FairTax Overview
EFFECTIVE TAX RATE
Effective Tax Rates vs. Stated Tax Rates. Is the 23% FairTax revenue neutral rate higher or lower when
compared to income and social Security taxes people pay today? Most people are paying that much or more
today – much of it just hidden from view. The income tax bracket most people fall into is 15 percent, and all
wage earners pay 7.65 percent in payroll taxes. That’s 23% right there’re, without taking into account the 7.65%
employer matching! On top of that, you have to add in the business taxes and associated compliance costs
passed on to consumers in higher prices. Because the 23% FairTax rate of $0.23 on every dollar spent is not
imposed on necessities, a household spending $31,020 pays an effective rate of 0.0%, not 23%. That same
household will have a federal tax burden of 6.0 percent of his or her income under current law.
FairTax Rate as a Percent of Spending: 2013
Two Adult/Two Child Household
30.0%
17.2%
20.0%
7.7%
10.0%
20.1%
21.6%
22.3%
11.5%
0.0%
0.0%
$15,510
$31,020
$46,530
$62,040
$124,080 $248,160 $496,320 $992,640 $1,985,280
-10.0%
-20.0%
-30.0%
22.6%
Annual Spending
-23.0%
Note: The Tax rate is calculated by subtracting the annual prebate from the FairTaxes on
spending and dividing that result by annual spending.
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