BUT WHAT ABOUT THE POOR?
OK ... let's put on our sensitivity hats for a few minutes here and think of the consequences of the Fair Tax Act on our nation's poor, poor,
pitiful poor. After all, they can hardly afford a 23% sales tax when they're living paycheck-to-paycheck in the first place, right? We're actually
going to forget, just for now, that poverty is largely a behavioral disorder and consider how they would survive under the fair tax.
We begin with a reality check. Right now, for the most part, those whom we define as "poor" aren't paying any income tax anyway. In fact, many of
them are getting checks from the government. The absurdly named Earned Income Tax Credit, for example. So right now the government is actually
supplementing their income. How can they endure a 23% sales tax?
The implementation of the Fair Tax would fail in short order if, as the question presupposes, the net effect on the poor would be the that they would
be paying today's prices for a gallon of milk or a loaf of bread, plus a 23% sales tax. But ... that would be far from the reality under the Fair
Tax. Under the Fair Tax the poor won't only survive, they'll positively thrive! The Fair Tax could turn out to be the best poverty-fighting tool
devised in this country since the concept of hard work.
Let's begin by considering two realities.
First, remember, please, that the poor, along with everybody else, will no longer have Social Security taxes or Medicare taxes withheld from their
paychecks. Whatever they earn, they get on payday. For most of them this means an immediate 10 to 15% increase in their earnings.
Second. Don't forget the 22% in embedded taxes. It's lurking there in virtually everything poor Americans have to buy. As soon as the competitive
forces of the free market work their magic these people will be paying 20% or more less for virtually retail purchase, including the basics of food,
clothing, shelter and transportation. Yes .. they'll have to pay the new national sales tax, but when you factor in the lower prices caused by the
disappearance of the embedded taxes you'll see that the total price paid for consumer goods will remain very nearly the same.
So ... just considering these factors, the Fair Tax delivers a winning hand to people living in or near to what we call poverty. They get every penny
they earn on payday, and when you factor in the Fair Tax and the lower prices, they're actually spending less of their money for a retail purchase
Pull out the calculators. Say that a single mother with two children spends $45 a week on groceries. The removal of the 22% embedded tax would bring
the price of those groceries down to $35.10. The sales tax would be $8.07. This brings the total price to $43.17. That's less than would have paid
under today's tax system. This single mother, whom we'll consider "poor," has just received a 10% to 15% increase in her weekly paychecks, and
she's paying less at the grocery story for her basic necessities.
Well, at this point you should be thoroughly convinced that the Fair Tax would actually benefit, rather than harm the poor. But, then again, maybe
not. So, here's the clincher.
Under the Fair Tax plan every consumer will receive a check from the federal government every single month equal to the sales tax that person would be
expected to pay on the purchase of the basic necessities of life for that month. The size of the monthly payment will be based on the government's
published poverty levels for various sized households.
Here's an example of how the rebate payments would have worked in 2003.
Let's say you're a married couple with two children. The Fair Tax Act sets forth a formula for computing the poverty level, based on government
figures, which negates any marriage penalty. Under the Fair Tax Act in 2003 you would have been granted an annual consumption allowance of $24,240.
This is what the government would assume you would have to spend during that one year to buy the basic necessities of life for your family. The sales
tax on this amount would equal $5,575. The government will rebate this amount to you in 12 equal monthly installments of $465. What about a single
woman with one child? Her monthly rebate in 2003 would have been $232. The lowest payment would be to a single person with no dependents. That person
would receive $172 per month.
Now ... bear in mind, this rebate isn't only paid to the poor. It is paid to everyone, rich and poor alike. The purpose here is to make sure that no
American has to pay the Fair Tax sales tax on the basic necessities of life. Unlike the present income tax system, the Fair Tax treats each and every
person in this country exactly the same. This, of course, presents somewhat of a problem to politicians who like to use the tax code to foment class
distrust or outright warfare.
OK ... let's add it up for America's lower income citizens:
They get their entire paycheck.
Even with the sales tax, and considering the drop in prices, they'll be paying essentially the same for everything they buy.
They get a check from the federal government every month to rebate any sales taxes they had to pay.
Though their tax returns aren't that complex, let's also include the time these the poor (all of us, really) will save by not having to keep tax
records or file tax returns.
So, my friends, if you're looking for some reason to oppose the Fair Tax plan, you're going to have to find a better excuse than its effect on the
P.S.Thanks to Crump
[edit on 4-8-2004 by Truth_Hunter_1976]
[edit on 4-8-2004 by ZeddicusZulZorander]
[edit on 4-8-2004 by Banshee]