Debate: Would Fair Tax Act Help Fix a Broken System?

Our tax experts discuss whether replacing the tax code with a flat sales tax would help Americans.

The GOP recently introduced the Fair Tax Act, which would completely abolish the Internal Revenue Code as we know it. The act would eliminate all income taxes, payroll taxes, estate taxes and gift taxes. These taxes would be replaced by a flat 30% sales tax that would be collected at the state level and transferred to the federal Treasury.

We asked two professors and authors of ALM’s Tax Facts with opposing political viewpoints to share their opinions about the most recent proposals from GOP leaders calling for eliminating the tax code entirely.

Below is a summary of the debate that ensued between the two professors.

Their Votes:

Bloink
Byrnes

Their Reasons:

Bloink: As the release of former President Trump’s tax returns have shown us, the current system for taxing Americans blatantly favors the rich. While the former president didn’t necessarily break the law, he used various manipulative schemes and loopholes to pay virtually no income tax. That’s not fair. Replacing the current complex system with a flat sales tax is one way to start fixing the problem.

Byrnes: GOP proposals to eliminate the tax code entirely are ridiculous and will never be taken seriously, even within their own party. The tax code is complex because it serves a variety of purposes. We use the tax system to encourage certain behaviors and help our business owners continue to grow our economy, all while providing benefits to individual Americans.

Bloink: While the GOP proposals may go a bit too far, it’s clear that our current system is overly complex and burdensome for ordinary Americans — and we need to take steps to fix the broken system. There is a certain appeal to replacing the income tax system with a more robust sales tax system — after all, it’s the wealthy Americans who spend the most, and this could be a way to force them to pay their fair share.

Byrnes: Relying solely on a sales tax to fund the government is completely untenable. The complete overhaul that would be required would create an administrative nightmare — and the bottom line is that it’ll simply never happen.

Bloink: Under today’s system, wealthy Americans simply don’t pay their fair share. While this proposal is perhaps a much oversimplified shell that would obviously be modified by nuanced exceptions, it would be a huge step toward a more equal tax system in which taxpayers would be required to pay taxes to maintain their lifestyle choices as consumers. The more you can afford to buy, the more you can afford to pay the government in tax dollars.

Byrnes: This proposal would completely overhaul our tax code — and many supporters aren’t fully considering what that means. The child tax credit, earned income tax credit and deduction for charitable giving would all be eliminated — because the entire concept of taxable income would be eliminated. Millions of Americans would be left to struggle financially because these valuable tax provisions offer much-needed assistance from the federal government.

Recommended Stories