Here is the website with information about tax reform and HR 25
Here’s a summary:
Fair Tax Act of 2003 – Amends the Internal Revenue Code to repeal subtitle A (Income Taxes), B (Estate and Gift Taxes), and C (Employment Taxes) of the Internal Revenue Code.
Imposes a tax on the use or consumption in the United States of taxable property or services. Sets the tax rate at 23 percent for the calendar year 2005. Sets the rate, for years after 2005, at the combined sum of the general revenue rate (14.91 percent), the old-age survivors and disability rate, and the hospital insurance rate.
Sets forth provisions concerning, among other things; (1) imports and exports; (2) definitions; (3) credits and refunds; (4) a “family consumption allowance”; (5) Federal and State cooperative tax administration; (6) administrative matters; (7) collections, appeals, and taxpayer rights; (8) special rules (hobbies, gaming, government purchases, non-profits, and etc.); (9) financial intermediation services; and (10) additional matters.
Sets forth provisions concerning the: (1) phase-out of administration of repealed taxes; (2) administration of other taxes (establishes an Excise Tax Bureau and a Sales Tax Bureau); and (3) sales tax inclusive social security benefits indexation.
Here is a thumbnail sketch:
Thumbnail Sketch of the FairTax
The FairTax is a consumption tax designed to replace the entire federal income tax system, including personal, payroll, corporate, self-employment, capital gains, gift, and inheritance taxes. The FairTax will allow Americans to keep 100% of their paychecks (minus any state income taxes), it will dramatically reduce pre-tax prices, and it will fully fund the Federal government, including Social Security and Medicare.
With the FairTax, you will get to take home 100% of your paycheck (minus any state income taxes). No federal income taxes or payroll taxes will be withheld from your paycheck, pension, or Social Security check.
Did you know that hidden income taxes currently make up 20% to 30% of all retail prices? It’s true. According to Dr. Dale Jorgenson of Harvard, hidden income taxes are passed on to the consumer in the form of higher prices, from 20% to 30% higher than they would otherwise be for everything you buy.
Therefore, when the FairTax Act of 2001 abolishes the federal income tax system, prices will drop 20% to 30%. The proposed FairTax rate is 23%. So, instead of paying 15.3% of your paycheck in payroll taxes, plus an average of 18% of your paycheck in federal income tax, for a total of about 33% of your paycheck going to the federal government in Washington, you pay only a 23% consumption tax each time you purchase a new good or service for your own personal consumption above the federal poverty level.
At this 23% rate, the FairTax will pay for all current government operations, including Social Security and Medicare. With a consumption tax like the FairTax, government revenues will be even more stable than they are now because consumption tends to be more constant than income.
With the FairTax, if you choose to buy any new good or service for yourself, a consumption tax of 23%, will be added into the price. If you choose to buy used goods — used car, used home, used clothing — you do not pay the FairTax. If, as a business owner, you buy something for strictly business purposes (not for personal consumption), you pay no consumption tax. So, in deciding what to buy, you get to choose whether or not you will pay the federal consumption tax.
Perhaps most importantly, to ensure that no American will pay tax on necessities, the FairTax plan provides a prepaid, monthly rebate for every registered household to cover the 23% consumption tax spent on necessities up to the federal poverty level. This is how the FairTax completely untaxes the poor, and lowers the tax burden on everyone else. Can you see how much freer life will be with the FairTax instead of the income tax?
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