I'm sure we can all agree that the US tax code is a disaster. With all the negative publicity the IRS generates for itself, compounded this year by confusion added by the Affordable Care Act (e.g. Obamacare penalties), it's about time to try something totally different. And I mean different in a very good way.
What is the FairTax?
The FairTax is a national sales tax. It's initially proposed to be revenue-neutral at 23%. That's pretty big. It sounds bigger if you note that, to be comparable to quoted income tax rates, 23% is a 'tax included' rate, meaning that if you paid a total of $100 at the register, $23 was tax. Thinking about it like a state sales tax, though, the rate would be 30%: If you buy a $77 item, the tax again is $23 for a total of $100, and 23/77 is 30%. Either way, same large-sounding tax.
The FairTax isn't all that big when you consider what it does: It replaces all federal personal, gift, estate, capital gains, alternative minimum, Social Security, Medicare, self-employment, and corporate taxes. If you have a job, your paycheck increases because none of these federal taxes are taken out.