The federal tax system is “totally broken,” says Tom Brown, a representative of Georgia for FairTax.
Brown wants to replace the entire federal tax system with the “fair tax,” a national sales tax. He spoke on the topic Tuesday at a meeting of the League of Women Voters of the Dalton Area.
“There would be no loopholes, no deductions, no exemptions. It would basically get rid of the Internal Revenue Service,” Brown said.
He said a 23 percent national sales tax on new goods and services for personal consumption could replace all federal taxes — income, estate, Social Security, Medicare and all the rest. It would remain revenue neutral, meaning the federal government would take in as much as it does now from all of those various taxes.
He said the fair tax proposal calls for all American households to get a monthly “prebate” to help them buy necessities. The amount of the prebate would be based on the federal poverty level for whatever size the household is.
Taxes on any item would be charged the first time it is sold, and never again. So those who buy, for instance, a used car or used house would not pay the sales tax. Sales of exported goods would also not be taxed.
Brown said adopting the fair tax would increase economic growth in the United States by about 10 to 11 percent in just the first year. Since exports are not taxed, it would boost exports, he said. And since income would no longer be taxed, U.S. companies would have an incentive to bring home money earned by their foreign subsidiaries, money that would be invested and spent here.
Although the fair tax would be a federal tax, Brown said Georgia for FairTax is encouraging state lawmakers to move towards financing state government solely or primarily by a sales tax. He noted that seven states currently have no individual income tax. Two more states tax only narrow types of incomes. North Carolina lawmakers are looking at ending that state’s income tax.
Brown said if more neighboring states end their income taxes and Georgia doesn’t that could make Georgia less competitive.
According to a report published Monday by the Tax Foundation, a nonpartisan group that studies the U.S. tax system, Georgia’s business tax climate ranks 34th in the nation. By comparison, Alabama ranks 21st, Tennessee ranks 15th and Florida ranks fifth. North Carolina and South Carolina rank 44th and 36th respectively.
Of the states with no income tax or a severely limited income tax, just two have a business tax climate that ranks outside the top 10, according to the Tax Foundation, and just one ranks outside the top 20.