BILL: GOP's Fair Tax Act Would Abolish IRS, Eliminate Income Tax
Do you support or oppose the Fair Tax Act?
House Republicans are voting on a bill that would abolish the Internal Revenue Service (IRS). The Fair Tax Act would also eliminate all federal taxes in favor of "FairTax"-- a 23% national retail sales tax (though, in reality, it's closer to a 30% sales tax).
What's the story?
- The motion to abolish the IRS was part of the concessions that Rep. Kevin McCarthy (R-CA) made with the House Freedom Caucus in order to get their votes for the speakership.
- The Fair Tax Act was reintroduced by Rep. Buddy Carter (R-GA) and currently has eleven co-signers. Versions of the bill have been introduced in almost every Congress since 1999.
- Carter said:
"Instead of adding 87,000 new agents to weaponize the IRS against small business owners and middle America, this bill will eliminate the need for the department entirely by simplifying the tax code.”
- Critics point out that the burden would disproportionately fall on lower-income Americans, who will be spending a larger percentage of their income on sales taxes, and will ultimately only benefit corporations and high-earners and shift taxes from the rich to the poor.
- Roughly 40% of American households currently pay no federal income taxes due to low income. Under the new sales tax, they would be faced with the burden of higher taxes.
What’s in the Bill?
Abolishment of personal and corporate income taxes
- These taxes will be replaced by a national simplified consumption (sales) tax, rather than being contingent on a worker’s income. The bill would allow the Treasury to administer the sales tax in all states, even those that currently have no sales tax.
Shutters the IRS
- Because states already collect sales tax, proponents of the bill argue that the IRS could be abolished as states could simply collect additional sales tax for the federal government and send the funds to the U.S. Treasury.
Abolishes death, gift, and payroll taxes
- All of these taxes would be eliminated and replaced by one sales tax.
A 23% federal sales FairTax
- Supporters of the bill say that 23% is comparable to a 15% income tax plus the 7.65% payroll tax that employers currently pay.
- Calculated a different way, the tax actually comes out to 30%--under the Fair Tax Act, if you buy something that costs $100 pre-tax, you would pay $30 of national sales tax.
Provides a prebate
- The act would provide a monthly stipend to offset the tax liability for essential goods and services. The stipend would be available to every American, regardless of income.
Do you support or oppose the Fair Tax Bill?
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The Republican House is leaderless, they will not get any of their specific legislation passed so they are using their offfices as a 'stage show' to propose presposterous legislation to appeal to the MAGA-mob.
They are also doing this with their vengence intitatives against anyone that would uphold the rule-of-law or the Constitution in finding that Republican congresspeople violated either or both.
Another part of this is to neuter the DOJ as their investigations could prove their alleged law-braking or their role in aiding and abetting the insurrection.
Two years of this crap should help clean the House of the radical right MAGA morons who seem to be in control the House Republicans, as well as those House Republicans who accept their nonsense.
It is time to really form that third political party, because the Republican Party is going to self-destruct soon and the country needs to build an ethical Conservative Party to bring principled balance back into governance.
The proposed Fair Tax legislation is a retread from 1999 when it was originally proposed in Congress by Linder (R-GA) and has been reproposed in 2005, 2008, and 2009. It’s another variation on the trickle down theory claiming it would save money for businesses that would be passed along to the consumer in lower cost goods & services which we’ve seen lately doesn’t happen when companies increase prices more than costs to increase profits, stock buy backs and executive compensation,
The concept originated in 1995 by Americans For Fair Taxation (AFFT) founded by three Houston entrepreneurs originally as a research organization based on polling and focus group studies. It would apply a tax, once, at the point of purchase on all new goods and services for personal consumption but doesn’t apply to business purchases.
Excluded are purchases of used goods, exports, all business transactions, investments (stock, bonds, corporate mergers and acquisitions, capital investments, educational tuition)
It requires a repeal of the of the 16th amendment (1913) to remove the IRS.
In my opinion it would turn the US into a financial feudal system where W-2 workers pay all the taxes at 23% (real rate of 30%) of all their purchases, while 1099 earners pay nothing as their purchases are business expenses.
The rate will need to be 10% higher to replace state taxes as well without a federal income tax to base state income taxes on.
(1) Eliminates annual tax preparation
(2) Eliminates the IRS
(3) Boosts income & consumer spending
(1) Unfair to 1st generation seniors who paid income taxes all their lives and would have to start paying higher sales taxes in addition to the taxes they've already contributed over decades
(2) Needs a new agency to enforce it
(3) Sales tax rate would be high (23% with an effective rate of 30%) to replace lost income tax
(4) Would need to add another 10% to replace state income tax
(5) How is Social Security & Medicare calculated & funded?
“Fair Taxation developed the Fair Tax plan. It would require the repeal of the 16th Amendment, and it would disband and defund the Internal Revenue Service (IRS).”
Yes, by all means, ditch the income tax A.S.A.P! The sales tax is much simpler to collect, easier to enforce, and hits the rich because they'd pay tax on every expensive toy that they buy! The lower income folks can be protected by exempting the basics, like food, clothing (no single article of clothing under $100 would be taxed) and rent. You'd need far fewer IRS agents to enforce it, since you'd only be collecting taxes from businesses, not individuals. There are a lot fewer businesses than there are individual taxpayers, so just by the numbers, enforcement is easier (I'm guessing at a150 million taxpayers versus possibly 50 million businesses, but you get the idea). We certainly wouldn't need 87k more IRS agents to enforce a sales tax!
The only down side is that the Government would lose a big stick to prosecute Mafia Dons and Dope Dealers (it's how they finally got Al Capone), but that's a small price to pay to get the Government off of our backs! The only reason that it probably won't happen is that too many vested interests make far too much money shielding income from the IRS in the present system (lawyers, accountants, Turbo Tax, billionaires) to give up the present mess that is the Federal tax code!
I would have to read this proposal over, a couple of times. So, why do have a fishy feeling about this. Why do I have a false sensation about this proposal. Why do I get the feeling the worker who has federal income tax taken from their paychecks and contractors who have to pay quarterly estimates, will get screwed on this and big businesses walk away free.
I'm not opposed to tax reform, and I would certainly be happy to get rid of the income tax, but a 30% sales tax? How would impact inflation? How many Americans could immediately afford to pay that much more?
This seems extreme and there has to be a better way. I also notice that it will benefit corporations, and I'm against corporate welfare.
In addition rich people will not be able to cut their taxes. For instance a rich person can afford a brand new electric vehicle for say &75,000 dollars. The federal tax would be $22,500 for a total of $97,500
Plus the state and local taxes will stil be there. In my city in Louisiana city tax is 10% which add another $$7,500 to the bill.
The Louisiana state tax on a new vehicle is 4.45% which adds another $3,350 to the bill.
so that $75,000 vehicle now will cost $109,000 for that rich person.
Vote no. The end.
The FairTax is the only existing or proposed tax. That is transparent,
FAIRtax is a reduction in TOTAL tax burden for 90% of households. The monthly tax rebate offsets tax on basics. You keep 100% of your earning and you choose when, why and how much you are taxed. Ending business taxes puts the economy on rocket fuel.
The FairTax is so much more than just a sales tax.
It raises take home pay by eliminating withholding, removes the hidden/embedded corporate income tax and compliance cost from your purchases, doesn't tax poverty level spending (regardless of income), and doesn't double tax used items.
This makes it a naturally progressive and transparent tax system that puts your effective rate (the one that matters) in your control. You only pay it when you are both willing and able.
It'll also spur job growth, make us the world's tax haven and bring in foreign capital, reduce illegal evasion, increase the tax base, shore up social security and Medicare funding, and more.
The Flat Tax will help everyone of us!! It will KEEP the government out of our pockets. The tax money will go to the Treasury where it belongs and give us more money in our pockets! No Federal Taxes out of every check, that goes to wherever congress wants!
Letter to the Editor - The FAIRtax (“FT”)
I am a retired tax professional (JD, LLM in Taxation, CPA, co-author of a 3-volume tax treatise, and lecturer), with no stake in ANY tax system (I would pay LESS tax under FT). This is a brief summary - for details, see Web: http://sceldridge.wix.com/sceldridge & YouTube video https://youtu.be/wiVLf1vrQX8
FT is 30% sales tax, not 23%. If an item costs $100 before adding FT, you add $30 (not $23), for a total of $130. They deceptively divide the $30 FT by the total $130. Pretty sneaky, eh? When exposed, they babble that it “compares to” a 23% income tax, but FT is a SALES tax of 30%. The 30% FT would be added onto virtually every dollar you spend on goods and services.
FT admits readily (advertises) that it is MORE Progressive (more welfare) – see http://sceldridge.wix.com/sceldridge%23!fairtaxs-progressive-socialist-heart/c1hzm
The Prebate is not a refund of FT paid, as advertised. It would be a (today) $750+B NEW ENTITLEMENT, with EVERYONE receiving a big monthly federal check. It is financially/ politically unwise to create yet another huge entitlement that automatically increases annually and could be increased even more by Congress at any time.
FT (Prebate) has the poor pay no part of the fed govt, pay nothing for their personal SS/Medicare benefits AND give them a big tax welfare check. FT (Prebate) extends tax welfare to the non-working poor – and also takes the next Progressive Cloward-Piven step towards giving SS/Medicare to all regardless of work, by removing the tax cost of reporting SS Wages, which “invites” fraud in reporting them (as also noted by other authors).
The Prebate purports to merely repay the poor for any FT they pay (as if we all agree with that), but it would actually pay them far MORE by “assuming” the poor spend more than the underlying HHS Poverty Guidelines and that they will pay FT on all of their purchases (but they WON’T) – see http://sceldridge.wix.com/sceldridge#!ft-increases-tax-welfare/copu
Many FT’ers still market the original FT lie that we get a big raise (no Income & P/R taxes) AND FT prices would be the same as today’s - that can’t be true. FT is merely supposed to change the method of paying the same total tax dollars we pay today, so if you get a big raise, prices must go up by the same total dollar amount (except for minor savings in compliance costs). Retail prices would rise by nearly the full 30%. Even the AFFT’s in-house economist later admitted that prices would rise substantially, but prices would rise even higher than AFFT admits - see http://sceldridge.wix.com/sceldridge#!ft-will-increase-prices-by-nearly-30/czaa
FT results in a combined fed+S/L 30-45% initial in-your-face sales tax that would spark a
taxpayer revolt that would destroy our retail-sales-sensitive economy - that’s 30% FT (not 23%) plus 0-15% S/L. Those rates might go up to (say) 60-75% at an illustrative 30% evasion/avoidance rate (incredibly, FT “assumes “zero evasion, zero intentional reduction in spending, and zero migration from new to used goods – instead of increasing the FT rates, the $600-$900B shortfall will more likely result in a new Income tax, see below). See also, https://www.taxpolicycenter.org/taxvox/proposed-fairtax-rate-would-add-trillions-deficits-over-ten-years
The FT’s 30% rate is actually closer to 50%. FT hides another appx. 20% in taxes (but FT’ers deceptively say “the FT is fully transparent - just look at your receipt and you will see all of the FT you will pay”). 1) 12+% is hidden by having fed + S/L govts pay FT (which is likely unconstitutional) – ultimately, they must get that money from us, 2) The fed budget will rise for a) SS & all fed pension COLAs caused by FT’s 30% price increase, and for b) fraudulent new SS benefits “invited” by FT’s removal of the tax cost for reporting SS Wages (as noted by other authors ), 3) FT economists have admitted that the FT is 5% short. See https://sceldridge.wixsite.com/sceldridge/fts-hidden-taxes
USED goods are advertised as exempt from FT, but that is a cruel hoax because the buyer won’t be able to prove that FT was paid by the seller(s) AND that none of the listed credits against FT were claimed, all as required by the Bill. And because the price of all used goods will rise to reflect the higher cost of new goods, the buyer will incur FT twice, once implicitly in the higher price of used goods and once explicitly because he can't prove the seller(s) paid FT.
Contrary to AFFT claims, FT’s new IRS (i.e., STAA) may well be even more invasive than today’s IRS - the buyer is liable to pay FT and receive/show a receipt, and STAA may audit consumers – see FT Sec 101(d). Also, we may well have to file an “Annual FT Summary”. See http://sceldridge.wix.com/sceldridge#!the-myth-that-the-irs-is-abolished-/c1tu0
As also noted by Cato Institute (see http://bit.ly/1vNxnq3 ), FT leaves us more vulnerable to wind up with both a NEW Income Tax and FT (instead of dramatically increasing FT’s already high explicit 30% rate). Congress would surely repeal FT’s laughable Sunset Clause and (with the 16th Amendment surely still in place) would use the excuse of the large revenue shortfall from evasion/avoidance to enact a new Income Tax which I believe is Congress’ true ultimate objective (i.e., to grab even more of our money to redistribute to those who will vote for them).
To summarize, the FT required a much higher tax rate. AFFT simply “assumed” away 20-30% evasion/avoidance, hid 12% by taxing fed +S/L govts, reduced the rate by 5%, and ignored the FT-caused fed budget increases - to get the rate down to 30%. Then a clever AFFT lawyer twisted the statute’s words deceptively, making 30% superficially appear to be “only” 23%.
Seniors would start to pay for SS/Medicare again and some would pay a 2nd-3rd tax on their earnings. Many middle-class seniors would pay more FT than they would have paid in Income Tax. Many would lose purchasing power because of 1) the nearly 30% price increase and 2) the higher S/L & federal taxes required because both govts must pay FT and can only get those funds from us, and 3) higher federal taxes due to nearly 30% higher SS & federal pension COLAs and fraudulent SS benefits. See https://sceldridge.wixsite.com/sceldridge/seniors
FT promises grand economic benefits which are all entirely unpredictable - mere Hype & Change. FT employs marketing hype and hyperbole, making countless undeliverable claims.
Instead, we need a Flat Income Tax; No Deductions/Exemptions/Credits,10% rate, business income taxed only once on a very simple basis - IRS is neutered, 1-page tax filing, everyone pays, evolutionary. See A Very Flat Income Tax, http://sceldridge.wix.com/sceldridge#!page-2/cjg9 Let your representatives in Congress know that this is what you want
We have $1 trillion dollars of evasion under the income tax. And yet IRS audits child tax credit recipients more than billionaires. We have $500 billion of tax compliance costs and another $500 billion in avoidance and collection costs. The income tax is a failed mess. A sales tax puts taxpayers in control of when, why and how much they are taxed. FAIRtax is fair because you not Congress or IRS are in control.
HR 25 will remove the power from Washington and place it back in the people. Contrary to the demogogues and out right lies, the FairTax is actually only a 1% consumption tax over what we pay now, not 30% or even 23%. Also, the FairTax provides a means for finally curing all problems with Medicare and Social Security. If anyone wants further information, please email me at firstname.lastname@example.org using the subject line "FairTax Questions".
Or start requiring multi-billion companies to pay their fair share
I don't agree with a 23-30% federal sales tax hike. If you add that to the State Tax we'll be paying almost twice as much for an item.
I also don't believe we need additional IRS personnel or any other additional govt personnel.
What the government needs to do is modernize the way taxes are done. It shouldn't be rocket science and everything is tied to a person's social security number.
Seems like everyone wants a piece of our hard earned money. Will it ever end?
FUND the IRS!!!
Increase budjet for hiring more IRS adgents so they can find the fraud and collect what is owed.
Close all the loop holes.
My mistake. I meant heir not era!
While I'm not a big fan of the IRS I'm not sold on this bil. It sounds like it would help some and hurt others. I use to be for it years ago because my thoughts were that a consumption tax would reach everyone and then everyone would be paying their so called fair share. But after seeing how hard it can be to pay for food and other things we need right now because of inflation, I hesitate. Even with exemptions. The absolute one thing that I am dead said against, no pun intended, is the death tax. I have always been upset when I'd hear of a farm that was in the family for one or two hundred years and they poored their whole being into it, past what they built to their eras, got through all the bad times and paid their taxes, and then they die and the farm is lost because the remaining family can't afford to pay for this death tax or inheritance tax. That is "socialism/communism"! It's our government stealing what we already bought and paid for. Legalized Theft! Plain and simple! And it's not just a farm but anything a person bought and worked for and accumulated all their life. They paid taxes when they bought it. They paid property taxes. What ever it is, the government already got their share of someone's earnings. And then they literally steal it away from you and your family! I've heard a lot of disturbing things over my life time that the IRS has done not just with this but other things to middle class people and their businesses as well that were unfair. I'm not for 87,000 new IRS Agents either. No matter if they're retiring or whatever the story. Desolve the authority of the IRS with parts like the inheritance tax and even the gift tax and other parts we don't even know about that may be intrusive. But I'm not for this bill as a whole.
Oppose this GOP bill
This is how they abolish Medicare and Social Security. Which run on income tax collected.
I can't even believe the theatrics of these people. How ridiculous. Give IRS resources to investigate any cheater
80% of people want to keep the IRS? Now I know this site is tainted.
We are getting down to brass tacks now, OPPOSSED! Reform is needed but this is not it. There are too many loopholes, it does not fund Social Security, Medicare, Unemployment, or other social programs. It does open up a vast crevice for businesses. There is no mention of how this would be regulated as now State Comptrollers would be out of a job. I like the idea of paring down the enormous entity of the IRS which would save millions if not billions of tax dollars just in that. How would this affect property taxes? Right now between all the taxes we pay the middle class pays somewhere in the range of 40-45% of their income to some kind of tax. This is an older study so it might be more.
Why is the flat tax for all income not previously taxed so unreasonable? It could be for everyone including businesses, corporations, and all types of investment gains. 10% has been presented before so possibly we could meet in the middle and say 12-15%. A small organization could monitor and collect. Businesses would need to report how much each person was paid kind of like a W2. Self-employed would be like revenue minus labor that was reported and COGS only, not expenses.
How that tax would fund all the government programs would be allocated in a federally approved budget. There is so much more that could be defined but I won't go into that at this time.
Reform is necessary but in my opinion, this is not the answer.