That Tax Isn't Fair!

Dave breaks down for Evan how the fair tax works.

QUESTION: Evan isn’t sure what the fair tax is, and how it’s different from what we have now. Dave is happy to break it down for him.

ANSWER: The premise of the fair tax is that it’s not moral to tax someone on their income. When you go out and earn an income, it should be yours. That’s a reasonable statement. It’s a sales tax, and only when you purchase something would you pay taxes. It would do away with the IRS and the need for 401k plans and Roth IRAs because the money you save would be yours unless you spent it. When you spend it, you would have taxes. The proposal is to not have it on food and basic clothing and that kind of thing. The argument against a sales tax in tax theory is that it’s regressive, which simply means it’s harder on poor people. The poorer you are, the more percentage of your world you are paying in taxes than the rich people do.

What I’ve discovered is that, the more money I make, then I save and give and spend more. Thus, I would pay more in taxes as someone who makes good money than someone who doesn’t because they are not buying as many cars or boats or houses.