As part of the set of concessions he made to his own party in order to become speaker, McCarthy pledged to hold a vote on a 2023 Fair tax proposal.
The proposal has been around for decades, but in short it replaces the federal tax system with a national sales tax between 20 and 30 percent. It would entirely abolish the IRS, and the sales tax would be removed if the 16th amendment isn't repealed (thereby dropping federal tax revenue to effectively 0).
There are some obvious pitfalls with the high level proposal as well as the numbers within the current draft including:
1) The proposal is regressive, significantly raising taxes on the middle class while significantly lowering taxes on the wealthy.
2) As written, the proposed rate of 23 percent is insufficient to replace current revenue streams. The necessary amount is estimated to be 30 percent prior to dynamic scoring.
Here's the link for those interested.
Is anyone interested in seeing this pass?
This bill imposes a national sales tax on the use or consumption in the United States of taxable property or services in lieu of the current income taxes, payroll taxes, and estate and gift taxes. The rate of the sales tax will be 23% in 2025, with adjustments to the rate in subsequent years. There are exemptions from the tax for used and intangible property; for property or services purchased for business, export, or investment purposes; and for state government functions.
Under the bill, family members who are lawful U.S. residents receive a monthly sales tax rebate (Family Consumption Allowance) based upon criteria related to family size and poverty guidelines.
The states have the responsibility for administering, collecting, and remitting the sales tax to the Treasury.
Tax revenues are to be allocated among (1) the general revenue, (2) the old-age and survivors insurance trust fund, (3) the disability insurance trust fund, (4) the hospital insurance trust fund, and (5) the federal supplementary medical insurance trust fund.
No funding is authorized for the operations of the Internal Revenue Service after FY2027.
Finally, the bill terminates the national sales tax if the Sixteenth Amendment to the Constitution (authorizing an income tax) is not repealed within seven years after the enactment of this bill.
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