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US National Sales Tax proposals

Single national sales tax levy propositions to replace state income, payroll, state sales and gift taxes

The US Congress’ research service has floated a proposal for a 2025 single national retails sales tax (NST) – a variation of VAT – regime to replace many existing taxes largely levied by the 50 states.

Republican 30% Fair Tax Act proposal

Another proposal, Fair Tax Act,  introduced two weeks ago proposes to replace income taxes with a national sales tax. The bill would eliminate all income taxes — from the payroll tax to corporate taxes to personal income taxes and more — and would also eliminate the tax code and Internal Revenue Service, The rate would begin at 30% in 2025. To avoid a regressive effect of such a tax, it offsets some of the negative impact on poor people by including what it calls a tax prebate. Each household would get a monthly check worth 23 percent of the poverty threshold for a household their size.While the plan was first introduced in 1999, it’s never been given a floor vote, and has only been supported by a small group of Republicans

Both proposals are highly unlikely to proceed.

NST would subsume the following taxes collected by federal states:

  • Payroll taxes
  • Estate taxes
  • Income taxes
  • Gift taxes
  • Sales taxes

According to the CRS report, the proposed H.R. 25 would replace the current system with a 23% tax-inclusive sales tax rate in 2025 (30% tax-exclusive rate), with adjustments to the rate moving forward.


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