"Republican Tax Scheme is a Killer" - A Guest Post from Charles and Rebecca Reier

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A Federal consumption tax is even being eyed. The leading proposal is called the Fair Tax, a measure introduced by Rep. Rob Woodall (Republican-GA). The bill, H.R. 25, has garnered over 50 co-sponsors*. But this plan has many hurdles to overcome.

Income, estate and gift, and FICA taxes would all be eliminated after 2014. There would be no corporate income tax, and capital gains would be completely tax free.

In their place, a federal sales tax would be levied on goods and services.

Since FICA would get the ax, a portion of the sales tax revenue would be transferred to the Social Security and Medicare trust funds to make up for the lost revenue.

The tax rate would be 29.9%. Although the rate listed in the bill is 23%, the legislative language says the tax is calculated as 23% of the item’s total price, including the tax. When the tax is figured as an add-on percentage to the price of an item, the way you’re used to at the cash register, the rate is just under 30%. If an item costs $100, a 29% sales tax adds another $29.90, so you pay $129.90. The $29.90 paid in sales tax is 23% of the $129.90 total amount paid for the item.

Tax rebates would be provided to all taxpayers to help offset the impact, a payment equal to 23% of the federal poverty level, adjusted for household size. - The Kiplinger Tax Letter March 1, 2013

According to our analysis, the very wealthy (above 500M) and the very poor are relatively unaffected. Most severely impacted would be the middle class. Where does the Tea Party stand on this issue? Does anyone know who the 50 co-sponsors and their lobbyists are? Perhaps Speaker of the House John Boehner could provide us with the names and a more erudite discussion of this issue.

*Currently up to 61.

To be continued.

Charles E. Reier MD

Rebecca A. Reier