Criticism: It’s really just a windfall tax cut for the rich.
This is another case of either a LIE or not being able to do simple math.
The math for computing The FairTax rate is simply multiplying retail purchases by 23% (this is amount that was collected at time of purchases) and then subtracting the FairTax prebate (the EXACT same amount is received by every American). The math for computing the Income Tax rate is admittedly FAR tougher because one must take into account Personal Income Tax, Social Security and Medicare Tax (FICA), embedded Corporate Taxes, Capital Gains Tax, etc.
Well, if you compute those rates for some representative income levels the hypocrisy is obvious. By the way, the following calculations assume a family size of 4 with ALL income being spent on retail purchases. This gives artificially higher FairTax rates at high income levels.
For the few Americans making $500,000 per year, they pay an average of 37% in federal taxes now. Under the FairTax, federal taxation would be reduced to around 22%. Savings of approximately 25% under The FairTax.
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