The FairTax has been called the most thoroughly researched tax reform plan in recent history.The
following offers a quick introduction to the FairTax and tax reform and how it may affect you.
The FairTax rate of 23 percent on a total taxable consumption base of $11.244 trillion will
generate $2.586 trillion dollars $358 billion more than the taxes it replaces.
The FairTax has the broadest base and the lowest rate of any single-rate tax reform plan.
Real wages are 10.3 percent, 9.5 percent, and 9.2 percent higher in years 1, 10, and 25, respectively
than would otherwise be the case.
Disposable personal income is higher than if the current tax system remains in place: 1.7 percent in year
1, 8.7 percent in year 5, and 11.8 percent in year 10.
The economy as measured by GDP is 2.4 percent higher in the first year and 11.3 percent higher by the
10th year than it would otherwise be.
Consumption increases by 2.4 percent more in the first year, which grows to 11.7 percent more by
the tenth year than it would be if the current system were to remain in place.
The increase in consumption is fueled by the 1.7 percent increase in disposable (after-tax)
personal income that accompanies the rise in incomes from capital and labor once the
FairTax is enacted.
By the 10th year, consumption increases by 11.7 percent over what it would be if the current
tax system remained in place, and disposable income is up by 11.8 percent.
Over time, the FairTax benefits all income groups. Of 42 household types (classified by income,
marital status, age), all have lower average remaining lifetime tax rates under the FairTax
than they would experience under the current tax system.
Implementing the FairTax at a 23 percent rate gives the poorest members of the generation
born in 1990 a 13.5 percent improvement in economic well-being; their middle class and rich
contemporaries experience a 5 percent and 2 percent improvement, respectively.
Based on standard measures of tax burden, the FairTax is more progressive than the
individual income tax, payroll tax, and the corporate income tax.
Charitable giving increases by $2.1 billion (about 1 percent) in the first year over what it
would be if the current system remained in place, by 2.4 percent in year 10, and
by 5 percent in year 20.
On average, states could cut their sales tax rates by more than half, or 3.2 percentage
points from 5.4 to 2.2 percent, if they conformed their state sales tax bases to the
FairTax base.
The FairTax provides the equivalent of a supercharged mortgage interest deduction,
reducing the true cost of buying a home by 19 percent.
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