The Fair Tax: a primer
The Fair Tax will abolish the IRS and the Tax Code. Farmers will not pay tax on income from their farming profits. They will only pay tax on purchases of goods or services for personal consumption. Business–to– business transactions will not be taxed; therefore, the purchase of items such as machinery, feed, fertilizer, and services will not be taxed. The self–employment tax on farmers will be eliminated.
The Fair Tax will favorably impact farming households by lowering the tax rates they currently pay. The maximum tax rate possible will be 23% on purchases at the retail level. This rate is well below the effective tax rate now imposed on the average farming operations. The actual tax rate paid by farming households will be significantly less than 23% since each family is provided a monthly tax rebate which assures their ability to purchase their basic needs tax free.
The Fair Tax will eliminate both capital gains and estate and gift taxes. It would allow farms to be sold without imposition of a capital gains tax on increases in price (including those caused only by inflation), and it would not penalize transfers to succeeding generations. The Fair Tax would ensure that no tax would be imposed on capital purchase, sales, or transfers.
In place of having to comply with the complexities of the IRS system’s income and payroll taxes, there will be one sales tax imposed only on new goods and services purchased for personal consumption. If the farm makes retail sales to a final consumer, the farm would simply need to collect and remit on a monthly basis a 23% retail sales tax. All sales to other business would not be taxable transactions.
For more information: www.fairtax.org or call 1-800-FAIRTAX.
(Next week: What about tax evasion?)