On January 23rd, 2023, the legislature passed a bill, the "Fair Tax Act," to strip the extra $80 billion for IRS funding for enforcement enacted by the Inflation Reduction Act last year. The Institute on Taxation and Economic Policy pointed out that the origins of the Fair Tax date back decades to an IRS dispute with the Church of Scientology over whether the church qualified for tax-exempt status, which it ultimately won after years of legal battles.
On January 25th, 2023, some legislators spoke out against a GOP-backed proposal that would discard some taxes and replace them with a steep national sales tax. While it was a bill that seemingly had no chance of passing, it now has the potential to become a prominent talking point for legislators as they seek to balance the scale of power within the House of Representatives. The "Fair Tax Act" would abolish income, payroll, estate, and gift taxes and replace them with a 30 percent national sales tax starting in 2025. The legislation would also do away with funding for the Internal Revenue Service starting in the fiscal year 2027, leaving tax collection authority to state governments. Americans would receive a monthly rebate check according to the federal poverty level and family size designed to offset costs for low-income families, who typically spend a larger share of their income on necessities. This means that the average tax cut the top 1% of earners would see under the proposal would be about $75,000.
History of the Fair Tax Act: The Fair Tax was first introduced in Congress in 1999 by former Georgia Congressman John Linder. In addition to eliminating all personal and corporate income taxes, the estate tax, gift taxes, and the payroll tax, the Fair Tax would also eliminate the IRS, repeal the current Tax Code, and replace it with a single national consumption tax. Similar bills have been introduced in most congressional terms but rarely advance past the committee stage. The bill would impose a 23% sales tax according to the legislation, although some believe the actual costs could add up to 30% or higher.
Talley's team of tax professionals provide comprehensive tax compliance and consulting services so you can preserve, enhance, and pass on your assets and wealth to the next generation. We welcome the opportunity to discuss the current options available for you. For more information, contact us today.