Democrats Lambast GOP Plan to Abolish Income Tax and Impose 30 Percent Sales Tax

Related:

What House Republicans Should Know about the Fair Tax

Any House Republican who backs this bill can accurately be accused of voting for the following things: raising the price of everything by a huge amount at a time when inflation is already high; shifting more of the tax burden to the middle class; instituting a large new wealth tax on senior citizens; increasing federal spending by a massive amount; increasing the deficit; and creating large black markets.

It should be pretty easy to see how the bill would shift the tax burden from high earners to the middle class. It holds poor people harmless by sending everyone a “prebate” to cover taxes on all purchases up to the poverty line, and it substantially reduces the taxation of returns to investment. If the bill achieves its goal of raising the same amount of money as the current tax system, it has to increase taxes on the middle class. (And that’s even before considering how much states and localities would raise tax rates once they found that everything they bought was 30 percent more expensive.) It almost certainly would fall far short of that, but the middle-class share of taxes paid would still go up.

Senior citizens would find that the real value of their savings had dropped by about 30 percent. Having paid taxes on their income throughout their working lives, they would now also be paying taxes when they spend that income in retirement.

Federal spending would rise because of one way the bill tries to cushion the blow for seniors. Simply swapping existing taxes for a new sales tax would reduce the real value of Social Security checks, too. The bill solves this problem by enlarging the checks. That’s one of many reasons for thinking that the bill is likely to swell the deficit. Another is that a sales-tax rate this high is bound to lead to large-scale evasion.

FairTax (Wikipedia):

The legislation would remove the Internal Revenue Service (after three years), and establish Excise Tax and Sales Tax bureaus in the Department of the Treasury.

…

The sales tax rate, as defined in the legislation for the first year, is 23% of the total payment including the tax ($23 of every $100 spent in total—calculated similar to income taxes). This would be equivalent to a 30% traditional U.S. sales tax ($23 on top of every $77 spent—$100 total, or $30 on top of every $100 spent—$130 total).[5] After the first year of implementation, this rate is automatically adjusted annually using a predefined formula reflecting actual federal receipts in the previous fiscal year.

…

A good would be considered “used” and not taxable if a consumer already owns it before the FairTax takes effect or if the FairTax has been paid previously on the good, which may be different from the item being sold previously. Personal services such as health care, legal services, financial services, and auto repairs would be subject to the FairTax, as would renting apartments and other real property. Food, clothing, prescription drugs, and medical services would be taxed. (State sales taxes generally exempt these types of basic-need items in an effort to reduce the tax burden on low-income families. The FairTax would use a monthly rebate system instead of the common state exclusions.) Internet purchases would be taxed, as would retail international purchases (such as a boat or car) that are imported to the United States (collected by the U.S. Customs and Border Protection).