Last night several candidates talked about the so called “Fair Tax”. That is a proposal to replace Federal Income, Medicare and Social Security taxes with a sales tax up to 30%. It was touted as FAIR which is a lie pure and simple. This is another Conservative plan to further lower the taxes on the wealthy.
Let’s take a look at just what a 30% sales tax would do.
The wealthy taxpayers only spend a portion of their income. Any income that they did not spend would escape this tax. A person with an annual income of $500,000 who spent $250,000 would pay taxes only on the $250,000 and would have an effective tax rate of 15%. A person with an income of $50,000 who most likely spends all of their income would have an effective tax rate of 30%.
A person with a $500,000 annual income pays $14,500 in Medicare taxes; $6,500 in Social Security Taxes and about $125,000 in income taxes for a total of $146,000. If they spent $250,000 of their $500,000 income under the Fair Tax they would pay $75,000 in tax (30% of $250,000). Their taxes would be cut in half!
A person making $50,000 pays $1,450 in Medicare; $3,200 in Social Security and $3,000 in income taxes for a total of $7,650. Under the Fail Tax they would pay $15,000 (30% of $50,000) Their taxes would be doubled!
In addition, how the low and middle income tax payers would pay this increased tax is a mystery!
YES this a FAIR Tax for ONLY the WEALTHY!