A proposal that has been put forth several times since the 1990s is back, this time with more adherents.
The bill, House Resolution 25 (HR 25), called the "FairTax Act'' would repeal all federal taxes, including income tax. It would create a national sales tax that would be administered by the states.
The bill has a confusing method of calculator that the Institute of Taxation and Economic Policy says is really a 30% tax.
“Under the bill, if you buy something that costs $100 before tax, you pay $30 of national sales tax. Most of us would call that a 30 percent sales tax,” ITEP says on its website. “Proponents, however, call it a 23 percent tax, because that $30 is 23 percent of your “gross payment” of $130, your payment including the sales tax. Proponents claim this method of calculation is more comparable to how we think about the income tax but its main result is widespread confusion.”
ITEP traces the history of this idea to the Church of Scientology and its dispute with the IRS about tax-exempt status.
The bill lists many reasons why the current taxation system is flawed.
“Congress finds the Federal income tax—
“(1)retards economic growth and has reduced the standard of living of the American public;
“(2)impedes the international competitiveness of United States industry;
“(3)reduces savings and investment in the United States by taxing income multiple times;
“(4)slows the capital formation necessary for real wages to steadily increase;
“(5)lowers productivity;
“(6)imposes unacceptable and unnecessary administrative and compliance costs on individual and business taxpayers;
“(7)is unfair and inequitable;
“(8)unnecessarily intrudes upon the privacy and civil rights of United States citizens;
“(9)hides the true cost of government by embedding taxes in the costs of everything Americans buy;
“(10)is not being complied with at satisfactory levels and therefore raises the tax burden on law abiding citizens; and
“(11)impedes upward social mobility.” - https://www.govtrack.us/congress/bills/118/hr25/text
The bill goes on to talk about how all the other taxes imposed by the federal government are onerous and destructive to the people.
The bill puts most of the work for collecting the taxes on the states, five of which don’t collect sales tax now and would need to create a system for doing so.
In 2004, William Gale estimated that replacing all federal taxes with a sales tax would require a tax rate of 60%.
The sales tax would raise tax on most Americans, except the wealthy. The average American pays 13% in federal taxes, so even the 23 percent would be a tax increase.
The “Fair Tax Act” has been sent to committee and has found some support among so-called MAGA Republicans who are very keen on curbing or eliminating the IRS.
Bob Peryea
National Correspondent
The Kentucky Daily