Editor’s note: This is the seventh in a series of commentaries in support of the Fair Tax.
By GLEN TERRELL
Well it’s not a tax refund exactly; it’s even better. It’s called a prebate. It’s what makes the Fair Tax truly progressive. The prebate comes to you and every resident “head of household” having a valid Social Security number. The Fair Tax Prebate is determined only by “size of household.”
“Does everyone receive this Prebate; even the very rich?” The answer is, yes! The Fair Tax treats everyone exactly the same.
Some haven’t given the Fair Tax serious consideration. It’s often thought of as an ordinary sales tax which weighs heavily on the poor. But the Fair Tax is not just a sales tax. It has a prebate which is important for two reasons: (1) The rebate, more properly called a prebate, makes the Fair Tax a progressive tax system; (2) The prebate shows compassion for the poor and economically challenged.
The Fair Tax eliminates the direct taxation of income from wages, which is very hard on the working poor. Any income tax withheld from their paycheck might be returned as a refund next year. Not so with the 7.65 percent FICA payroll tax. This is also withheld from their paychecks. Most workers, including all the working poor, will realize an immediate 7.65 percent increase in disposable income. The federal government will no longer deduct any money from any worker’s paycheck.
Plus, economists predict lower prices of U.S. produced goods because the Fair Tax eliminates hidden and embedded taxes estimated to be an average of 22 cents per dollar. With the prebate, no individual or family pays federal taxes on purchasers of goods and services up to the poverty level. Disposable income of the entire working class will improve substantially under the Fair Tax.
The poverty level for a family of four is $31,020 in annual household income. If the family spends exactly this figure on new goods and services, no money they have earned goes to fund the federal government. Very low spenders may realize a net gain with the prebate being more than the Fair Tax tax they pay.
Another benefit: the tax punishment for working hard and saving has been removed. The Fair Tax also removes the reward for one’s debt. With the Fair Tax, working families could earn and taxably spend $46,000 and still pay less in taxes than the 7.65 percent FICA tax alone under the existing income tax. Disposable income will increase with the prebate and the elimination of pay deductions for income and payroll taxes.
Consider too, with lower prices resulting from removal of hidden taxes, the increased disposable income will purchase even more with the Fair Tax.
You’re thinking, “This is just too good; it can’t possibly be true!” But it is true; in part because now tourists, those in the country illegally and the over $1 trillion underground economy (which pays no tax with the income tax system) will pay taxes just like you.
Call your representative and senators. Ask them to cosponsor the FairTax Act. Learn more at www.fairtax.org and join this nonpartisan, grassroots effort for real/true tax reform.
Glen Terrell is a resident of Arlington, Texas. You can contact him at firstname.lastname@example.org.