home based Business and the Fair Tax Act

home based businesses expend considerable time and money wrangling with the structures inherent with monitoring and paying their taxes. Some will pay to little some will pay too much. The process may cut deeply into profits and in some instances tip the balance between success and insolvency.

Imagine not having to file federal taxes? No more quarterly or annual reports to the IRS. No more sweating through tons of paperwork or reviewing complex and convoluted tax rules, regulations and mandates. No more dealing with withholding, deductions, penalties or invoices from the federal government. If the Fair Tax Act becomes law, all of those things would happen.

The Fair Tax Act abolishes the IRS and repeals the 16^th amendment effectively doing away with all federal income or payroll based taxes. This means the elimination of all federal personal and corporate income taxes. In addition, gift, estate, capital gains, alternative minimum, death, Social Security, Medicare, and self-employment taxes would vanish. Businesses would be free to retain all of their profit and absorb all of their loss. Employees would keep all of the money that they earn.

In its place a national sales tax of 23% on all items purchased new (used items are exempt) would generate revenue for the federal government to operate. Proponents say the Fair Tax will overhaul the economy, add to growth, keep jobs from moving over seas and help balance the budget. In addition, with the elimination of embedded taxes on manufacture and distribution of products, the retail price would remain the same even after the added 23%.

It is a proposition that is gaining popularity among a large number of taxpayers, especially those who own small businesses.

Congressman John Linder (R) Georgia introduced the Fair Tax Act (HR2525) to the 109^th Congress of the United States where it floundered in committee. Linder has reintroduced the legislation each subsequent congressional session. Today the bill has 76 co-sponsors yet still has not made it out of committee. It seems as though the legislation has been put on the back burner in an election year and Ways and Means Chairman, Charles Rangel (D) New York, who is opposed to the bill, does not wish to allow a floor vote.

Opponents argue that the Fair Tax is a radical proposition that is regressive rather than progressive as its backer claim. They argue that it unfairly taxes the poor while giving the affluent a pass.

Proponents claim that the Fair Tax takes power away from politicians and lobbyists and that is the root of the opposition.

Home based business owners, who by the nature of their entrepreneurial spirit tend to be more involved and enlightened regarding business and politics than the majority of Americans, should weight in on the issue. The Fair Tax could dramatically affect them.

There are also a myriad of anti-Fair Tax articles, blogs and posting available that offer opposition views. Many state that the Fair-Tax could never become law because of the complications involved in repealing the 16^th amendment, which grants congress the power to impose income taxes.

Researchers will find arguments both for and against the Fair Tax Act that are abundant, well thought out, persuasive and passionate. What do you think?

Sources of research for this article included:

-The Fair Tax Book by John Linder and Neil Boortz

Posted:Tuesday, September 09, 2008