more in income tax than their estimated tax liability, they are given a refund. People also acquire refunds by having deductions such as children, charitable giving, etc.
This is the current tax structure. Some Americans are not happy about the current tax system. Critics of the federal income tax feel a person should not be penalized for “hard work” or making more money. They argue taxes should be based on a person’s consumption and not their income. The Fair Tax is designed to change the federal tax laws of the United States by replacing all federal income taxes with a single national retail sales tax. This would only effect taxation at the federal level.
With the implementation of the fair tax, a person would no longer be taxed on how much they make, but rather how much they spend. With a national sales tax on goods and possibly services, the majority of an individual’s tax burden would be imposed upfront. This ideal of a fair tax is gaining momentum in the current economy. Under this tax plan, everyone from Millionaires to Welfare recipients will be taxed equally based on their consumption level.As stated by the fairtax.org website:
“The FairTax is revenue neutral at $0.23 out of every retail dollar spent.”
Liberate Magazine seeks to inform the public about the fair tax by presenting this series on it. Both sides of the argument will be presented for and against the fair tax. For a more in depth overview of the fair tax, visit FairTax.org.
I’ve been included in taxes for lengthier then I care to acknowledge, both on the personal side (all my employed life story!!) and from a legal standpoint since satisfying the bar and pursuing tax law. I’ve put up a lot of advice and rectified a lot of wrongs, and I must say that what you’ve posted makes utter sense. Please continue the good work – the more people know the better they’ll be outfitted to handle with the tax man, and that’s what it’s all about.
Comment by Small Business Tax Guru — November 22, 2009 @ 8:50 pm