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Instead the tax system will be completely overhauled and people would have pay simple federal retail sales tax. And this sales tax would be administered mainly by the existing state sales tax authorities in each state.
This further means that Fair Tax will do away with the IRS completely and people would have to pay taxes just on what goods or services they choose to purchase or buy. The Fair Tax has many proponents and opponents.
There are many economists who think that Fair Tax system should be introduced in the US as it would be a fair and transparent system which would be providing a solution to the frustration of the current tax system.
According to economists, Fair Tax would allow the people to do the following:
- Enable workers to keep their entire paychecks
- Enable retirees to keep their entire pensions
- Refund in advance the tax on purchases of basic necessities
- Allow American products to compete fairly
- Bring transparency and accountability to tax policy
- Ensure Social Security and Medicare funding
- Close all loopholes and brings fairness to taxation
- Abolish the IRS
According to conservative economist Bruce R Bartlett, Fair Tax would not be fair as people would be offered two prices -- one price would allow them to pay using check or credit card that includes Fair Tax and the other would be cash and people would save the proposed 23 percent of the Fair Tax.
Just like Bruce Bartlett, there are other economists who feel that as they would be no audits on income and the IRS would be abolished on introduction of Fair Tax, massive tax evasion would be a forgone conclusion. In addition, economists feel that black market would develop, especially for the service industry.
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