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house Bill H.R. 25

Should the Tax Code Be Replaced With a National 23% Sales Tax?

Argument in favor

The current tax system is unnecessarily complicated, costing American taxpayers an inordinate amount of time and effort to file their annual returns. FairTax would be much simpler and would eliminate a federal agency, as well, helping shrink a bloated government.

Peter's Opinion
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04/15/2019
The billions we spend in preparing and filing our taxes will be eliminated, the loopholes that frustrate so many people hearing Amazon didn’t pay federal tax, etc, will be gone, it will encourage companies to bring their money to the US, sparking jobs and investments, it’s simple, and is worth a try. The only hard part is explaining... yes everything costs more but you’ll have more money to offset it. And offering hard cash at the end of the year to the lower and middle income levels means your first $10,000 dollars or whatever they come up with is tax free. If you get 2,800 dollars- or first $20,000 if you get a 5,600 dollar check. This isn’t a return, all the money that is withheld from every paycheck will show up in your account.
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Scott 's Opinion
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04/15/2019
Most definitely. No more IRS, no more tax day and everything gets funded. And the prebate everyone will get will make it progressive. Also, for those freaking out about 23% being added to the cost of a product, relax. The tax will be inclusive, not added on, but part of the price of goods and services at the retail level. And since every business will no longer be paying a federal income tax that cost will no longer need to be added on to the cost of products produced. So the price for production goes down keeping the price of things the same as they are now. Competition will also stabilize the cost of goods. Wages will go up as well since companies will no longer be required to pay their portion of FICA and payroll taxes. Fairtax.com
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04/15/2019
I LOVE the idea of not having to report income to our government, and this approach would fix that problem. A few commenters have argued that it is regressive. Our current system is highly regressive as well. Not income, but payroll tax. That is 15% on everyone.
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Argument opposed

FairTax would be regressive, disproportionately burdening low- and middle-class families while allowing the rich to spend a smaller proportion of their incomes on taxes. Its high rate would also incentivize tax evasion and black market sales to avoid the 23 percent tax.

SneakyPete's Opinion
···
04/15/2019
“Woodall (R) House Bill H.R. 25 AKA “23% “Fair Tax” “UN-FAIR & REPRESSIVE” FairTax would be regressive, disproportionately burdening low- and middle-class families while allowing the rich to spend a smaller proportion of their incomes on taxes. Its high rate would also incentivize tax evasion and black market sales to avoid the 23 percent tax. SneakyPete..... 👎🏻👎🏻FairTax👎🏻👎🏻. 4*15*19.....
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Kodiwodi's Opinion
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04/15/2019
O my gosh I’m agreeing with Sneaky Pete twice in one week! These Sales Taxes have been proposed many times before but they just don’t work. Just another name for a flat tax. Well, they work great for the wealthy, but not for the middle class or poor. As you read the description you find the first thing they tell you is this does not apply to business purchases, so for the wealthy every purchase will be a business purchase. They also make a number of other exclusions including investment purchases etc all things out of the range of the poor but helpful to the rich. What this also doesn’t mention, probably on purpose, is this type of tax requires everything to be taxed including food, medical supplies and SERVICES, any small business and internet services, virtually anything you purchase. Utilities, transportation, entertainment, hairdressers, doctors, yoga classes, restaurants, lawn care all taxed at this ridiculous rated. This is a regressive tax which unfairly affects the poor and middle class. Try again Republicans.
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IllWill's Opinion
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04/15/2019
The idea that this is a fair tax is moronic! A 23% sales tax on goods and services is absurd and will only be felt heavily by the working class and the poor. The wealthiest Americans will barely feel the pinch while they get to enjoy the fact that they won’t have to pay income taxes anymore! Progressive income taxes and corporate taxes are needed in order to make sure the government goes where the money is and to ensure that the tax burden is shifted more towards the wealthiest people in the country that afford to pay higher taxes. One way the government can reduce the burden of filing taxes is to direct Americans to a truly free and easy to use tax preparation software that isn’t run by tax preparation companies!
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bill Progress


  • Not enacted
    The President has not signed this bill
  • The senate has not voted
  • The house has not voted
      house Committees
      Committee on Ways and Means
    IntroducedJanuary 3rd, 2019

What is House Bill H.R. 25?

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 FY 2023. Tax revenues would go to the following:

  • General revenue;
  • Old-age and survivors insurance trust fund;
  • Disability insurance trust fund;
  • Hospital insurance trust fund; and
  • 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

U.S. taxpayers; the IRS; and the federal government.

Cost of House Bill H.R. 25

A CBO cost estimate is unavailable.

More Information

In-DepthRep. Rob Woodall (R-GA) reintroduced this bill from the 115th Congress (and multiple Congresses before that) to overhaul the federal tax code by replacing all existing income and payroll taxes with a one-time 23 percent consumption tax on new goods and services at the point of purchase. In 2013, Rep. Woodall said:

“For far too long the existing tax code has been an economic drain on our country.  America’s job creators are handcuffed by oppressive tax regulations and consequently seek less costly environments overseas. With the United States having the highest corporate income tax rates in the entire world, it can come as no surprise that businesses are going elsewhere.  It is estimated that over $10 trillion is currently being held offshore, but with passage of the FairTax we can incentivize businesses to bring that money back to our shores. When they invest and grow their business, they employ our neighbors.”

Rep. Woodall argues that this bill would help restore the American Dream by letting people keep more of the money they earn:

“Overnight, the FairTax would allow individuals to keep 100 percent of their income without the government first taking a penny… Right now, we are punished by the government for working hard and making money to support our families," he said. "The FairTax would eliminate that unfair burden and lift all income-related taxes. Hard-working Americans would keep their entire salary and pay taxes on their terms."

In a 2015 Atlanta-Journal Constitution article, Sen. David Perdue (R-GA) argued that the FairTax would benefit both individuals and businesses:

“Not only does the FairTax have powerful economic potential but it will also help rein in federal agencies like the IRS, preventing abuse and government overreach. Under this plan, Americans would be encouraged to save and invest and the amount they would pay to the federal government would be based on what they actually consume. The FairTax encourages innovation and investment and creates a level playing field with the rest of the world to support continued American growth.”

Americans For Fair Taxation expressed its support for FairTax in 2015. Its Chairman and President, Steve Hayes, said:

"Americans For Fair Taxation® is thrilled that Senators Jerry Moran and David Perdue are leading the fight for real tax reform. The Senators' sponsorship of the FairTax® serves notice that it is time for Congress to stand with the American people and enact the only tax replacement plan that will generate jobs, stimulate the economy and free the American people from the shackles of a punitive and out-of-control IRS."

FairTax’s critics say that it would be regressive, causing 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 FairTax, which causes taxes to be hiked further to compensate for tax evaders. Economist Dean Baker, co-director of the Center for Economic and Policy Research, adds that abolishing the IRS would exacerbate the problem of tax-dodging.

The Fair Tax’s proponents argue that its prebate would ensure that the tax isn’t regressive. However, Bruce Bartlett, a former Treasury Dept. official, says the prebate would do little to change the tax’s regressive nature, since people would spend their prebate, causing it to be taxed at the same 23 percent rate as normal wages:

“Even with the rebate counted the way the Fair Tax supporters want it calculated — as a reduction in tax liability rather than an increase in income — there would be an enormous shift in the tax burden from the wealthy to those with lower middle incomes.”

Political Correction, a project of the Media Matters Action Network, says FairTax “has numerous problems: It relies on unsound numbers and, in practice, it would cause taxes to rise, incentivize tax evasion, and shift the tax burden onto the middle class.” Among its points, Political Correction argues that FairTax:

  • Would effectively tax products at an equivalent of 30, rather than 23, percent;
  • Unfairly burdens the lower and middle classes;
  • Relies on a flawed rebate system that wouldn’t prevent the tax burden from shifting to the middle class;
  • Incentivizes tax evasion through off the books purchases and black markets; and
  • Would exacerbate tax evasion problems and necessitate tax hikes.

Writing for the Ludwig Von Mises Institute, a Libertarian political and economics think tank, Laurence M. Vance adds that FairTax would shift tax collecting responsibilities onto ordinary businesses, which would have to collect and report taxes for each good and service. Thus, Vance argues, “the FairTax turns every business into a tax collector.” He contends that this would mean “[e]very small service business and every Internet business that does not currently collect state sales taxes will have to collect taxes for the federal government. Every doctor will now have to charge sales tax on his services.” He asks, “Where will this end? Will the neighborhood boy who mows lawns have to begin collecting federal sales tax on each lawn mowed? Will the neighborhood girl who baby sits have to do likewise?

This bill has 29 Republican cosponsors in the 116th Congress. In the 115th Congress, it had 47 Republican cosponsors and didn’t receive a committee vote. Prior to the 115th Congress, Rep. Woodall had introduced this bill in the 114th Congress with the support of 75 Republican cosponsors, and it didn’t receive a vote in that Congress.

The FairTax Act was first introduced by then-Rep. John Linder (R-GA) in 1999.


Of NoteAccording to the National Taxpayers Union, American taxpayers lost $234 billion from spending 1.9 billion hours figuring out and paying their taxes. The NTU says:

“Of this total, $64.6 billion is attributable to lost productivity from 1.9 billion hours spent on the 1040 tax form series alone. While $29.6 billion can be chalked up to software, tax preparation fees, supplies, and other overhead for the yearly tax filing chore. The remainder of the costs, made up mostly of corporate compliance pains, affects the economy in numerous ways such as higher prices for consumers, lower returns for shareholders, and less competitive operations abroad.”

The Tax Foundation adds that the current tax code has grown substantially since the eighties. When President Reagan signed the Tax Reform Act into law in 1986, the tax code was 30,000 pages. Today, it’s over 70,000 pages.


Media:

Summary by Lorelei Yang

(Photo Credit: iStockphoto.com / designer491)

AKA

FairTax Act of 2019

Official Title

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.

    The billions we spend in preparing and filing our taxes will be eliminated, the loopholes that frustrate so many people hearing Amazon didn’t pay federal tax, etc, will be gone, it will encourage companies to bring their money to the US, sparking jobs and investments, it’s simple, and is worth a try. The only hard part is explaining... yes everything costs more but you’ll have more money to offset it. And offering hard cash at the end of the year to the lower and middle income levels means your first $10,000 dollars or whatever they come up with is tax free. If you get 2,800 dollars- or first $20,000 if you get a 5,600 dollar check. This isn’t a return, all the money that is withheld from every paycheck will show up in your account.
    Like (57)
    Follow
    Share
    “Woodall (R) House Bill H.R. 25 AKA “23% “Fair Tax” “UN-FAIR & REPRESSIVE” FairTax would be regressive, disproportionately burdening low- and middle-class families while allowing the rich to spend a smaller proportion of their incomes on taxes. Its high rate would also incentivize tax evasion and black market sales to avoid the 23 percent tax. SneakyPete..... 👎🏻👎🏻FairTax👎🏻👎🏻. 4*15*19.....
    Like (126)
    Follow
    Share
    O my gosh I’m agreeing with Sneaky Pete twice in one week! These Sales Taxes have been proposed many times before but they just don’t work. Just another name for a flat tax. Well, they work great for the wealthy, but not for the middle class or poor. As you read the description you find the first thing they tell you is this does not apply to business purchases, so for the wealthy every purchase will be a business purchase. They also make a number of other exclusions including investment purchases etc all things out of the range of the poor but helpful to the rich. What this also doesn’t mention, probably on purpose, is this type of tax requires everything to be taxed including food, medical supplies and SERVICES, any small business and internet services, virtually anything you purchase. Utilities, transportation, entertainment, hairdressers, doctors, yoga classes, restaurants, lawn care all taxed at this ridiculous rated. This is a regressive tax which unfairly affects the poor and middle class. Try again Republicans.
    Like (116)
    Follow
    Share
    The idea that this is a fair tax is moronic! A 23% sales tax on goods and services is absurd and will only be felt heavily by the working class and the poor. The wealthiest Americans will barely feel the pinch while they get to enjoy the fact that they won’t have to pay income taxes anymore! Progressive income taxes and corporate taxes are needed in order to make sure the government goes where the money is and to ensure that the tax burden is shifted more towards the wealthiest people in the country that afford to pay higher taxes. One way the government can reduce the burden of filing taxes is to direct Americans to a truly free and easy to use tax preparation software that isn’t run by tax preparation companies!
    Like (73)
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    Instead Simplify the tax code, tax the rich and large corporations to FAIRLY redistribute the tax burden away from the middle class and small business entrepreneurs. This is another deplorable Republican SCAM to undermine effective governance. Vote the fuckers OUT!
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    Just another crazy republican proposing some form of flat tax that, in the end, only further hurts the middle class while benefitting the wealthiest.
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    No. Absolutely Not. Sales tax disproportionately taxes the poor people more. This is not a solution it will be a societal problem for those trying to scrape by. A national flat tax that taxes the rich at a much higher level then they are now is the answer. No tax on the first 30k or so? 75% on the top 1% 50 on the top 10%? These groups make a tremendous amount money on the backs of the lower 90%. People should be taxed accordingly. A sales tax is NOT the answer.
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    23% sales tax? Add state and local taxes and that $1000 flatscreen TV you wanted to buy is now $1400. Not a well thought out plan.
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    Sales tax is inherently regressive and puts the burden on the poor and middle class. Let’s do Eisenhower taxation.
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    How will this solve anything, unless the goal is to make the poor poorer and the middle class poor? If Republicans want to make America as great as it was in the past, tax the super rich at 90%. It worked in the past; it would work now.
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    While i do agree our tax law is way too complicated, a 23% tax on everything is just insane.
    Like (27)
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    NO. The majority of Americans who are the least able to afford it get screwed while for the rich, 1%, donor class once again get to keep 99.999% of their fortunes.
    Like (25)
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    I’m against this fair tax, I completely agree with SneakyPete that middle and lower class citizens would bear the brunt of this as they have since national income tax were initiated in 1913. Continuing to simplify our tax code as President Trump has done, lowering the tax burden on middle and lower classes is the right approach, also cutting 5% from every agency, department in the Federal government as President Trump had them do too find waste, the only exception would be the Department of Defense which suffered under Obama. #MAGA
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    Too many loopholes for the wealthy, as usual.
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    Greed is running amuck in this administration. https://youtu.be/IpeNWhbbyDI
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    This is a regressive tax.
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    Fair Tax? Where in the Constitution does the word Fair appear?
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    Most definitely. No more IRS, no more tax day and everything gets funded. And the prebate everyone will get will make it progressive. Also, for those freaking out about 23% being added to the cost of a product, relax. The tax will be inclusive, not added on, but part of the price of goods and services at the retail level. And since every business will no longer be paying a federal income tax that cost will no longer need to be added on to the cost of products produced. So the price for production goes down keeping the price of things the same as they are now. Competition will also stabilize the cost of goods. Wages will go up as well since companies will no longer be required to pay their portion of FICA and payroll taxes. Fairtax.com
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    NO, UNFAIR to those on minimal income!
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    The sales tax is a regressive tax, hurting the poor more than anyone else.
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