Bye Bye, Federal Income Tax?

Rep. Buddy Carter [GA] has filed HR 25 – Fair Tax Act. I’ve been looking it over.

Basically, it repeals all federal personal and corporate income taxes, and replaces it with a national sales tax. If it somehow passed as-is (which it won’t, see below), it would — in theory — be an improvement over the current system. You’d keep more of your money.

L. Neil Smith once calculated that seven-eighths of the price of a loaf of bread is actually taxes: cumulative taxes along every stage of production; farming wheat, selling to milling companies that turn it into flour, selling to bakeries that turn it into bread, selling it to distributors that in turn sell it to stores. And finally the sales tax the consumer pays.

HR 25 gets rid of that cumulative taxing. In theory, companies should adjust their prices down to compensate for the taxes once built into the price, that they’d no longer be paying. You’d still be paying a 23% sales tax on a new lower price, but that beats paying 87.5%. The problem I see is that few companies would adjust their prices accordingly; they’d view it as just an improvement to their profit margin.

Or, perhaps, some genius could convince companies that dropping prices would be a great PR move. Doubtful.

But I can’t see this passing. It would be tough in the barely Republican House, and impossible in the Dimwit controlled Senate. It takes away the Dims’ power to social engineer corporations through taxation. Worse, from the spendthrift Dim perspective, it caps federal revenue at just 14.91% (plus some other stuff).

Worst for the Dims: It eliminates the IRS, one of their favorite Lois Lerner style cudgels with which to threaten and damage political opponents.

It won’t pass now, anymore than did the previous attempts. Nice try, Buddy.


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4 thoughts on “Bye Bye, Federal Income Tax?”

  1. Looked into it years ago. One problem: America has very long borders with two other countries and lots of people could cross to escape the sales tax. Has anyone addressed this?

    The other issue is online sales. Lots of those are taxed now, so maybe less of an issue now. But what of online foreign purchases?

    1. I’m not advocating this, but…

      1. Canada/Mexico sales: The vast majority of Americans won’t see that as much of an option for routine purchases. For those that do, there’s this thing called CBP checkpoints. Agents could simply present a tax bill for the estimated purchase price.

      2. Online foreign purchases: Ditto. Customs already intercepts shipments. Slap a bill on the parcel.

      3. Domestic online sales: Easiest of all. Outfits like Amazon are already required to collect sales taxes if they have a business presence in the state where the buyer resides. They just add another tax jurisdiction — federal — to all transactions. The system is already in place.

  2. Hm. Thank you.
    Even if there are other kinks not yet addressed… getting rid of IRS would be priceless.

    Not that they’ll do it… but talking about it seems like a good idea…

    1. Eliminating the IRS? Sure; great.

      But someone would have to oversee Carter’s federal sales tax. To make sure sure all sellers are registered and collecting; including yard sales and classified ads.

      Call it the United States Sales Revenue Service (USSR).

      Kinda like when Congress passed a bill eliminating the organization called “Total Information Awareness,” but for some odd reason didn’t ban collecting “total information” on citizens. A rose by any other name would still reek of DC swamp water.

      Sorry; I tend to be at my most pessimistic when I’ve had a few drinks.

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