Blog A 30% National Sales Tax Munnigramming Classifieds - February 7, 2023 0 A 30% national sales tax? Abolishing the IRS? What the FairTax Act of 2023 would do. There is hardly an area of American life more subject to partisan debate than the tax code. Democrats want to raise taxes. Republicans want to slash them. At least that’s how the well-worn narrative goes. But, in actuality, debate over the IRS and how much Americans should fork over to Uncle Sam can be more complicated. Not all lawmakers of a certain caucus align. Take, for example, the FairTax Act of 2023, a new bill championed by some GOP House members, but not all. The idea for the legislation — a universally applied sales tax on consumer goods and services — has been around for a long time. Perennially, it gains new vigor, as it has this year. Here’s everything you need to know about the proposed bill, and how it would work. What is the FairTax Act of 2023? The ‘FairTax Act of 2023,’ a bill introduced in early January by U.S. Rep. Earl “Buddy” Carter (R-GA) proposes a national sales tax on the use or consumption of taxable property or services. The sales tax would be levied in place of current income taxes, payroll taxes, and estate or gift taxes which are outlined in Subtitles A, B, C and H of the Internal Revenue Code of 1986. The proposed legislation would repeal those subtitles and instead enact a new Internal Revenue Code: The Internal Revenue Code of 2023. Though the bill outlines a 23% tax rate, the “gross payment” or the payment for both taxable property and services, combined with federal taxes is actually closer to 30%. The bill, a brainchild of one faction of the Republican party, does not yet have broad GOP support, and is unlikely to pass. It would need to not only make it through the House but also the Senate which has a Democratic majority. President Joe Biden has already said he will veto the bill should it defy odds and reach his desk. How does FairTax work? Enacting the ‘FairTax Act’ would usher in a complete overhaul of the tax system. The sales tax levied would effectively replace both payroll and income taxes. The proposed rate is 23% for 2025, to be adjusted in the subsequent years. It would fall to the states to administer, collect, and remit the sales tax to the Treasury. There are some exceptions to taxable property and services including: used and intangible property property or services purchased for business, export, or investment purposes property or services purchased for state government functions The tax revenues generated would be allocated to five different categories: the general revenue, the old-age and survivors insurance trust fund, the disability insurance trust fund, the hospital insurance trust fund, and finally the federal supplementary medical insurance trust fund. US citizens would receive a monthly sales tax rebate — a Family Consumption Allowance — based on certain guidelines outlined for family size and poverty. The bill also cuts off funding for operation of the IRS after the 2027 fiscal year, a possible pain point for Democratic lawmakers who have pushed for increased allocations to help with oversight. The bill’s final provision is a termination of the national sales tax if the Sixteenth Amendment to the Constitution, which authorizes an income tax, is not repealed within seven years of the law being enacted. Share this:Click to share on Twitter (Opens in new window)Click to share on Facebook (Opens in new window)Click to share on Pinterest (Opens in new window)Click to share on WhatsApp (Opens in new window)Click to share on Reddit (Opens in new window) Related Categories: Blog Business Employment Finance Financial Jobs News United States Comments (0) Leave a Reply Cancel replyYou must be logged in to post a comment.