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Macroeconomics and Microeconomics - Fair Taxes - Essay Example

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FairTax Instructor Name December 3, 2011 Abstract FairTax is a kind of sales tax presented by some US house members & supported by some of the Americans. It says that a 23% sales tax should be implemented on all items cutting off all other federal taxes…
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Macroeconomics and Microeconomics - Fair Taxes
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Download file to see previous pages The people of US are fully aware of the deductions made in the name of federal government taxes; they are now facing a new & unique kind of tax, which is being sponsored by 21 members from the house. This unique & novel specie of tax was proposed in the house of Republic of Georgia by John Linder & Rob Woodall by the name of FairTax Act of 2003, which states that the Americans are gifted with a single “national retail sales tax” in place of all other federal government taxes which include income taxes, capital gains taxes, death taxes, payroll taxes like social security & Medicare taxes etc. This sales tax comes with an amount of 23% of the original cost on all products in their final sale. Thus every American has to pay a 23% more of the original cost of any product in which way they simply get rid of every other sort of tax (FairTax official website 2011). Every American has his/her own reservations & concerns against this bill. None of them is very sure that this act is actually going to change their lives in terms of betterment or not. They are under the concept of a single but huge kind of tax which is going to cover the rest of all other taxes. On the other hand, Rep. John Linder named it FairTax as according to him, other federally administered taxes were not fairly distributed among the high earners & low earners, while FairTax emphasizes that the more one spends, the more he/she pay the tax (the more one spends the more he/she has to pay in terms of taxation). Hence he made his point clear that high earners will surely spend more as compared to low earners, so the imposed tax will become “Fair” corresponding to everyone. According to a survey in the year 2009, 43% Americans are in favor of this bill, while 38% of them wanted to settle for the ongoing taxes. Hence overall less than a half population is in favor of the bill which clearly indicates its low level of appreciation & acceptance among the general public. (Boortz & Linder. 2005). However, for this bill to become a permanent act in US constitution, it has to go a long way. It must be passed by the U.S. House Committee on Ways and Means, both the House and the Senate and then finally signed by the President. In the year 2005, an advisor committee made by President George W. Bush indicated severe concerns regarding this bill. The most important issue was that the federally administered funds like retirement funds or gratuities etc have to be paid from the revenue gained by FairTax, which is very difficult to administer. Many critics also say that this bill would have harmful effects on the economy of the country as the revenue collected by it would be very less than currently enforced taxes, thus the government will either have to reduce its own expenses or else would face a great deficit in budget. Since the investments like exports, business transactions, savings or education tuition expenses would not be taxed as they are not considered to be a final consumption; there will be a huge setback for the economy. Hence many economists & advisory & advocacy groups strongly disagree with the idea of implementing FairTax bill as a revenue-neutral act for the government. (Hoagland. 2010). On the other hand, there are economists who are in a great support of this bill as according to them; it will boost US economy in the coming years. By doing some calculations with the rate of FairTax, The Beacon Hill Institute estimated that ...Download file to see next pagesRead More
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