SensibleTaxReform Blog

8. A Federal Consumption Tax (B)

The federal consumption tax (FCT) that is proposed under Sensible Tax Reform—Simple, Just and Effective satisfies all three of those goals: simplicity, justice and economic effectiveness.

A Simple Tax

The FCT will be a simple tax:

• A single rate,
• Federal tax,
• On retail purchases only,
• Applying to virtually all retail purchases (goods and services),
• Easy for everyone to understand,
• Very difficult for tax lobbyists to manipulate and
• With no longer any annual reporting obligations for households

Very simply, the tax will apply to most of what individuals and families consume. It will be much broader than any existing sales tax in order to keep the tax rate as low as possible. We will pay the tax whenever we shop. The tax will be included in the listed sales price, but shown clearly on the sales receipt. Unlike now, we will know how much we are paying to the government, since it will be primarily the sales taxes that we pay.

A Just Tax

The FCT will be a just tax, applying:

• To all consumers (even those with illegal income, such as drug dealers),
• From any commercial seller (whether in store or online),
• With special provisions for only four high-priority categories of consumption (healthcare, homes, cars and higher education),
• With a rebate of the tax on purchases up to the poverty level.
• Everyone will be treated exactly alike—paying the same taxes and benefiting from the same special provisions.

In sharp contrast to our existing federal tax system, Sensible Tax Reform will treat everyone the same–all consumers and all retailers.

An Economically-Effective Tax

The FCT will be economically effective. It will:

• Apply to retail purchases only and will not apply to businesses;
• Stimulate savings, since savings will all be pre-tax;
• Level the international playing field so that American businesses can compete more effectively in export markets and against imports;
• Reduce the need for the US Government to borrow so heavily abroad;
• Keep American companies home;
• Create millions of jobs in this country; and
• Be phased-in over a five-year period.

Sensible Tax Reform—Simple, Just and Effective will be a workable and easy-to-understand tax system. The next post will discuss several categories of expenditures, such as the payment of taxes and investments, which will be exempt from the FCT.

Tags: #tax reform

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