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The 'Fair Tax' Act

H.R.25 -118th Congress (2023-2024)

Representative Carter (R-GA-1) introduced the 'Fair Tax' Act of 2023, proposing to replace individual and corporate income taxes, the estate tax, and payroll taxes with a national 30% sales tax. Speaker McCarthy has indicated he will advance the bill to the floor for a vote.

The first impressions of the bill suggest that this is a ridiculous proposal. However, after delving into the legislative details, it is unequivically absurd.

It is a frequent misunderstanding that the poor and middle classes 'don't pay taxes'. They do: payroll tax, sales taxes, excise taxes, if not a proportionate share of the income tax. Increasing sales tax is therefore an unreasonable burden for the middle and lower classes.

These incerases are allegedly offset by reductions in income tax which would be returned to taxpayers by 'pre-funds' and refunds of income tax withholding. With so many people living paycheck to paycheck, an immediate 30% increase in living expenses would be devestating. They wouldn't make it to the periodic government payments.

The resulting decreases in revenue it would necessarily gut the budget, requiring welfare programs like social security and medicare to be discontinued.

On the other end of the spectrum, wealthy and high-income taxpayers are relieved of any income tax from the highest tax rates.

Finally, the bill would eliminate funding for the IRS in 2027.

In brief, this bill is political stunt, nothing more than performative theatre. Bringing it to a vote is a waste of time. This is not a serious proposal.