When discussing how he would reduce the size of government, Gov. Huckabee stated that he’s “still the one who says that we can get rid of the Internal Revenue Service (IRS) if we would pass the FairTax, which is a tax on consumption rather than a tax on people’s income.”
While the tax system could be restructured to eliminate the IRS, there would still need to be some mechanism in place to administer tax collection. In the case of the FairTax, the duties of the IRSare shifted to state tax agencies or to the Social Security Administration (SSA), which would need to perform similar roles.
The FairTax proposes to abolish the IRS by mandating that state agencies collect taxes in the form of a flat 23 percent consumption tax, and send the revenues to the U.S. Treasury. The plan also includes a “prebate” check sent each month to individuals and families a check each month for an amount that equals one-twelfth of the federal poverty line, administered by the Social Security Administration.
While the IRS could be abolished, many of its functions – tax administration, enforcement, and sending rebate checks – would be shifted to state agencies and SSA, including to some states that do not currently collect sales tax. FairTaxcalculatesthat this would impose a cost of $9.66 billion on states while saving the federal government $9.38 billion in IRS funding - a net cost of $280 million.
Ruling: It's Complicated
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As an expert in taxation and fiscal policy, I have a comprehensive understanding of the concepts and issues discussed in the provided article. My expertise is evident in my ability to analyze and articulate the complexities surrounding tax systems and government funding. Let's delve into the key concepts presented in the article:
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FairTax Proposal:
- Date: August 7, 2015
- Central Idea: Governor Huckabee advocates for the FairTax as a means to reduce the size of government by eliminating the Internal Revenue Service (IRS).
- FairTax Mechanism: The FairTax suggests replacing income tax with a flat 23 percent consumption tax.
- IRS Replacement: Under the FairTax, the responsibilities of the IRS would be shifted to state tax agencies or the Social Security Administration (SSA).
- Tax Collection: State agencies would collect taxes and send revenues to the U.S. Treasury.
- Prebate: The plan includes a monthly "prebate" check, equivalent to one-twelfth of the federal poverty line, administered by the SSA.
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IRS Abolition and Functions Transfer:
- Function Transfer: While the IRS could be abolished, functions such as tax administration, enforcement, and sending rebate checks would be shifted to state agencies and the SSA.
- Cost Implications: FairTax calculates a net cost of $280 million, with $9.66 billion imposed on states and $9.38 billion saved in federal IRS funding.
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Challenges and Complexity:
- Complications: The article concludes that the situation is complicated, indicating potential challenges and complexities in implementing the FairTax proposal.
Moving beyond the specific article, my expertise extends to broader taxation and fiscal policy issues. I can provide insights into the implications of tax reforms on government revenue, economic behavior, and overall financial stability. Additionally, my knowledge encompasses recent developments, such as the December 18, 2023, blog post discussing payroll taxes falling short of paying for Social Security and Medicare.
If you have further questions or if there are specific aspects you would like me to elaborate on, feel free to ask.
