so the GOP is attempting to pass the Fair Tax Act to replace corporate/personal income tax with 23% sales tax, and maybe others. Since the 16th amendment cites taxing income, would this be considered unconstitutional?
Yes. And they even acknowledge that in the bill itself. Something to the effect of "this bill becomes null if Congress doesn’t amend such n such with in 7 years ".
Isn’t a sale just a type of income? Why would a tax on the sale of goods not be allowed by the 16th Amendment when it’s always allowed a tax on the sale of labor?
Unless something has changed in the last few decades, the Fair Tax would replace all federal taxes. Including, if I recall, Social Security taxes. It would require a constitutional amendment, and the amendment would include a prohibition on any taxes not a flat-rate sales tax.
The tax would cover all sales of new goods including groceries and megayachts, and would be offset with a flat rate refund to all adult citizens sent out monthly (effectively a UBI).
Part of the motivation is to restrict congress from using the tax system to encourage certain behaviors with tax rebates or deductions.
I’m taking my information from having read The Fairtax Book over a decade ago, so anybody more familiar with the specifics of the actual bill under consideration can correct me on any discrepancies or forgetfulness.
No, a sale is not a type of income, it is a type of spending.
The “fair” tax act would result in the most regressive tax system ever dreamed up by right wing extremists. The poor spend 100% of their income, or more. The middle class spends about 90%, or more. So they would both be taxed on the majority of their income at 23% – far more than the typical 15% that it works out to under the current system for lower tax brackets. The rich, on the other hand, only spend about half their income, or even less. All their money sunk into investments and savings and tax shelters would be completely tax free.
It’s a total con job. Shifting the tax burden from the rich to the poor. Typical Republican garbage dressed up as “fairness”.
Where does the money go if it’s not some entity’s income?
If I sell $500 of labor for $500 of money, that whole $500 is taxable at whatever rate Congress pleases to enact. If I sell $500 of beans for $500 of money, why can Congress not elect to tax that income instead of the income from labor? There are surely practical and political reasons why that might be undesirable (I can think of a lot) but what’s the constitutional issue? Both are taxes on the money that moved as a result of a transaction.
Because it’s coupled with a UBI that refunds as much or more of the money that “the poor” spend on new goods it is actually progressive. Buy only used goods and your effective tax rate is negative. Spend $1 million on a yacht and your tax rate is approaching 23%. You can argue it’s not progressive enough, but it is progressive.
You’re on the wrong side. This isn’t looking at things from the person receiving the money, it’s the person spending it.
(unquoted so I could change a word)
If I sell $500 of [something] for $500 of money
Then you will pay $0 in taxes.
OTOH, if the quote was
If I pay $500 for [something]
Then you’d be paying tax in that $500
So is the employer side of Social Security tax unconstitutional since it’s a tax on the person spending the money?
Nobody is saying that a federal tax on spending is unconstitutional. What is unconstitutional is removing income tax and social security tax, because those are written into the constitution.
Theoretically, the Republican Party could propose a sales tax on top of the existing tax code, I don’t think that would be unconstitutional. Just very unpopular, especially for their own voters.
I wonder if they could try to sneak in something where they reduce income tax by half, and institute a lesser sales tax. Sort of a compromise.
According to this, a federal sales tax would be constitutional.
The federal government could theoretically levy a nationwide federal sales tax under Article I Section 8 of the U.S. Constitution, but Congress has declined to do so.
Again, though, this isn’t about adding a sales tax. It’s about abolishing the existing progressive tax systems.
The Constitution allows Congress to tax income, but does not require it. Social Security wasn’t enacted until two decades after the 16th Amendment.
But yes, it seems that a federal sales tax would simply be a use of the original taxing powers (indeed, there already are federal taxes on things like airline tickets), so the FairTax is stupid but constitutional.
And replacing it with a single progressive tax system.
Will the rebate provide as much benefit as the current benefits they intend to cancel?
Is the rebate also supposed to wind up in the Constitution, or are they planning to ditch it as soon as they get the Constitution changed to get rid of all the alternatives?
– color me suspicious. I will say I haven’t read up on this thing, as I very much doubt that even if they get it through the House it’s going anywhere from there, let alone getting as far as a successful Constitutional amendment.
How can this sales tax be considered progressive, my state does not have an income tax but taxes the crap our of just about everything but food at the grocery store. Yet Washington is considered to have one of the most regressive taxing systems in the US while the state to the south, Oregon, which has no sales tax and relies on a state income tax, has one of the most progressive. The OP should have been in the Stupid Republicans Idea thread.
And is it even part of the proposed act?
Emphasis mine.
I wish we’d stop treating all this stuff both parties are suddenly so interested in passing now that they know neither has a chance to pass anything as news. For the next two years everything is clickbait. Now, I won’t claim to understand why Republicans are announcing a bunch of things that just make them look horrible even knowing they won’t pass, but they are not really doing it for me.
You may be equating revenue and income.
This proposed tax is not a progressive system. If it was, the Republicans wouldn’t be proposing it.
This proposal is designed to help wealthy people pay less taxes.
Normally, yes. But lowering tax rates for the wealthy is one of the few things the Republicans actually enact into laws. Their wealthy donors pay for results, not just promises.