Would the FairTax Raise or Lower Marginal and Average Tax Rates

Topics:
Payroll,
Taxes
Tags:
FairTax,
Finance,
Financial Planning,
Free Trade,
Taxes
Source:
National Bureau of Economic Research

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Overview: This paper compares marginal and average tax rates on working and saving under our current federal tax system with those that would arise under a federal retail sales tax, specifically the FairTax. The FairTax would replace the personal income, corporate income, payroll, and estate and gift taxes with a 23 percent effective retail sales tax plus a progressive rebate. The FairTax's effective marginal tax on labor supply is 23 percent. Its effective marginal tax on saving is zero. In contrast, for the stylized working households considered here, current effective marginal labor taxes are higher or much higher than 23 percent.

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Format: PDF | Size: 210KB | Date: Dec 2005 | Pages: 39

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