New Speaker of the House Kevin McCarthy has proposed a vote on a proposal called the Fair Tax, which would abolish the current federal income tax and replace it with a 30% national sales tax. Payroll taxes, which finance Social Security and Medicare, would also get axed.The IRS would go. States would collect the sales levy and remit proceeds to Washington.
Unfortunately, as this segment of What’s Ahead discusses, the Fair Tax has serious problems. Right out of the gate, the big one is political. How, particularly in these inflationary times, are voters going to react to paying a 30% sales tax on what they buy? A typical new house would cost an additional $125,000, not to mention the thousands of extra dollars people would pay for food, fuel, electricity and countless other items.
Proponents say incomes would go up because Federal levies on earnings would disappear, but since that wouldn’t make most people whole, the Fair Tax would pay a rebate each month to every household to help pay for necessities. That idea poses challenges.
Other problems with the Fair Tax are examined.
The GOP is playing with fire here—both politically and administratively.