FairTax Overview
The impact of the FairTax on American manufacturing, agriculture, trade, and
international competitiveness
The FairTax Plan is a comprehensive proposal that replaces all federal income and payroll taxes
with an integrated approach including a progressive national retail sales tax, a rebate to ensure no
American pays federal taxes on spending up to the poverty level, dollar-for-dollar revenue neutrality,
and through companion legislation, the repeal of the 16th Amendment.
The FairTax plan reduces the cost of American manufacturing and agriculture considerably.
Under the FairTax, American manufactured or grown goods and services no longer enter the
marketplace burdened with hidden corporate taxes, the cost of compliance with such taxes, and Social
Security employee matching. This amounts to an average cost reduction from 12 percent to in some
cases more than 25 percent. Said another way, American goods become 12 to 25 percent more
competitive.
This nonpartisan legislation (HR 25 / S122) abolishes all federal personal, gift, estate, capital
gains, alternative minimum, Social Security, Medicare, self-employment, and corporate taxes and
replaces them all with one simple, visible, federal retail sales tax – collected by existing state sales tax
authorities. The FairTax taxes us only on what we choose to spend, not on what we earn. It is a tax on
wealth, not wages. It does not raise any more or less revenue; it is designed to be revenue neutral.
How do U.S. goods incur federal taxes today, while imported goods do not?
Let’s buy a bottle of California wine. Or a Boeing 787. Or some Kansas wheat. Or a Caterpillar D11T
dozer. Or some consulting services from PricewaterhouseCoopers. While your invoice will not show it,
included in the cost you’ll pay is your share of each provider’s corporate income taxes. And you’ll pay
for the tax department, accounting firms, and law firms that figure those taxes and defend the audits or
lobby tax-law loopholes. While the taxes themselves can go below zero in a bad year, those compliance
costs just keep on toting up. And then there is the matching of each employee’s Social Security
contribution.
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