The Rich Don't Pay Tax! …Or Do They

A seldom mentioned benefit of the FairTax is that it would indirectly punish illegal aliens, by taxing them at 23% more than the US citizens most likely to compete with them for jobs.

Critics of the FairTax often try to misrepresent the FairTax as a 23% tax on everyone. That is NOT true. In fact, the only people in the USA who would pay the full 23% FairTax base rate would be illegal aliens.

You see, under the FairTax, every US citizen family would receive a “Prebate” check every month, equal to the amount of FairTax that would be paid on spending up to the poverty level, in one month. Illegal aliens would not receive that check. This means that those citizens living at or near the poverty level would pay an effective FairTax rate of approximately zero percent (0%), while illegal aliens, who don’t receive the “Prebate” check, but who compete for the same jobs, would pay the full 23% base rate on all of their new retail purchases. And don’t think that they can just buy everything used, either. That’s because you can’t buy used rent, used food, used electricity, used gas, used bus fare, etc. Most monthly purchases would be taxable.

Do you see where this is leading?

The result is that US citizens and those aliens who are in the USA legally and qualified to hold a job here, would have a 23% tax advantage over illegals. Illegals, who have never paid a penny of US income tax would suddenly find themselves paying at a rate even higher than Bill Gates. (OK. If you rounded to less than 8 or 9 decimal places, then it would look like Gates pays the full 23%, too.) Even billionaires, who spend outrageous amounts of money, would pay only 22.9(followed by a bunch more nines)%, due to the “Prebate.” Only illegal aliens, who don’t get the “Prebate” check would pay the full 23% FairTax base rate. (FYI, most citizens would pay less than 11%, after “Prebate”.)

Illegal aliens, who typically work at a few percent below minimum wage, would find themselves having to make 10-15% more than minimum wage, just to maintain their current lifestyle. If illegals can no longer afford to work for less than minimum wage, then why would employers hire an illegal alien for more than minimum wage, when he could hire a US citizen for the same pay and not have to worry about being fined?

The FairTax would turn off the illegal alien magnet and go a long way toward starting self-deportation of illegal aliens.

Although the “base” FairTax would seem high, at 23%, the effective FairTax Rate for most Americans would be well below 11%.

A family of four, living at the poverty level (about $30k) would get a $580 “Prebate” chack every month and they would pay $580 in FairTax, on a maximum of $2522 in retail spending every month. Their FairTax rate would net out to zero (0%).

A family of four, living at double the poverty level (about $60k) would get the same $580 “Prebate” as the lower-spending family. But spending at that level would mean that they would pay $1160 in FairTax every month. Their FairTax rate would therefore net out to 11.5%.

When you consider that most US families live at somewhere far less than double the poverty level for their size of family, it means that most US citizens would pay an “effective” FairTax rate of less than 11%. Then consider that there is more embedded tax than that in most of the products that we buy today. So the FairTax would represent a tax cut for most US citizens.

The very wealthy, who live far above the poverty line, would end up paying an effective FairTax rate of 20 to 22.9%. Note that only illegal aliens, who would not get a “Prebate” check, would pay the full 23%.

The book that conclusively answers the question, "Who pays tax?"

Exposing the disastrous consequences of punishing success.

The FairTax would coerce illegal aliens to Self-Deport.

The Effective FairTax Rate for most Americans would be less than 11%