Since taxes are necessary for schools, roads, police and firemen, they need to be collected somewhere. When income is not taxed, the person who worked for the money retains all of it initially. This is similar to a Ponzi Scheme, except Ponzi Schemes promise large gains and involvement is voluntary. This means that the government receives the funds, spends them, and pays back anything they should not have had minus any interest. Typically, they have more money withheld, resulting in a tax return.
When the government withholds taxes from one’s income, the person who earned it does not always receive the correct amount. To clarify the biggest difference between these two plans, it is important to understand why it matters where taxes are levied. The Flat Tax Taxes Income While the FairTax Taxes Consumption With both of these tax plans appearing to have so many similarities, it is important to note some differences.
Corporations would pay the same taxes as everyone else, just as the rich would. The FairTax proposes to levy a 23% inclusive tax on all goods and services, meaning that a cart of groceries today costing $77 before tax will cost $100 with the FairTax. The FairTax has a flat rate as well, but it does not apply to income. This rate would also apply to corporations. The Flat Tax will tax all income above $25,000 for singles and $30,000 for families of four or more at a rate of 15%. The Flat Tax and FairTax are thought of by many civic-minded people.
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