Proposed Bill Would Replace Income Tax with National Sales Tax, Bringing Significant Changes to U.S. Tax System
Rep. Carter, Earl L. "Buddy" [R-GA-1]
A new bill has been proposed that would fundamentally change the way taxes are collected in the United States. The bill would replace the current income taxes, payroll taxes, and estate and gift taxes with a national sales tax on the use or consumption of taxable property or services. The proposed sales tax rate would be 23% in 2025, with adjustments in subsequent years. The bill also includes provisions for exemptions from the tax, a monthly rebate for U.S. resident families, and the allocation of tax revenue to several trust funds. However, the bill's implementation would also come with potential drawbacks, such as higher prices for goods and services and potential issues with exemptions and allowances. Let's take a closer look at what this proposed bill entails.
The bill includes exemptions from the tax for used and intangible property, purchases for business, export, investment purposes, and state government functions. Additionally, lawful U.S. resident family members would receive a monthly sales tax rebate called the Family Consumption Allowance, based on family size and poverty guidelines. This rebate would help lower-income families offset the costs of the new tax.
The proposed bill would also shift the responsibility of collecting and remitting the sales tax revenue from the federal government to the states. The tax revenue would be allocated among several trust funds, including the general revenue, old-age and survivors insurance trust fund, disability insurance trust fund, hospital insurance trust fund, and federal supplementary medical insurance trust fund.
One notable provision in the bill is that it would terminate the national sales tax if the Sixteenth Amendment to the Constitution, which authorizes an income tax, is not repealed within seven years after the enactment of this bill. Additionally, no funding is authorized for the operations of the Internal Revenue Service after FY2027.
While the proposed bill has potential benefits, such as simplifying the tax code and stimulating economic growth, it could also result in higher prices for goods and services, particularly for lower-income individuals who would not receive the full amount of the Family Consumption Allowance. Nonetheless, proponents argue that it would encourage saving and investment.
The proposed bill could bring about significant changes in the way taxes are collected in the United States. While it would simplify the tax code and shift the tax burden away from income and towards consumption, it could also result in higher prices for goods and services, particularly for lower-income individuals who would not receive the full amount of the Family Consumption Allowance. There are also concerns about how the exemptions and allowances would be administered and whether the revenue generated would be enough to sustain the trust funds. Nevertheless, supporters of the bill argue that it would promote fiscal responsibility and economic growth, as well as reduce the burden of compliance costs associated with income tax. Overall, the success of the proposed legislation would depend on how it is implemented and the specific exemptions and allowances included.