Republicans Propose Bill To Replace Income, Payroll Taxes With National Sales Tax, Abolish IRS

By Ben Zeisloft - The Daily Wire


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Republican lawmakers proposed a bill to replace the income, payroll, and estate taxes with a national sales tax while abolishing the IRS.

The Fair Tax Act, introduced by Rep. Buddy Carter (R-GA), is an attempt to simplify the tax code and the tax collection system. Similar legislation was first proposed in 1999 by former Rep. John Linder (R-GA); the current iteration of the bill is also sponsored by House Freedom Caucus Chair Scott Perry (R-PA), as well as lawmakers such as Rep. Bob Good (R-VA), Rep. Jeff Duncan (R-SC), Rep. Thomas Massie (R-KY), and Rep. Kat Cammack (R-FL).

“As a former small business owner, I understand the unnecessary burden our failing income tax system has on Americans,” Duncan said in a press release. “The Fair Tax Act eliminates the tax code, replaces the income tax with a sales tax, and abolishes the abusive Internal Revenue Service. If enacted, this will invigorate the American taxpayer and help more Americans achieve the American Dream.”

The 23% national sales tax established by the bill would enter into effect by 2025. The federal income tax, created by the Sixteenth Amendment in 1913, currently accounts for 49% of total federal revenues, according to data from the Treasury Department. Social Security and Medicare taxes constitute 35% of revenues, while corporate taxes provide 10% of revenues.

The Fair Tax Act would attempt to repeal the Sixteenth Amendment and sunset the national sales tax if the repeal is unsuccessful within a seven-year period.

The new legislation comes after President Joe Biden’s Inflation Reduction Act approved $80 billion for the IRS. Treasury Secretary Janet Yellen said that the funding will enable staff to more easily assist individuals and businesses seeking to file their taxes; a report from the Treasury Inspector General for Tax Administration, however, indicated that the agency has not yet decided how the funds will impact audit rates for middle-income taxpayers.

Critics of the national sales tax note the regressive nature of the policy. While the current federal income tax system is progressive, meaning that individuals tend to pay more as their income rises, sales taxes take a larger share of low-income households’ salaries since they utilize a larger portion of their wages for expenses, according to an analysis from the Tax Policy Center.

Biden responded to the proposal by asserting that the national sales tax would increase prices on “everything from groceries and gas to food and medicine.” His post neglected to mention that the bill would also repeal the income, payroll, and estate taxes while offering a number of refunds and rebates to families. Sen. Elizabeth Warren (D-MA) likewise failed to mention the repeal of the current tax regime when she said on social media that “it’s not fair to impose taxes on working people, while giving massive tax breaks to the ultra-rich.”

Republicans have often called for the abolition of the IRS and voted earlier this month to reverse the windfall offered to the agency by the Inflation Reduction Act. “This bill will eliminate the need for the department entirely by simplifying the tax code with provisions that work for the American people and encourage growth and innovation,” Carter said in the press release. “Armed, unelected bureaucrats should not have more power over your paycheck than you do.”

:shock:

Cash becomes king. Underreport the sales price of something bought with cash, and the buyer pays less tax. No IRS means no enforcement of tax cheats.

I've been paying cash for furniture and appliances for years. Usually bargain for 20% less.

But wait, there's more!!!!

The sales tax would be a flat 30%; collection of the tax would be delegated to the States and "income prebates" would be given that will essentially establish a guaranteed national wage.

Conservative, my ass.

MYTH VS. FACT: THE FAIRTAX ACT

MYTH: The FairTax rate is really 30 percent not 23 percent.

Our current income tax is expressed as an inclusive rate. When directly comparing the FairTax to our current income tax, the FairTax rate is 23 percent.

Under the FairTax, if you pay $100 for a good, you pay $77 for the good and an inclusive $23 tax. If you take the $23 as a percentage of the $100 tendered, the tax rate is 23 percent. Unfortunately, opponents of the FairTax typically speak of the FairTax in terms of an exclusive tax, simply because the rate sounds higher to consumers. Not only do opponents of the FairTax fail to admit that the inclusive and exclusive rates have consumers paying the same amount of money, but they also compare the exclusive FairTax rate to the inclusive income tax rate. This is an unfair and misleading comparison.


MYTH: The FairTax will hurt the poor and give the rich a huge tax cut.

The FairTax is the only progressive tax reform bill currently pending before Congress. Each household will receive a monthly prebate based on federal poverty levels and household size that will allow families to purchase necessary goods, such as food, shelter, and medicine, essentially tax-free. This is similar to our current individual exemption and refundable tax credit system.

Further, the FairTax is not riddled with shelters and loopholes, meaning wealthy taxpayers cannot minimize what they pay in taxes, regardless of how many lawyers and accountants they hire to advise them.


MYTH: The FairTax will unfairly punish senior citizens living off of their retirement income.

Retired individuals living on a fixed income will benefit from the FairTax just like all other Americans. The new system will eliminate the current income tax on Social Security benefits, as well as income taxes on investment income, pension benefits, and Individual Retirement Accounts (IRA) withdrawals. The monthly prebate will offset the taxes paid by seniors on essential goods. After the initial implementation of the FairTax, if prices increase, penny for penny seniors will receive additional Social Security benefits until prices return to or below pre-FairTax levels.


MYTH: The FairTax adds 23 percent onto the price of everything we buy.

Americans will not experience a decrease in their purchasing power under the FairTax. The costs of goods and services under the FairTax will remain relative to the costs of goods and services under our current system.

Under today’s income system, the embedded cost of payroll, income taxes, and compliance are hidden and can be as high as 25% of the cost you pay at the register. The FairTax will eliminate all of those costs and replace them with a transparent 23 percent personal consumption tax on new goods and services. The FairTax will make every American a voluntary taxpayer with the ability to decide when and how much they will pay the Federal government in taxes.


MYTH: The FairTax will make new homes too expensive and it will eliminate incentives like the mortgage interest rate deduction.

Under the current system, each time a new home is purchased, the home buyer is paying an increased price that results from embedded costs. Under the FairTax, these embedded costs are eliminated, meaning the cost for consumers can fall relative to the price of home construction and compliance costs. Additionally, under the FairTax, mortgage interest rates are expected to drop as interest income falls toward the tax-free bond rate.


THE BOTTOM LINES

Our current tax system is broken and oppressive.
The FairTax allows Americans to keep 100 percent of their hard-earned paycheck and end the IRS headache. A family of four could spend $30,000.00 annually without paying a penny in taxes.
Further, this bill will save small businesses hundreds of billions of dollars a year in compliance costs, making it easier to start and grow a business here in America.
By capturing the underground economy, tourism dollars, and purchases made by illegal immigrants, this bill will save social security while leaving more money in the hands of the American people and revolutionizing our economy.

Taken from an email that my Representative Buddy Carter sent me.

Kindly do me a favor and ask Buddy some questions, including:
What happens to the housing market when the mortgage interest deduction vanishes?
How do you stop merchants for charging less for cash purchases, and what incentive do State officials have to enforce this when the money goes to the Feds?
Doesn't the prebate effectively establish a guaranteed income?
What incentive do young wage earners have to contribute to IRAs if there is no tax savings incentive to do so?

Quote:

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Originally Posted by perrhaps

Kindly do me a favor and ask Buddy some questions, including:
What happens to the housing market when the mortgage interest deduction vanishes?

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It's already vanished for me. When I do our taxes, since they increased the standard deduction amount, no matter what I try to itemize, we still don't end up at or above the standard deduction, so we haven't itemized since the increase so there has been effectively been no mortgage interest deduction. Unless you have a metric crap-ton of stuff to deduct and itemize, which the majority of taxpayers don't have, there is no mortgage interest deduction benefit because it's completely out of play, the standard deduction is already higher.

Quote:

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Originally Posted by perrhaps

How do you stop merchants for charging less for cash purchases, and what incentive do State officials have to enforce this when the money goes to the Feds?

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You act like this is something new. It happens now and my boss does it all the time when he buys things like used cars in a private sale, he lies about the selling price on the Bill of Sale so that he can pay the least amount of tax on the vehicle when he goes to register it. The new tax structure won't change this at all and it's only going to happen in limited areas. You can't walk into Walmart and negotiate a lower cash price for the items in your cart. Nor could you walk into your local Porsche dealership and wink and nod at the salesman and pay 50% of the sticker price in cash just to avoid paying the correct amount of sales tax.

Quote:

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Originally Posted by Teh One Who Knocks

It's already vanished for me. When I do our taxes, since they increased the standard deduction amount, no matter what I try to itemize, we still don't end up at or above the standard deduction, so we haven't itemized since the increase so there has been effectively been no mortgage interest deduction. Unless you have a metric crap-ton of stuff to deduct and itemize, which the majority of taxpayers don't have, there is no mortgage interest deduction benefit because it's completely out of play, the standard deduction is already higher.



You act like this is something new. It happens now and my boss does it all the time when he buys things like used cars in a private sale, he lies about the selling price on the Bill of Sale so that he can pay the least amount of tax on the vehicle when he goes to register it. The new tax structure won't change this at all and it's only going to happen in limited areas. You can't walk into Walmart and negotiate a lower cash price for the items in your cart. Nor could you walk into your local Porsche dealership and wink and nod at the salesman and pay 50% of the sticker price in cash just to avoid paying the correct amount of sales tax.

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That's 2 out of 4. How is the tax enforced in Delaware, which I believe still has no sales tax?
You raise another valid point against the proposal, which is that it will effectively kill the new car market by boosting the used car market.

And we all realize that 23 is 30 percent of 77, right?