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The Fair Tax Act is not the first proposal to change the tax system

The Fair Tax Act is not the first proposal to change the tax system

On January 9, some Republicans in the House introduced the Fair Tax Act of 2023. The bill would eliminate income, payroll, estate and gift taxes. Instead, it would replace them with a 23% sales tax that would be closer to 30% after other taxes are included.

The bill is unlikely to pass. Not all Republicans are on board, Democrats control the Senate, and President Biden has said he would veto it if it defies hurdles and reaches his desk.

“It is technically possible [eliminate the income tax]”There’s a question of whether it’s desirable and whether the consequences will be good and that’s another question,” said Eric Toder, a fellow at the Urban Brookings Tax Policy Center, a nonpartisan think tank based in Washington, DC.

This is not the first time that parliamentarians have talked about overhauling the country’s tax system.

In 2017, President Trump’s administration issued the biggest overhaul of taxes in decades, cutting the corporate income tax from 35% to 21% and the top marginal rate from 39.5% to 37%.

Prior to this, the biggest change to the tax code came in 1986, when the top income tax rate was reduced from 50% to 28% as it raised the bottom rate from 11% to 15%.

But it still revolves around the idea of โ€‹โ€‹the income tax, a uniquely American approach to taxes on a global scale, when considering how much of our tax base it makes up.

“Most countries in the world rely more heavily on consumption taxes than the United States,” Toder said. “Almost every country has something called a value-added tax, which is actually a form of retail sales tax, but it’s collected at different stages of production.”

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The recently proposed Fair Tax Act is similar to a consumption tax, levying a tax on consumers. A value added tax is paid by the production companies, who then pass on the cost of the tax to the consumer through higher prices on their goods.

In the United States, income tax accounts for about 50% of our tax base, while payroll tax accounts for 35%. Alternatives such as a value added tax or a sales tax are ideas to change who and where the money comes from.

“If you look at opinion polls for years and years, and you ask people whether they think the tax system is fair to them or not, surprisingly perhaps, most people say they think it’s They think they’re paying the right amount of tax. What bothers them is that they think rich people and corporations aren’t paying enough tax,” said Howard Urban, a fellow at the Brookings Tax Policy Center. Glickman said.

Independent analysis by groups such as the Tax Policy Center shows that sales taxes are a greater burden on low-income households because they spend more money than wealthier households.

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