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senate Bill S. 18

Should Income and Payroll Taxes be Eliminated and Replaced by a National Sales Tax?

Argument in favor

Our current tax system is overly complex between income, payroll, and other taxes. Eliminating those and replacing them with a national sales tax would be much simpler and fairer.

Brittney's Opinion
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07/14/2017
Yes! As someone with a low income I would benefit much more from being taxed on what I SPEND (virtually nothing, and something I can control) than from what I EARN. My income is much better used being able to pay rent, which is tax-free, than it is being taxed to pay for many services I don't even use or really benefit from.
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Jerry's Opinion
···
07/14/2017
It DOESN'T "disproportionately affect the poor," its the opposite, it makes Everyone pay The Same: the very definition of PROportionate...and Fair. We're all in this together, and are obligated to pay the same %, Not some more than others. So, knock of the class war rhetoric and vote for a Level Playing field. No loopholes for the rich; No unfair "credits" to the poor and unproductive. If your ethic says someone needs "charity or a tax break," do it with your own dollars according to your own means, and Keep you hands Off my earnings, and leave me be to my own conscience to be charitable how, when and where I wish, not how You decide. Mind tour Own damn business, not mine. If you think taxes are a "burden" to some group, then work to lower them, make the government smaller and more efficient, and Quit trying to steal extra money from other citizens. Pay your share % and leave me to pay the same %.
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Jim's Opinion
···
07/14/2017
Only way to make Federal taxation fair (assuming all loopholes were closed) is a sales tax. The rich spend more than the poor, so they would be paying more in sales taxes.
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Argument opposed

Eliminating the income tax would make it harder to compel the wealthiest Americans to pay their fair share. Working families may need a larger sales tax rebate than this bill offers.

Liz's Opinion
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07/14/2017
I'm sorry but the poorest Americans can literally not afford to pay the same as the wealthiest Americans. As "unfair" as it may seem to some, wealthy Americans need to help pick up the slack of the far less fortunate.
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Steven 's Opinion
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07/14/2017
So an additional 23% sales tax on every single item I purchase however corporations do not have to pay the tax. And how does this make any sense?
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Christa's Opinion
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07/14/2017
This plan unfairly affects the poor, who cannot afford to pay that much for necessities. The rich, on the other hand, not only can afford to pay this, and other taxes, but they have access to loopholes the rest of us can't even dream of to avoid doing so. Make people pay income taxes that are proportional to their income! Income tax is NOT highway robbery! Those taxes go into paying for everything from infrastructure projects to food safety and the CDC. I don't mind paying taxes; I just believe i should pay less than someone who makes $300 million per year.
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What is Senate Bill S. 18?

This bill — known as the Fair Tax Act — would reform the tax code by eliminating the income tax on individuals and corporations, employment taxes, plus estate and gift taxes and replacing them with a 23 percent national sales tax starting in 2019. The sales tax rate would be adjusted in subsequent years and some exemptions would exist, such as the for the purchase of used or intangible property, or services purchased for business, export, or investment, and for state government purposes. A rebate from the sales tax called the Family Consumption Allowance would be available for U.S. residents and family members based on family size and poverty guidelines.

States would be responsible for administering, collecting, and remitting the sales tax to the Treasury Dept., as the Internal Revenue Service (IRS) would no longer receive funding for its operations after fiscal year 2021. Tax revenues would go to the following:

  • General revenue;

  • Old-age and survivors insurance trust fund;

  • Disability insurance trust fund;

  • Hospital insurance trust fund;

  • Federal supplementary medical insurance trust fund.

This national sales tax would be terminated if the Sixteenth Amendment to the Constitution (which authorizes an income tax) isn’t repealed within seven years of this bill’s enactment.

Impact

The American public; states; the Treasury Dept.; and the federal government.

Cost of Senate Bill S. 18

A CBO cost estimate is unavailable.

More Information

In-Depth: Sponsoring Sen. Jerry Moran (R-KS) is leading proponent of the so-called FairTax, and said the following when he introduced this bill’s predecessor in the last Congress:

“Overhauling the American tax system is not an easy undertaking, but the economic need for a leaner and fairer tax code has never been greater. Reducing costly inefficiencies and the burden of filing taxes should be a priority in this Congress. The FairTax would place all taxpayers on equal footing, protect Americans from government intrusion by the IRS, boost business growth, and incentivize savings and investment – all while collecting revenue at levels similar to those of our current mess of a tax code."

Critics of the Fair Tax say that it would be regressive and cause people with lower incomes to pay a disproportionately high amount of tax compared the proportion paid by those with higher incomes. They add that economists say the incentive to buy things "off the books" rises when sales taxes are set at as high a level they would be under the Fair Tax, which causes taxes to be hiked further to compensate for tax evaders.

This legislation has the support of four cosponsors in the Senate, all of whom are Republicans.


Media:

Summary by Eric Revell

(Photo Credit: John Beagle via Flickr / Creative Commons)

AKA

Fair Tax Act of 2017

Official Title

A bill to promote freedom, fairness, and economic opportunity by repealing the income tax and other taxes, abolishing the Internal Revenue Service, and enacting a national sales tax to be administered primarily by the States.

bill Progress


  • Not enacted
    The President has not signed this bill
  • The house has not voted
  • The senate has not voted
      senate Committees
      Committee on Finance
    IntroducedJanuary 3rd, 2017
    Yes! As someone with a low income I would benefit much more from being taxed on what I SPEND (virtually nothing, and something I can control) than from what I EARN. My income is much better used being able to pay rent, which is tax-free, than it is being taxed to pay for many services I don't even use or really benefit from.
    Like (100)
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    I'm sorry but the poorest Americans can literally not afford to pay the same as the wealthiest Americans. As "unfair" as it may seem to some, wealthy Americans need to help pick up the slack of the far less fortunate.
    Like (316)
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    So an additional 23% sales tax on every single item I purchase however corporations do not have to pay the tax. And how does this make any sense?
    Like (228)
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    This disproportionately impacts the poor
    Like (207)
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    Stop protecting the rich
    Like (158)
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    This plan unfairly affects the poor, who cannot afford to pay that much for necessities. The rich, on the other hand, not only can afford to pay this, and other taxes, but they have access to loopholes the rest of us can't even dream of to avoid doing so. Make people pay income taxes that are proportional to their income! Income tax is NOT highway robbery! Those taxes go into paying for everything from infrastructure projects to food safety and the CDC. I don't mind paying taxes; I just believe i should pay less than someone who makes $300 million per year.
    Like (98)
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    This would have been great before payroll taxes began. Now this country has the majority of its citizens either retired or close to it. The hardship this would place on them is insurmountable. A sales tax or use tax would have been generally a good idea because then everyone, including the wealthy would be paying for what they purchase. This would have been a fair tax system. By the time people are in their 40's they have already purchase many big ticket items, in contrast to the higher earnings later in their careers. BAD IDEA
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    It DOESN'T "disproportionately affect the poor," its the opposite, it makes Everyone pay The Same: the very definition of PROportionate...and Fair. We're all in this together, and are obligated to pay the same %, Not some more than others. So, knock of the class war rhetoric and vote for a Level Playing field. No loopholes for the rich; No unfair "credits" to the poor and unproductive. If your ethic says someone needs "charity or a tax break," do it with your own dollars according to your own means, and Keep you hands Off my earnings, and leave me be to my own conscience to be charitable how, when and where I wish, not how You decide. Mind tour Own damn business, not mine. If you think taxes are a "burden" to some group, then work to lower them, make the government smaller and more efficient, and Quit trying to steal extra money from other citizens. Pay your share % and leave me to pay the same %.
    Like (83)
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    Sure. We haven't done enough damage to the poor. Adding a disproportionately unfair tax to them should about eliminate them completely. Fabulous thinking folks. Vote no.
    Like (77)
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    Since Kansas is in a hole so deep they might actually reach China, I'm not really keen on a tax plan devised by one of their "experts". I'll pass on this sales tax. I'm sure it will be on women's clothes, makeup, shoes, tampons, birth control, hair care, chick flicks, QVC products, abortions and anything pink.
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    This hurts the poor and middle class who have to spend a greater proportion of their money just for basics. This helps the wealthy.
    Like (51)
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    Only way to make Federal taxation fair (assuming all loopholes were closed) is a sales tax. The rich spend more than the poor, so they would be paying more in sales taxes.
    Like (51)
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    This is patently absurd and will only serve to shift the burden of the budget to the lower income brackets and eliminating any responsibility to share the burden the higher and higher a persons income. Eliminate corporate taxes? This only increases the burden on the individual and further hoards resources away from the general welfare. Anyone voting for this vile suggestion, should have their "Human Being Card" revoked.
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    There are different kinds of taxes to make sure everybody pays something and nobody gets a free ride. By splitting the tax burden among consumption (sales/use) taxes, earnings (payroll/income) taxes, and holdings (property/estate) taxes, we're more likely to see that happen. Loading all taxes in one area will unfairly burden some groups while letting others ride the system. I'm OK with getting rid of the estate tax if it is replaced by an annual assets tax. But replacing it with a sales tax removes the tax burden from an entire class of taxable items, mostly wealthy people with assets in excess of the excludable threshold. Everyone, including the poor, would have to make up the difference. Not cool.
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    Don't tax the necessities like food, clothing, heating fuel. Taxes should be placed on luxury items such as vacation homes, third and fourth cars.
    Like (43)
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    Fair Tax? I believe Taxes are not Fair. Leaning more towards the Flat Tax. But when we get down to the nitty-gritty, I'll take the Fair Tax just to get Commissioner John Koskinen retired or in jail.
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    The idea that the wealthy will "consume more" than the poor and thus pay a higher sales tax is a disingenuous lie perpetrated by the wealth class against those bad at math. In a nation where the rich have literally hundreds of millions of times more wealth than the poor (and even most everyone else) there is NO WAY THE RICH CAN BUY HUNDREDS OF MILLIONS OF TIMES MORE CRAP to make up the tax shortfall
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    Pure sales tax is inherently regressive, disproportionately hurting the poor and middle class. This isn't fair to anyone. It's just another way to funnel more money to the billionaires.
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    This is a way for the rich to pay less tax, while those of us are retired and on a fixed income would carry the load. It is Robin Hood in reverse. Do not pass this bill. Another reason to vote for the Democrats! This is also a regressive tax which taxes the poor and middle class more as a percentage of income. Bad idea.
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    Make corporations pay the taxes they currently owe before we go changing anything!
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