![]() Tax-exclusive rates compare the tax paid to the price excluding taxes. Tax-inclusive rates compare the tax paid to the total price including taxes. Tax rates can be stated in tax-inclusive or tax-exclusive terms. Consumption taxes also tend to be regressive because lower-income households tend to spend more of their incomes than they save. In general, consumption taxes are more economically efficient than income taxes because they do not place an economic burden on investment or saving, but they do still place a burden on labor by reducing the after-tax return to work. As a retail sales tax, the Fair Tax is one form of a consumption tax. Is the Fair Tax a consumption tax?Ī consumption tax is a tax on what people spend, as opposed to an income tax on what people earn. It would be the first time the proposal has been given a floor vote, and it could happen sometime this year. The FairTax Act has also received attention in presidential campaigns, most prominently in 2008.Īs part of deliberations over the House Speakership, Speaker Kevin McCarthy (R-CA) reportedly committed to holding a House floor vote on the FairTax Act as introduced by Rep. It has since been introduced in each new Congress, only garnering a small number of cosponsors and never moving out of committee. The FairTax Act was first introduced in 1999 by then-Congressman John Linder (R-GA). What is the history of the Fair Tax, and why is it back in the discussion? Overall, the plan would likely result in a significant reduction in federal tax revenue and a more regressive tax system as measured by tax rates on income. The Fair Tax is a proposal to replace all major sources of the federal government’s revenue-the individual income tax, corporate income tax, estate and gift taxes, and payroll tax-with a national sales tax and rebate, abolishing the Internal Revenue Service (IRS) in the process.
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