Synonyms:
Tax simplification, Fair Tax
Definition:
Eliminate the progressive tax based on income and replace it with one based on consumption, that is a National Sales Tax.
Under the old tax those who made more money, paid at a higher rate. Those living in poverty and falling below a certain level might pay no income tax at all.
Proponents suggest they can mitigate the effect on the poor by exempting certain purchases, such as food. Estimates by economists suggest that the sales tax rate would need to be about 15%. This means when you go to REI to purchase a prAna top or whatever, you will pay 15 + 8.6 (local, state and county) = 23.6% on your purchase.
The Cato Institute suggest that economic activity will be stimulated in such a way that the rate will eventually fall to 10%.
Okay, here's my opinion. Apart from transferring the tax burden from the rich to the poor and Middle Class, I would predict that the economic effect would be the opposite of that predicted by the Cato Institute. I think there would be a huge fall off in economic activity, as money pours overseas for luxury purchases and into Swiss bank accounts.
Discuss