FairTax is a fixed rate sales tax proposal introduced as bill H.R. 25 in the United States Congress every year since 2005. The Fair Tax Act calls for elimination of the Internal Revenue Service and repeal the 16th Amendment to the Constitution. H.R. 25 would eliminate all federal income taxes (including the alternative minimum tax , corporate income taxes , and capital gains taxes ), payroll taxes (including Social Security and Medicare taxes ), gift taxes , and estate taxes , replacing federal taxes with a single consumption tax levied on retail sales.
202-412: The Fair Tax Act ( H.R. 25 / S. 18 ) would apply a fixed rate sales tax at the point of sale on all new, final goods and services purchased for household consumption. The proposal also specifies a monthly payment made to all households based on household size. Called a "prebate," the monthly payment offsets the regressive nature of a sales tax up to the poverty level. First introduced into
404-631: A welfare payment regardless of need. The President's Advisory Panel for Federal Tax Reform cited the rebate as one of their chief concerns when analyzing their national sales tax, stating that it would be the largest entitlement program in American history, and contending that it would "make most American families dependent on monthly checks from the federal government". Estimated by the advisory panel at approximately $ 600 billion, "the Prebate program would cost more than all budgeted spending in 2006 on
606-410: A "Family Consumption Allowance" (FCA) based on family size (regardless of income) that is equal to the estimated total FairTax paid on poverty level spending according to the poverty guidelines published by the U.S. Department of Health and Human Services . The FCA is a tax rebate (known as a "prebate" as it would be an advance) paid in twelve monthly installments, adjusted for inflation . The rebate
808-471: A 15.3% total tax that is often split between employee and employer) greatly changes the tax distribution, and that the FairTax would relieve the tax burden on middle-class workers. The predicted effects of the FairTax are a source of disagreement among economists and other analysts. According to Money magazine, while many economists and tax experts support the idea of a consumption tax , many of them view
1010-413: A 28% (38.9% tax-exclusive) rate would be revenue neutral for 2006. The President's Advisory Panel for Federal Tax Reform performed a 2006 analysis to replace the individual and corporate income tax with a retail sales tax and estimated the rate to be 25% (34% tax-exclusive) assuming 15% tax evasion, and 33% (49% tax-exclusive) with 30% tax evasion. The rate would need to be substantially higher to replace
1212-451: A 30% traditional U.S. sales tax ($ 23 on top of every $ 77 spent—$ 100 total, or $ 30 on top of every $ 100 spent—$ 130 total). After the first year of implementation, this rate is automatically adjusted annually using a predefined formula reflecting actual federal receipts in the previous fiscal year. The effective tax rate for any household would be variable due to the fixed monthly tax rebate that are used to rebate taxes paid on purchases up to
1414-584: A VAT. In the United States, a general sales tax is imposed in 45 states plus the District of Columbia (accounting for over 97% of both population and economic output), which proponents argue provides a large infrastructure for taxing sales that many countries do not have. Businesses would be required to submit monthly or quarterly reports (depending on sales volume) of taxable sales and sales tax collected on their monthly sales tax return. During audits ,
1616-499: A bank account, or a "smartcard" that can be used like a debit card . Opponents of the plan criticize this tax rebate due to its costs. Economists at the Beacon Hill Institute estimated the overall rebate cost to be $ 489 billion (assuming 100% participation). In addition, economist Bruce Bartlett has argued that the rebate would create a large opportunity for fraud , treats children disparately, and would constitute
1818-497: A basic interest rate) and donations, but some lawmakers have concerns about losing tax incentives on home ownership and charitable contributions. There is also concern about the effect on the income tax industry and the difficulty of repealing the Sixteenth Amendment (to prevent Congress from re-introducing an income tax). Americans For Fair Taxation states the FairTax would boost the United States economy and offers
2020-618: A broader nationalist message. His election accelerated the Republican Party's shift towards right-wing populism and resulted in decreasing influence among its conservative factions. After the 2016 elections , Republicans maintained their majority in the Senate , the House , and governorships , and wielded newly acquired executive power with Trump's election. The Republican Party controlled 69 of 99 state legislative chambers in 2017,
2222-525: A consumer already owns it before the FairTax takes effect or if the FairTax has been paid previously on the good, which may be different from the item being sold previously. Personal services such as health care , legal services, financial services , and auto repairs would be subject to the FairTax, as would renting apartments and other real property . Food, clothing, prescription drugs, and medical services would be taxed. ( State sales taxes generally exempt these types of basic-need items in an effort to reduce
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#17327870468122424-538: A consumption tax, like the FairTax, would bring long-term interest rates down by 25–35%. An analysis in 2008 by the Baker Institute For Public Policy indicated that the plan would generate significant overall macroeconomic improvement in both the short and long-term, but warned of transitional issues. FairTax proponents argue that the proposal would provide tax burden visibility and reduce compliance and efficiency costs by 90%, returning
2626-578: A contingent sunset provision in H.R. 25. It would require the repeal of the Sixteenth Amendment within 8 years after the implementation of the FairTax or, failing that, the FairTax would expire. Critics have also argued that a tax on state government consumption could be unconstitutional . Since the FairTax would not tax used goods, the value would be determined by the supply and demand in relation to new goods. The price differential/margins between used and new goods would stay consistent, as
2828-482: A differential between the price of new and used goods, which may take years to equalize. Such a differential would certainly influence the sale of new goods like vehicles and homes. Similarly, some supporters have claimed that this would create an incentive to buy used goods, creating environmental benefits of re-use and re-sale. Conversely, it is argued that like the income tax system that contains embedded tax cost (see Theories of retail pricing ), used goods would contain
3030-537: A federal income tax. This is referred to as an "aggressive repeal". Separate income taxes enforced by individual states would be unaffected by the federal repeal. Passing the FairTax would require only a simple majority in each house of the United States Congress along with the signature of the President, whereas enactment of a constitutional amendment must be approved by two thirds of each house of
3232-632: A final retail good that would be taxed. Individuals and businesses may be able to manipulate the tax system by claiming that purchases are for intermediate goods, when in fact they are final purchases that should be taxed. Proponents point out that a business is required to have a registered seller's certificate on file, and must keep complete records of all transactions for six years. Businesses must also record all taxable goods bought for seven years. They are required to report these sales every month (see Personal vs. business purchases ). The government could also stipulate that all retail sellers provide buyers with
3434-458: A good is a substitute or a complement depends on its relationship to other goods, rather than an intrinsic characteristic, and can be measured as cross elasticity of demand by employing statistical techniques such as covariance and correlation. Goods can be classified based on their degree of excludability and rivalry (competitiveness). Considering excludability can be measured on a continuous scale, some goods would not be able to fall into one of
3636-650: A guise for destroying his enemies." Representative John Linder told the Atlanta Journal-Constitution that Bartlett confused the FairTax movement with the Scientology-affiliated Citizens for an Alternative Tax System , which also seeks to abolish the federal income tax and replace it with a national retail sales tax. Leo Linbeck, AFFT Chairman and CEO, stated "As a founder of Americans For Fair Taxation, I can state categorically, however, that Scientology played no role in
3838-558: A large majority of the Democratic Party's upper and middle-class support. McKinley defeated Bryan and returned the presidency to Republican control until the 1912 presidential election . The 1896 realignment cemented the Republicans as the party of big businesses while president Theodore Roosevelt added more small business support by his embrace of trust busting . He handpicked his successor William Howard Taft in
4040-472: A large share of money to the productive economy. The Beacon Hill Institute concluded that the FairTax would save $ 346.51 billion in administrative costs and would be a much more efficient taxation system. Bill Archer , former head of the House Ways and Means Committee , asked Princeton University Econometrics to survey 500 European and Asian companies regarding the effect on their business decisions if
4242-403: A letter signed by eighty economists, including Nobel Laureate Vernon L. Smith , that have endorsed the plan. The Beacon Hill Institute estimated that within five years real GDP would increase 10.7% over the current system, domestic investment by 86.3%, capital stock by 9.3%, employment by 9.9%, real wages by 10.2%, and consumption by 1.8%. Arduin, Laffer & Moore Econometrics projected
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#17327870468124444-447: A mechanism for reporting tax cheats to obtain a reward. To prevent businesses from purchasing everything for their employees, in a family business for example, goods and services bought by the business for the employees that are not strictly for business use would be taxable. Health insurance or medical expenses would be an example where the business would have to pay the FairTax on these purchases. Taxable property and services purchased by
4646-418: A mostly successful in excluding non-paying customer, but are still able to be consumed by non-paying consumers. An example of this is movies, books or video games that could be easily pirated and shared for free. food, clothing, cars, parking spaces like movies, books, video games fish, timber, coal, free public transport cinemas, private parks, television, public transport to more users than what
4848-418: A number of Republicans and conservative thought leaders questioning whether Trump should continue as the party's main figurehead and leader. Despite this, Trump easily won the nomination to be the party's candidate again in the 2024 presidential election . Trump achieved a decisive victory against Democratic nominee Kamala Harris , winning every swing state and the popular vote, while the Republicans held
5050-522: A percentage of income). Income earned and saved would not be taxed until spent under the proposal. Households at the extreme high end of consumption often finance their purchases out of savings, not income. Economist Laurence Kotlikoff states that the FairTax could make the tax system much more progressive and generationally equitable, and argues that taxing consumption is effectively the same as taxing wages plus taxing wealth . A household of three persons (this example will use two adults plus one child;
5252-408: A person sees from the time they wake up in their home, on their commute to work to their arrival at the workplace. Commodities may be used as a synonym for economic goods but often refer to marketable raw materials and primary products . Although common goods are tangible , certain classes of goods, such as information , only take intangible forms. For example, among other goods an apple
5454-478: A qualified non-profit or religious organization "for business purposes" would not be taxable. The creation of the FairTax began with a group of businessmen from Houston, Texas, who initially financed what has become the political advocacy group Americans For Fair Taxation (AFFT), which has grown into a large tax reform movement. This organization, founded in 1994, claims to have spent over $ 20 million in research, marketing, lobbying, and organizing efforts over
5656-544: A reduction of the national debt and federal budget deficit through decreased government spending . The Tea Party movement was also described as a popular constitutional movement composed of a mixture of libertarian , right-wing populist , and conservative activism. The Tea Party movement's electoral success began with Scott Brown 's upset win in the January Senate special election in Massachusetts ;
5858-467: A rise in the price of beef results in a decrease in the quantity of beef demanded, it is likely that the quantity of hamburger buns demanded will also drop, despite no change in buns' prices. This is because hamburger buns and beef (in Western culture) are complementary goods . Goods considered complements or substitutes are relative associations and should not be understood in a vacuum. The degree to which
6060-660: A sales tax, supporters argue that black market activity would be taxed when proceeds from such activity are spent on legal consumption. For example, the sale of illegal narcotics would remain untaxed (instead of being guilty of income tax evasion, drug dealers would be guilty of failing to submit sales tax), but they would face taxation when they used drug proceeds to buy consumer goods such as food, clothing, and cars. By taxing this previously untaxed money, FairTax supporters argue that non-filers would be paying part of their share of what would otherwise be uncollected income and payroll taxes. Other economists and analysts have argued that
6262-536: A single tax. Retailers would receive an administrative fee equal to the greater of $ 200 or 0.25% of the remitted tax as compensation for compliance costs. In addition, supporters state that the overwhelming majority of purchases occur in major retail outlets, which are very unlikely to evade the FairTax and risk losing their business licenses. Economic Census figures for 2002 show that 48.5% of merchandise sales are made by just 688 businesses ( "Big-Box" retailers ). 85.7% of all retail sales are made by 92,334 businesses, which
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6464-426: A specified household size. At higher spending levels, the rebate has less impact, and a household's effective tax rate would approach 23% of total spending. A person spending at the poverty level would have an effective tax rate of 0%, whereas someone spending at four times the poverty level would have an effective tax rate of 17.2%. Buying or otherwise receiving items and services not subject to federal taxation (such as
6666-591: A ten-year period and is seeking to raise over $ 100 million more to promote the plan. AFFT includes a staff in Houston and a large group of volunteers who are working to get the FairTax enacted. In 2007 Bruce Bartlett said the FairTax was devised by the Church of Scientology in the early 1990s, drawing comparisons between the tax policy and religious doctrine from the faith, whose creation myth holds that an evil alien ruler known as Xenu "used phony tax inspections as
6868-512: A third party, self-report their tax liability. For example, ordinary personal income taxes can be automatically withheld and are reported to the government by a third party. Taxes without withholding and with self-reporting, such as the FairTax, can see higher evasion rates. Economist Jane Gravelle of the Congressional Research Service found studies showing that evasion rates of sales taxes are often above 10%, even when
7070-467: A three-year decline in the economy, a four-year decline in employment and an eight-year decline in consumer spending . The Wall Street Journal columnist James Taranto states the FairTax is unsuited to take advantage of supply-side effects and would create a powerful disincentive to spend money. John Linder states an estimated $ 11 trillion is held in foreign accounts (largely for tax purposes), which he states would be repatriated back to U.S. banks if
7272-516: A total of 56 House and Senate cosponsors in the 108th Congress , 61 in the 109th , 76 in the 110th , 70 in the 111th , 78 in the 112th , 83 in the 113th ( H.R. 25 / S. 122 ), 81 in the 114th ( H.R. 25 / S. 155 ), 51 in the 115th ( H.R. 25 / S. 18 ), 33 in the 116th ( H.R. 25 ), and 30 in the 117th ( H.R. 25 ). Former Speaker of the House Dennis Hastert (Republican) had cosponsored
7474-527: A treaty annexing Hawaii before Cleveland could be inaugurated. Most Republicans supported the proposed annexation, but Cleveland opposed it. In the 1896 presidential election , Republican William McKinley 's platform supported the gold standard and high tariffs, having been the creator and namesake for the McKinley Tariff of 1890. Though having been divided on the issue prior to that year's National Convention , McKinley decided to heavily favor
7676-449: A used home or car) can contribute towards a lower effective tax rate. The total amount of spending and the proportion of spending allocated to taxable items would determine a household's effective tax rate on consumption. If a rate is calculated on income, instead of the tax base, the percentage could exceed the statutory tax rate in a given year. Under the FairTax, family households of lawful U.S. residents would be eligible to receive
7878-560: A winner at the end of election day. Voter suppression in the South gave Republican-controlled returning officers enough of a reason to declare that fraud, intimidation and violence had soiled the states' results. They proceeded to throw out enough Democratic votes for Republican Rutherford B. Hayes to be declared the winner. Democrats refused to accept the results and the Electoral Commission made up of members of Congress
8080-400: A written receipt, regardless of transaction type (cash, credit, etc.), which would create a paper trail for evasion with risk of having the buyer turn them in (the FairTax authorizes a reward for reporting tax cheats). While many economists and tax experts support a consumption tax, problems could arise with using a retail sales tax rather than a value added tax (VAT). A VAT imposes a tax on
8282-427: A year could live well spending $ 1 million, and as a result pay a mere 11% of that year's income in taxes. Households at the lower end of the income scale spend almost all their income, while households at the higher end are more likely to devote a portion of income to saving. Therefore, according to economist William G. Gale , the percentage of income taxed is regressive at higher income levels (as consumption falls as
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8484-567: Is 23% and the FairTax is 30% as it implies that the sales tax burden is higher. A key question surrounding the FairTax is whether the tax has the ability to be revenue-neutral; that is, whether the tax would result in an increase or reduction in overall federal tax revenues. Economists, advisory groups, and political advocacy groups disagree about the tax rate required for the FairTax to be truly revenue-neutral. Various analysts use different assumptions, time-frames, and methods resulting in dramatically different tax rates making direct comparison among
8686-563: Is 3.6% of American companies. In the service sector, approximately 80% of sales are made by 1.2% of U.S. businesses. The FairTax is a national tax, but can be administered by the states rather than a federal agency, which may have a bearing on compliance as the states' own agencies could monitor and audit businesses within that state. The 0.25% retained by the states amounts to $ 5 billion the states would have available for enforcement and administration. For example, California should receive over $ 500 million for enforcement and administration, which
8888-405: Is 30% if the FairTax is applied to the pre-tax price of a good like traditional U.S. state sales taxes (sometimes called tax-exclusive ; this rate is not directly comparable with existing income and employment taxes). After the first year of implementation, this tax rate would be automatically adjusted annually using a formula specified in the legislation that reflects actual federal receipts in
9090-426: Is a service provided by an electric utility company. This service can only be experienced through the consumption of electrical energy , which is available in a variety of voltages and, in this case, is the economic goods produced by the electric utility company. While the service (namely, distribution of electrical energy) is a process that remains in its entirety in the ownership of the electric service provider,
9292-511: Is a tangible object, while news belongs to an intangible class of goods and can be perceived only by means of an instrument such as printers or television . Goods may increase or decrease their utility directly or indirectly and may be described as having marginal utility . Some things are useful, but not scarce enough to have monetary value , such as the Earth's atmosphere , these are referred to as ' free goods '. In normal parlance, "goods"
9494-538: Is always a plural word, but economists have long termed a single item of goods "a good". In economics, a bad is the opposite of a good. Ultimately, whether an object is a good or a bad depends on each individual consumer and therefore, not all goods are goods to all people. Goods' diversity allows for their classification into different categories based on distinctive characteristics, such as tangibility and (ordinal) relative elasticity. A tangible good like an apple differs from an intangible good like information due to
9696-718: Is any item that is ultimately consumed, rather than used in the production of another good. For example, a microwave oven or a bicycle that is sold to a consumer is a final good or consumer good, but the components that are sold to be used in those goods are intermediate goods . For example, textiles or transistors can be used to make some further goods. Commercial goods are construed as tangible products that are manufactured and then made available for supply to be used in an industry of commerce. Commercial goods could be tractors, commercial vehicles, mobile structures, airplanes, and even roofing materials. Commercial and personal goods as categories are very broad and cover almost everything
9898-423: Is being paid for free-to-air, air, national defense, free and open-source software Goods are capable of being physically delivered to a consumer . Goods that are economic intangibles can only be stored, delivered, and consumed by means of media . Goods, both tangibles and intangibles, may involve the transfer of product ownership to the consumer. Services do not normally involve transfer of ownership of
10100-528: Is included in the text of the legislation, Congressman John Linder has stated that the FairTax would be implemented as an inclusive tax, which would include the tax in the retail price, not added on at checkout—an item on the shelf for five dollars would be five dollars total. The legislation requires the receipt to display the tax as 23% of the total. Linder states the FairTax is presented as a 23% tax rate for easy comparison to income and employment tax rates (the taxes it would be replacing). The plan's opponents call
10302-425: Is likely to be part of a family of substitute goods ; for example, as pen prices rise, consumers might buy more pencils instead. An inelastic good is one for which there are few or no substitutes, such as tickets to major sporting events, original works by famous artists, and prescription medicine such as insulin. Complementary goods are generally more inelastic than goods in a family of substitutes. For example, if
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#173278704681210504-408: Is meant to eliminate the taxation of household necessities and make the plan progressive . Households would register once a year with their sales tax administering authority, providing the names and social security numbers of each household member. The Social Security Administration would disburse the monthly rebate payments in the form of a paper check via U.S. Mail, an electronic funds transfer to
10706-451: Is more than the $ 327 million budget for the state's sales and excise taxes. Because the federal money paid to the states would be a percentage of the total revenue collected, John Linder claims the states would have an incentive to maximize collections. Proponents believe that states that choose to conform to the federal tax base would have advantages in enforcement, information sharing , and clear interstate revenue allocation rules. A study by
10908-422: Is to say, consuming some goods will deprive another consumer of the ability to consume the goods. Private goods are the most common type of goods. They include what you have to get from the store. For examples food, clothing, cars, parking spaces, etc. An individual who consumes an apple denies another individual from consuming the same one. It is excludable because consumption is only offered to those willing to pay
11110-413: Is transferred to state and local taxpayers from state and local governments. To recapture the lost revenue, state and local governments would have to raise tax rates or otherwise change tax laws in order to continue collecting the same real revenues from their taxpayers. The Argus Group and Arduin, Laffer & Moore Econometrics each published an analysis that defended the 23% rate. While proponents of
11312-453: Is useful to people but scarce in relation to its demand so that human effort is required to obtain it. In contrast, free goods , such as air, are naturally in abundant supply and need no conscious effort to obtain them. Private goods are things owned by people, such as televisions , living room furniture, wallets, cellular telephones, almost anything owned or used on a daily basis that is not food-related. A consumer good or "final good"
11514-451: Is usually responsible for public goods and common goods, and enterprises are generally responsible for the production of private and club goods, although this is not always the case. In 1977, Nobel winner Elinor Ostrom and her husband Vincent Ostrom proposed additional modifications to the existing classification of goods so to identify fundamental differences that affect the incentives facing individuals. Their definitions are presented on
11716-483: The 1980 United States presidential election . The Reagan presidency , lasting from 1981 to 1989, constituted what is known as " the Reagan Revolution ". It was seen as a fundamental shift from the stagflation of the 1970s, with the introduction of Reagan's economic policies intended to cut taxes, prioritize government deregulation and shift funding from the domestic sphere into the military to check
11918-412: The 2008 presidential campaign . As defined in the proposed legislation, the initial sales tax rate is 30% (i.e. a purchase of $ 100 would incur a sales tax of $ 30, resulting in a total price to the consumer of $ 130). Advocates promote this as a 23% tax inclusive rate based on the total amount paid including the tax, which is the method currently used to calculate income tax liability. In subsequent years
12120-466: The 2022 elections confident and with analysts predicting a red wave , but it ultimately underperformed expectations, with voters in swing states and competitive districts joining Democrats in rejecting candidates who had been endorsed by Trump or who had denied the results of the 2020 election. The party won control of the House with a narrow majority, but lost the Senate and several state legislative majorities and governorships. The results led to
12322-465: The Beacon Hill Institute concluded that, on average, states could more than halve their sales tax rates and that state economies would benefit greatly from adopting a state-level FairTax. FairTax opponents state that compliance decreases when taxes are not automatically withheld from citizens, and that massive tax evasion could result by collecting at just one point in the economic system. Compliance rates can also fall when taxed entities, rather than
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#173278704681212524-567: The Bush tax cuts expire on schedule and accounts for the replacement of an additional $ 3 trillion collected through the Alternative Minimum Tax ). The study also concluded that if the tax base were eroded by 10% due to tax evasion, tax avoidance, and/or legislative adjustments, the average rate would be 34% (53% tax-exclusive) for the 10-year period. A dynamic analysis in 2008 by the Baker Institute For Public Policy concluded that
12726-546: The Coinage Act of 1873 , as a solution to the depressed American economy in the aftermath of that year's panic . Ahead of the 1880 presidential election , both James G. Blaine and opponent John Sherman failed to win the Republican nomination; each then backed James A. Garfield for president. Garfield won the 1880 presidential election, but was assassinated early in his term . His death helped create support for
12928-635: The Court of International Trade by the time he left office, shifting the court system to the right . Other notable achievements during his presidency included the passing of the Tax Cuts and Jobs Act in 2017; the creation of the U.S. Space Force , the first new independent military service since 1947; and the brokering of the Abraham Accords , a series of normalization agreements between Israel and various Arab states . The second half of his term
13130-502: The Internal Revenue Service , it would be more difficult for the states to maintain viable income tax systems. Opponents of the FairTax argue that imposing a national retail sales tax would drive transactions underground and create a vast underground economy . Under a retail sales tax system, the purchase of intermediate goods and services that are factors of production are not taxed, since those goods would produce
13332-544: The Iraq War . In the 2008 presidential election , Arizona Republican senator John McCain was defeated by Illinois Democratic senator Barack Obama . The Republicans experienced electoral success in the 2010 elections . The 2010 elections coincided with the ascendancy of the Tea Party movement , an anti-Obama protest movement of fiscal conservatives . Members of the movement called for lower taxes , and for
13534-653: The Kansas–Nebraska Act , which repealed the Missouri Compromise and opened the Kansas and Nebraska Territories to slavery and future admission as slave states. They denounced the expansion of slavery as a great evil, but did not call for complete abolition , including in the Southern states. While opposition to the expansion of slavery was the most consequential founding principle of the party, like
13736-537: The Pendleton Civil Service Reform Act , which was passed in 1883; the bill was signed into law by Republican president Chester A. Arthur , who succeeded Garfield. In 1884, Blaine won the Republican presidential nomination, but lost the general election to Democrat Grover Cleveland . Cleveland was the first Democrat to be elected president since James Buchanan. Dissident Republicans, known as Mugwumps , had defected from Blaine due to
13938-470: The Pew Research Center found that social conservatives and free market advocates remained the other two main groups within the party's coalition of support, with all three being roughly equal in number. However, libertarians and libertarian-leaning conservatives increasingly found fault with what they saw as Republicans' restricting of vital civil liberties while corporate welfare and
14140-577: The Second New Deal , saying it represented class warfare and socialism . Roosevelt was easily re-elected president in 1936 ; however, as his second term began, the economy declined , strikes soared, and he failed to take control of the Supreme Court and purge the Southern conservatives from the Democratic Party. Republicans made a major comeback in the 1938 House elections . Southern conservatives joined with most Republicans to form
14342-815: The Soviet Union by utilizing deterrence theory . During a visit to then- West Berlin in June 1987, he addressed Soviet leader Mikhail Gorbachev during a speech at the Berlin Wall , demanding that he " Tear down this wall! ". The remark was later seen as influential in the fall of the wall in 1989, and was retroactively seen as a defining achievement. The Soviet Union was dissolved in 1991 . Following Reagan's presidency, Republican presidential candidates frequently claimed to share Reagan's views and aimed to portray themselves and their policies as heirs to his legacy. Reagan's vice president, George H. W. Bush , won
14544-564: The Thirteenth Amendment to the U.S. Constitution —which banned slavery, except as punishment for a crime—was ratified in 1865. Following the assassination of Lincoln , Johnson ascended to the presidency. Johnson was vitriolic in his criticisms of the Radical Republicans during a national tour ahead of the 1866 elections . Anti-Johnson Republicans won a two-thirds majority in both chambers of Congress following
14746-589: The U.S. House Committee on Ways and Means , pass both the House and the Senate, and finally be signed by the President . In 2005, President Bush established an advisory panel on tax reform that examined several national sales tax variants including aspects of the FairTax and noted several concerns. These included uncertainties as to the revenue that would be generated, and difficulties of enforcement and administration, which made this type of tax undesirable to recommend in their final report. The panel did not examine
14948-529: The United States Congress in 1999, a number of congressional committees have heard testimony on the bill ; however, it did not move from committee. A campaign in 2005 for the FairTax proposal involved Leo E. Linbeck and the Fairtax.org. Talk radio personality Neal Boortz and Georgia Congressman John Linder published The FairTax Book in 2005 and additional visibility was gained in
15150-629: The World Trade Organization . Bush lost his re-election bid in 1992 . While there is debate about whether Perot's candidacy cost Bush re-election, Charlie Cook asserted that Perot's messaging carried weight with Republican and conservative voters. In the 1994 elections , the Republican Party, led by House minority whip Newt Gingrich , who campaigned on the " Contract with America ", won majorities in both chambers of Congress, gained 12 governorships, and regained control of 20 state legislatures . The Republican Party won control of
15352-514: The conservative coalition , which dominated domestic issues in Congress until 1964. By the time of World War II , both parties split on foreign policy issues, with the anti-war isolationists dominant in the Republican Party and the interventionists dominant in the Democratic Party. Roosevelt won a third term in 1940 and a fourth in 1944 . Conservatives abolished most of the New Deal during
15554-458: The federal borrowing rate for like-term instruments as determined by the Treasury , but since savings, education, and other investments would be tax free under the plan, the FairTax could decrease the incentive to spend more on homes. An analysis in 2008 by the Baker Institute For Public Policy concluded that the FairTax would have significant transitional issues for the housing sector since
15756-609: The large-scale corruption present in the Grant administration , with the emerging Stalwart faction defending Grant and the spoils system , and the Half-Breeds advocating reform of the civil service . Republicans who opposed Grant branched off to form the Liberal Republican Party , nominating Horace Greeley in the 1872 presidential election . The Democratic Party attempted to capitalize on this divide in
15958-527: The lower class earners. Supporters contend that the plan would effectively tax wealth , increase purchasing power and decrease tax burdens by broadening the tax base. Advocates expect a consumption tax to increase savings and investment , ease tax compliance and increase economic growth , increase incentives for international business to locate in the US and increase US competitiveness in international trade . The plan would provide transparency for funding
16160-428: The semantics deceptive. FactCheck called the presentation misleading, saying that it hides the real truth of the tax rate. Bruce Bartlett stated that polls show tax reform support is extremely sensitive to the proposed rate, and called the presentation confusing and deceptive based on the conventional method of calculating sales taxes. Proponents believe it is both inaccurate and misleading to say that an income tax
16362-522: The value added at every intermediate step of production, so the goods reach the final consumer with much of the tax already in the price. The retail seller has little incentive to conceal retail sales, since he has already paid much of the good's tax. Retailers are unlikely to subsidize the consumer's tax evasion by concealing sales. In contrast, a retailer has paid no tax on goods under a sales tax system. This provides an incentive for retailers to conceal sales and engage in " tax arbitrage " by sharing some of
16564-518: The 1908 election , but they became enemies as the party split down the middle. Taft defeated Roosevelt for the 1912 nomination . Roosevelt ran on the ticket of his new Progressive Party . He called for social reforms , many of which were later championed by New Deal Democrats in the 1930s. He lost and when most of his supporters returned to the GOP, they found they did not agree with the new conservative economic thinking , leading to an ideological shift to
16766-428: The Congress, and three-quarters of the individual U.S. states. It is therefore possible that passage of the FairTax bill would simply add another taxation system. If a new income tax bill were passed after the FairTax passage, a hybrid system could develop; albeit, there is nothing preventing a bill for a hybrid system today. To address this issue and preclude that possibility, in the 111th Congress John Linder introduced
16968-538: The Democrats, whom they saw as the party of bloated, secular, and liberal government. This period saw the rise of "pro-government conservatives"—a core part of the Bush's base—a considerable group of the Republicans who advocated for increased government spending and greater regulations covering both the economy and people's personal lives, as well as for an activist and interventionist foreign policy. Survey groups such as
17170-592: The Departments of Agriculture, Commerce, Defense, Education, Energy, Homeland Security, Housing and Urban Development, and Interior combined." Proponents point out that income tax deductions , tax preferences, loopholes , credits , etc. under the current system was estimated at $ 945 billion by the Joint Committee on Taxation . They argue this is $ 456 billion more than the FairTax "entitlement" (tax refund) would spend to cover each person's tax expenses up to
17372-528: The FairTax as proposed in the legislation. The FairTax received visibility in the 2008 presidential election on the issue of taxes and the IRS, with several candidates supporting the bill. A poll in 2009 by Rasmussen Reports found that 43% of Americans would support a national sales tax replacement, with 38% opposed to the idea; the sales tax was viewed as fairer by 52% of Republicans, 44% of Democrats, and 49% of unaffiliateds. President Barack Obama did not support
17574-486: The FairTax bill were passed, permanent elimination of income taxation would not be guaranteed; the FairTax bill would repeal much of the existing tax code , but the Sixteenth Amendment would remain in place. Preventing new legislation from reintroducing income taxation would require a repeal of the Sixteenth Amendment to the United States Constitution with a separate provision expressly prohibiting
17776-461: The FairTax concede that the above studies did not explicitly account for tax evasion , they also claim that the studies did not altogether ignore tax evasion under the FairTax. These studies presumably incorporated some degree of tax evasion in their calculations by using National Income and Product Account based figures, which is argued to understate total household consumption. The studies also did not account for capital gains that may be realized by
17978-592: The FairTax eliminates corporate income taxes and is automatically border adjustable, the competitive tax advantage of foreign producers would be eliminated, immediately boosting U.S. competitiveness overseas and at home. Opponents point to a study commissioned by the National Retail Federation in 2000 that found a national sales tax bill filed by Billy Tauzin , the Individual Tax Freedom Act ( H.R. 2717 ), would bring
18180-434: The FairTax may have a negative effect on the well-being of mid-income earners for several years after implementation. According to the President's Advisory Panel for Federal Tax Reform report, which compared the individual and corporate income tax (excluding other taxes the FairTax replaces) to a sales tax with rebate, the percentage of federal taxes paid by those earning from $ 15,000–$ 50,000 would rise from 3.6% to 6.7%, while
18382-421: The FairTax proposal as having serious problems with evasion and revenue neutrality. Some economists argue that a consumption tax (the FairTax is one such tax) would have a positive effect on economic growth , incentives for international business to locate in the U.S., and increased U.S. international competitiveness (border tax adjustment in global trade ). The FairTax would be tax-free on mortgage interest (up to
18584-550: The FairTax through environmental economics and the re-use and re-sale of used goods . Advocates argue the FairTax would provide an incentive for illegal immigrants to legalize as they would otherwise not receive the rebate. Proponents also believe that the FairTax would have positive effects on civil liberties that are sometimes charged against the income tax system, such as social inequality , economic inequality , financial privacy , self-incrimination , unreasonable search and seizure , burden of proof , and due process . If
18786-449: The FairTax were enacted, becoming available to U.S. capital markets , bringing down interest rates, and otherwise promoting economic growth in the United States. Attorney Allen Buckley states that a tremendous amount of wealth was already repatriated under law changes in 2004 and 2005. Buckley also argues that if the tax rate was significantly higher, the FairTax would discourage the consumption of new goods and hurt economic growth. During
18988-400: The FairTax worry it could exacerbate an existing consumer debt problem. Proponents of the FairTax state that this effect could also allow individuals to pay off their existing (pre-FairTax) debt more quickly, and studies suggest lower interest rates after FairTax passage. Individuals under the current system who accumulated savings from ordinary income (by choosing not to spend their money when
19190-498: The FairTax would offer the broadest tax base (an increase of over $ 2 trillion), which allows the FairTax to have a lower tax rate than current tax law. Gale analyzed a national sales tax (though different from the FairTax in several aspects) and reported that the overall tax burden on middle-income Americans would increase while the tax burden on the top 1% would drop. A study by the Beacon Hill Institute reported that
19392-464: The FairTax, they would have massive confusion and complication as to what is taxed by the state and what is taxed by the federal government. In addition, sales taxes have long exempted all but a few services because of the enormous difficulty in taxing intangibles—Bartlett suggests that the state may not have sufficient incentive to enforce the tax. University of Michigan economist Joel Slemrod argues that states would face significant issues in enforcing
19594-657: The Federal Reserve would likely increase the money supply to accommodate price increases. David Tuerck states "The monetary authorities would have to consider how the degree of accommodation, varying from none to full, would affect the overall economy and how it would affect the well-being of various groups such as retirees." Social Security benefits would be adjusted for any price changes due to FairTax implementation. The Beacon Hill Institute states that it would not matter, apart from transition issues, whether prices fall or rise—the relative tax burden and tax rate remains
19796-556: The GOP and he proved unable to shift the party to a more moderate position. Historians cite the 1964 presidential election and its respective National Convention as a significant shift, which saw the conservative wing, helmed by Arizona senator Barry Goldwater , battle liberal New York governor Nelson Rockefeller and his eponymous Rockefeller Republican faction for the nomination. With Goldwater poised to win, Rockefeller, urged to mobilize his liberal faction, retorted, "You're looking at it, buddy. I'm all that's left." Following
19998-406: The GOP by co-nominating Greeley under their party banner. Greeley's positions proved inconsistent with the Liberal Republican Party that nominated him, with Greeley supporting high tariffs despite the party's opposition. Grant was easily re-elected. The 1876 presidential election saw a contentious conclusion as both parties claimed victory despite three southern states not officially declaring
20200-597: The GOP cooperated with Truman's Cold War foreign policy, funded the Marshall Plan and supported NATO , despite the continued isolationism of the Old Right. Eisenhower had defeated conservative leader senator Robert A. Taft for the 1952 Republican presidential nomination , but conservatives dominated the domestic policies of the Eisenhower administration . Voters liked Eisenhower much more than they liked
20402-520: The House and retook control of the Senate, thus delivering a Republican trifecta . Trump significantly improved his vote share among almost all demographics nationwide, particularly among Hispanic voters, in a working class coalition described as the most racially diverse for a Republican presidential candidate in decades. As of 2024, the GOP holds a majority in the U.S. House of Representatives . It also holds 27 state governorships , 28 state legislatures , and 23 state government trifectas . Six of
20604-475: The House by Georgia Republicans John Linder (1999–2010) and Rob Woodall (2011–2014), while being introduced in the Senate by Georgia Republican Saxby Chambliss (2003–2014). Linder first introduced the Fair Tax Act ( H.R. 2525 ) on July 14, 1999, to the 106th United States Congress and a substantially similar bill has been reintroduced in each subsequent session of Congress. The bill attracted
20806-504: The House of Representatives for the first time in 40 years , and won a majority of U.S. House seats in the South for the first time since Reconstruction. However, most voters had not heard of the Contract and the Republican victory was attributed to traditional mid-term anti-incumbent voting and Republicans becoming the majority party in the South for the first time since Reconstruction, winning many former Southern Democrats . Gingrich
21008-424: The IRS for three years after implementation before completely decommissioning the agency, providing employees time to find other employment. In the period before the FairTax is implemented, there could be a strong incentive for individuals to buy goods without the sales tax using credit. After the FairTax is in effect, the credit could be paid off using untaxed payroll. If credit incentives do not change, opponents of
21210-536: The Republican House's legislative agenda if he were to serve as speaker. Illinois representative Dennis Hastert was promoted to speaker in Livingston's place, serving in that position until 2007. Republican George W. Bush won the 2000 and 2004 presidential elections . He campaigned as a " compassionate conservative " in 2000, wanting to better appeal to immigrants and minority voters. The goal
21412-421: The Republican Party lost seven seats in the House , but still retained control of that chamber. However, Republicans were unable to gain control of the Senate , continuing their minority status with a net loss of two seats. In the aftermath of the loss, some prominent Republicans spoke out against their own party. A 2012 election post-mortem by the Republican Party concluded that the party needed to do more on
21614-634: The Republican Party had greatly shifted towards illiberalism following the election of Trump, and research conducted by the V-Dem Institute concluded that the party was more similar to Europe's most right-wing parties such as Law and Justice in Poland or Fidesz in Hungary. In 2022 and 2023, Supreme Court justices appointed by Trump proved decisive in landmark decisions on gun rights , abortion , and affirmative action . The party went into
21816-401: The Republican Party's first National Convention in 1856 , the party adopted a national platform emphasizing opposition to the expansion of slavery into the free territories. Although Republican nominee John C. Frémont lost that year's presidential election to Democrat James Buchanan , Buchanan managed to win only four of the fourteen northern states. Despite the loss of the presidency and
22018-855: The Republican banner. Since 2009, the party has faced significant factionalism within its own ranks and has shifted towards right-wing populism . In the 21st century, the Republican Party receives its strongest support from rural voters , evangelical Christians , men , senior citizens , and voters without college degrees . On economic issues, the party has maintained a pro-business attitude since its inception. It supports low taxes and deregulation while opposing socialism , labor unions and single-payer healthcare . The populist faction supports economic protectionism , including tariffs . On social issues, it advocates for restricting abortion , discouraging and often prohibiting recreational drug use , promoting gun ownership and easing gun restrictions , and opposing transgender rights . In foreign policy,
22220-497: The Republicans lost five seats, though whether it was due to poor messaging or Clinton's popularity providing a coattail effect is debated. Gingrich was ousted from party power due to the performance, ultimately deciding to resign from Congress altogether. For a short time afterward, it appeared Louisiana representative Bob Livingston would become his successor; Livingston, however, stepped down from consideration and resigned from Congress after damaging reports of affairs threatened
22422-503: The Republicans struck a deal with Clinton on the Balanced Budget Act of 1997 , which included tax cuts, the Republican House majority had difficulty convening on a new agenda ahead of the 1998 elections . During the ongoing impeachment of Bill Clinton in 1998, Gingrich decided to make Clinton's misconduct the party message heading into the elections, believing it would add to their majority. The strategy proved mistaken and
22624-500: The Senate on June 6, 2001, when Vermont Republican senator Jim Jeffords switched his party affiliation to Democrat. The Republicans regained the Senate majority in the 2002 elections , helped by Bush's surge in popularity following the September 11 attacks , and Republican majorities in the House and Senate were held until the Democrats regained control of both chambers in the 2006 elections , largely due to increasing opposition to
22826-473: The Senate voted to acquit him. Trump lost the 2020 presidential election to Democrat Joe Biden . He refused to concede the race, claiming widespread electoral fraud and attempting to overturn the results . On January 6, 2021, the United States Capitol was attacked by Trump supporters following a rally at which Trump spoke. After the attack, the House impeached Trump for a second time on
23028-408: The Senate. Over the course of his presidency, Trump appointed three justices to the Supreme Court : Neil Gorsuch , Brett Kavanaugh , and Amy Coney Barrett . It was the most Supreme Court appointments for any president in a single term since Richard Nixon . Trump appointed 260 judges in total, creating overall Republican-appointed majorities on every branch of the federal judiciary except for
23230-465: The U.S. (imported goods would be subject to collection by the U.S. Customs and Border Protection ). Economists from the University of Tennessee concluded that while there would be many desirable macroeconomic effects, adoption of a national retail sales tax would also have serious effects on state and local government finances. Economist Bruce Bartlett stated that if the states did not conform to
23432-680: The U.S. government if consumer prices were allowed to rise, which would reduce the real value of nominal U.S. government debt . Nor did these studies account for any increased economic growth that many economists researching the plan believe would occur. In contrast to the above studies, William G. Gale of the Brookings Institution published a study in Tax Notes that estimated a rate of 28.2% (39.3% tax-exclusive) for 2007 assuming full taxpayer compliance and an average rate of 31% (44% tax-exclusive) from 2006 to 2015 (assumes that
23634-446: The United States enacted the FairTax. 400 of those companies stated they would build their next plant in the United States, and 100 companies said they would move their corporate headquarters to the United States. Supporters argue that the U.S. has the highest combined statutory corporate income tax rate among OECD countries along with being the only country with no border adjustment element in its tax system. Proponents state that because
23836-612: The Whig Party it replaced, Republicans also called for economic and social modernization . At the first public meeting of the anti-Nebraska movement on March 20, 1854, at the Little White Schoolhouse in Ripon, Wisconsin , the name "Republican" was proposed as the name of the party. The name was partly chosen to pay homage to Thomas Jefferson 's Democratic-Republican Party . The first official party convention
24038-636: The ability of others to consume them. Examples in addition to the ones in the matrix are national parks, or firework displays. It is generally accepted by mainstream economists that the market mechanism will under-provide public goods, so these goods have to be produced by other means, including government provision. Public goods can also suffer from the Free-Rider problem . Private goods are excludable goods, which prevent other consumers from consuming them. Private goods are also rivalrous because one good in private ownership cannot be used by someone else. That
24240-452: The addition of new customers without infringing on existing customers viewing abilities. This would also mean that marginal cost would be close to zero, which satisfies the criteria for a good to be considered non-rival. However, access to cable TV services is only available to consumers willing to pay the price, demonstrating the excludability aspect. Economists set these categories for these goods and their impact on consumers. The government
24442-824: The additional taxes replaced by the FairTax (payroll, estate, and gift taxes). Beacon Hill Institute , FairTax.org, and Kotlikoff criticized the President's Advisory Panel's study as having allegedly altered the terms of the FairTax, using unsound methodology, and/or failing to fully explain their calculations. The tax would be levied once at the final retail sale for personal consumption on new goods and services. Purchases of used items, exports and all business transactions would not be taxed. Also excluded are investments, such as purchases of stock , corporate mergers and acquisitions and capital investments . Savings and education tuition expenses would be exempt as they would be considered an investment (rather than final consumption). A good would be considered "used" and not taxable if
24644-459: The base on which the tax rate is imposed (known as tax-inclusive ). If an individual's gross income is $ 100 and the sum of their income plus employment tax rate is 23%, taxes owed equals $ 23. Traditional state sales taxes are imposed on a tax base equal to the pre-tax portion of a good's price (known as tax-exclusive ). A good priced at $ 77 with a 30% sales tax rate yields $ 23 in taxes owed. To adjust an inclusive rate to an exclusive rate, divide
24846-519: The bill in the 109th–110th Congress, but it has not received support from the Democratic leadership. Democratic Representative Collin Peterson of Minnesota and Democratic Senator Zell Miller of Georgia cosponsored and introduced the bill in the 108th Congress, but Peterson has left the House of Representatives and Miller has left the Senate. In the 109th–111th Congress, Representative Dan Boren
25048-435: The bill, arguing for more progressive changes to the income and payroll tax systems. President Donald Trump proposed to lower overall income taxation and reduce the number of tax brackets from seven to three. The sales tax rate, as defined in the legislation for the first year, is 23% of the total payment including the tax ($ 23 of every $ 100 spent in total—calculated similar to income taxes). This would be equivalent to
25250-461: The burden on those earning more than $ 200,000 would fall from 53.5% to 45.9%. The report states that the top 5% of earners would see their burden decrease from 58.6% to 37.4%. FairTax supporters argue that replacing the regressive payroll tax (a 15.3% total tax not included in the Tax Panel study; payroll taxes include a 12.4% Social Security tax on wages up to $ 97,500 and a 2.9% Medicare tax,
25452-465: The business would have to produce invoices for the "business purchases" that they did not pay sales tax on, and would have to be able to show that they were genuine business expenses. Advocates state the significant 86% reduction in collection points would greatly increase the likelihood of business audits, making tax evasion behavior much more risky. Additionally, the FairTax legislation has several fines and penalties for non-compliance, and authorizes
25654-583: The charge of incitement of insurrection , making him the only federal officeholder to be impeached twice. Trump left office on January 20, 2021. His impeachment trial continued into the early weeks of the Biden presidency , and he was acquitted on February 13, 2021 . Since the 2020 election, election denial has become increasingly mainstream in the party, with the majority of 2022 Republican candidates being election deniers. The party also made efforts to restrict voting based on false claims of fraud. By 2020,
25856-464: The collection of sales tax revenues and the remittance of such revenues to the Treasury. The plan was created by Americans For Fair Taxation , an advocacy group formed to change the tax system. The group states that, together with economists, it developed the plan and the name "Fair Tax", based on interviews, polls, and focus groups of the general public. The FairTax legislation has been introduced in
26058-545: The consumption. That is, not everyone can use the good, but when one individual has claim to use it, they do not reduce the amount or the ability for others to consume the good. By joining a specific club or organization we can obtain club goods; As a result, some people are excluded because they are not members. Examples in addition to the ones in the matrix are cable television, golf courses, and any merchandise provided to club members. A large television service provider would already have infrastructure in place which would allow for
26260-626: The corruption which had plagued his political career. Republican Benjamin Harrison defeated Cleveland in the 1888 election . During his presidency, Harrison signed the Dependent and Disability Pension Act , which established pensions for all veterans of the Union who had served for more than 90 days and were unable to perform manual labor. Following his loss to Cleveland in the 1892 presidential election , Harrison unsuccessfully attempted to pass
26462-463: The cost and value of the new goods. Based on a study conducted by Dale Jorgenson , proponents state that production cost of domestic goods and services could decrease by approximately 22% on average after embedded tax costs are removed, leaving the sale nearly the same after taxes. The study concludes that producer prices would drop between 15% and 26% (depending on the type of good/service). Jorgenson's research included all income and payroll taxes in
26664-457: The cost and value of used goods are in direct relationship to the cost and value of the new goods. Because the U.S. tax system has a hidden effect on prices , it is expected that moving to the FairTax would decrease production costs from the removal of business taxes and compliance costs, which is predicted to offset a portion of the FairTax effect on prices. Since the FairTax would not tax used goods, some critics have argued that this would create
26866-560: The decade produced an unprecedented prosperity until the Wall Street Crash of 1929 heralded the Great Depression. The New Deal coalition forged by Democratic president Franklin D. Roosevelt controlled American politics for most of the next three decades, excluding the presidency of Republican Dwight D. Eisenhower in the 1950s. After Roosevelt took office in 1933, New Deal legislation sailed through Congress and
27068-424: The distribution of economic welfare ) is a point of dispute. The plan's supporters argue that the tax would broaden the tax base, that it would be progressive , and that it would decrease tax burdens and start taxing wealth (reducing the economic gap ). Opponents argue that a national sales tax would be inherently regressive and would decrease tax burdens paid by high-income individuals. A person earning $ 2 million
27270-401: The economy as measured by GDP would be 2.4% higher in the first year and 11.3% higher by the 10th year than it would otherwise be. Economists Laurence Kotlikoff and Sabine Jokisch reported the incentive to work and save would increase; by 2030, the economy's capital stock would increase by 43.7% over the current system, output by 9.4%, and real wages by 11.5%. Economist John Golob estimates
27472-528: The economy moved sharply upward from its nadir in early 1933. The 1934 elections left the GOP with only 25 senators against 71 Democrats. The House likewise had overwhelming Democratic majorities. The Republican Party factionalized into a majority Old Right , based predominantly in the Midwest , and a liberal wing based in the Northeast that supported much of the New Deal. The Old Right sharply attacked
27674-417: The elections, which helped lead the way toward his impeachment and near ouster from office in 1868, the same year Ulysses S. Grant was elected as the next Republican president . Grant was a Radical Republican, which created some division within the party. Massachusetts senator Charles Sumner and Illinois senator Lyman Trumbull opposed most of his Reconstructionist policies. Others took issue with
27876-415: The embedded FairTax cost. While the FairTax would not be applied to the retail sales of used goods, the inherent value of a used good includes the taxes paid when the good was sold at retail. The value is determined by the supply and demand in relation to new goods. The price differential/margins between used and new goods should stay consistent, as the cost and value of used goods are in direct relationship to
28078-517: The embedded tax estimation, which assumes employee take-home pay ( net income ) remains unchanged from pre-FairTax levels. Price and wage changes after the FairTax would largely depend on the response of the Federal Reserve monetary authorities. Non-accommodation of the money supply would suggest retail prices and take home pay stay the same—embedded taxes are replaced by the FairTax. Full accommodation would suggest prices and incomes rise by
28280-424: The exclusive rate (i.e., 30%)—embedded taxes become windfall gains . Partial accommodation would suggest a varying degree in-between. If businesses provided employees with gross pay (including income tax withholding and the employee share of payroll taxes), Arduin, Laffer & Moore Econometrics estimated production costs could decrease by a minimum of 11.55% (partial accommodation). This reduction would be from
28482-544: The federal government. Supporters believe it would increase civil liberties , benefit the environment , and effectively tax illegal activity and undocumented immigrants . Critics contend that a consumption tax of this size would be extremely difficult to collect, would lead to pervasive tax evasion , and raise less revenue than the current tax system, leading to an increased budget deficit . The proposed Fairtax might cause removal of tax deduction incentives, transition effects on after-tax savings, incentives on credit use and
28684-479: The first year of implementation, the FairTax legislation would apply a 23% federal retail sales tax on the total transaction value of a purchase; in other words, consumers pay to the government 23 cents of every dollar spent in total (sometimes called tax-inclusive , and presented this way to provide a direct comparison with individual income and employment taxes which reduce a person's available money before they can make purchases). The equivalent assessed tax rate
28886-426: The founding, research or crafting of the legislation giving expression to the FairTax." Goods (economics) In economics , goods are items that satisfy human wants and provide utility , for example, to a consumer making a purchase of a satisfying product . A common distinction is made between goods which are transferable, and services , which are not transferable. A good is an "economic good" if it
29088-645: The four common categories used. There are four types of goods based on the characteristics of rival in consumption and excludability: Public Goods, Private Goods, Common Resources, and Club Goods. These four types plus examples for anti-rivalry appear in the accompanying table. Goods that are both non-rival and non-excludable are called public goods . In many cases, renewable resources, such as land, are common commodities but some of them are contained in public goods. Public goods are non-exclusive and non-competitive, meaning that individuals cannot be stopped from using them and anyone can consume this good without hindering
29290-452: The given rate by one minus that rate (i.e. 0.23 / ( 1 − 0.23 ) = 0.23 / 0.77 = 0.30 {\displaystyle 0.23/(1-0.23)=0.23/0.77=0.30} ). The FairTax statutory rate , unlike most U.S. state-level sales taxes , is presented on a tax base that includes the amount of FairTax paid. For example, a final after-tax price of $ 100 includes $ 23 of taxes. Although no such requirement
29492-522: The gold standard over free silver in his campaign messaging, but promised to continue bimetallism to ward off continued skepticism over the gold standard, which had lingered since the Panic of 1893 . Democrat William Jennings Bryan proved to be a devoted adherent to the free silver movement, which cost Bryan the support of Democratic institutions such as Tammany Hall , the New York World and
29694-457: The goods (namely, electric energy) is the object of ownership transfer. The consumer becomes an electric energy owner by purchase and may use it for any lawful purposes just like any other goods. Republican Party (United States) The Republican Party , also known as the GOP ( Grand Old Party ), is one of the two major contemporary political parties in the United States . It emerged as
29896-407: The greater of $ 200 or 0.25% of the remitted tax as compensation for compliance costs, which amounts to around $ 5 billion. One avenue for non-compliance is the black market. FairTax supporters state that the black market is largely untaxed under the current tax system. Economists estimate the underground economy in the United States to be between one and three trillion dollars annually. By imposing
30098-455: The illicit tax savings with the final consumer. Citing evasion, Tim Worstall wrote in Forbes that Europe's 20-25% consumption taxes simply would not work if they were a sales tax: that's why they're all a VAT. Laurence Kotlikoff has stated that the government could compel firms to report, via 1099-type forms , their sales to other firms, which would provide the same records that arise under
30300-433: The impossibility of a person to physically hold the latter, whereas the former occupies physical space. Intangible goods differ from services in that final (intangible) goods are transferable and can be traded, whereas a service cannot. Price elasticity also differentiates types of goods. An elastic good is one for which there is a relatively large change in quantity due to a relatively small change in price, and therefore
30502-460: The income was earned) paid taxes on that income before it was placed in savings (such as a Roth IRA or CD ). When individuals spend above the poverty level with money saved under the current system, that spending would be subject to the FairTax. People living through the transition may find both their earnings and their spending taxed. Critics have stated that the FairTax would result in unfair double taxation for savers and suggest it does not address
30704-486: The investment would no longer be tax-favored . In a 2007 study, the Beacon Hill Institute concluded that total charitable giving would increase under the FairTax, although increases in giving would not be distributed proportionately among the various types of charitable organizations. The FairTax may also affect state and local government debt as the federal income tax system provides tax advantages to municipal bonds . Proponents believe environmental benefits would result from
30906-479: The lack of a majority in the U.S. Congress , Republicans were able to orchestrate a Republican speaker of the House of Representatives , which went to Nathaniel P. Banks . Historian James M. McPherson writes regarding Banks' speakership that "if any one moment marked the birth of the Republican party, this was it." The Republicans were eager for the 1860 elections . Former Illinois U.S. representative Abraham Lincoln spent several years building support within
31108-655: The leadership of Lincoln and a Republican Congress, the Republican Party led the fight to defeat the Confederate States in the American Civil War , thereby preserving the Union and abolishing slavery . After the war, the party largely dominated national politics until the Great Depression in the 1930s, when it lost its congressional majorities and the Democrats' New Deal programs proved popular. Dwight D. Eisenhower 's election in 1952
31310-437: The long-term effects of the FairTax would reward low-income households with 26.3% more purchasing power , middle-income households with 12.4% more purchasing power, and high-income households with 5% more purchasing power. The Beacon Hill Institute reported that the FairTax would make the federal tax system more progressive and would benefit the average individual in almost all expenditures deciles. In another study, they state
31512-528: The loss of tax advantages to state and local bonds . It also includes a sunset clause if the 16th Amendment to the US Constitution is not repealed within seven years of its enactment. The legislation would remove the Internal Revenue Service (after three years), and establish Excise Tax and Sales Tax bureaus in the Department of the Treasury . The states are granted the primary authority for
31714-500: The main political rival of the then-dominant Democratic Party in the 1850s, and the two parties have dominated American politics since then. The Republican Party was founded in 1854 by anti-slavery activists who opposed the Kansas–Nebraska Act , which allowed for the potential extension of slavery to the western territories. The party supported classical liberalism and economic reform geared to industry, supporting investments in manufacturing, railroads, and banking. The party
31916-496: The matrix. Elinor Ostrom proposed additional modifications to the classification of goods to identify fundamental differences that affect the incentives facing individuals Consumption can be extended to include "Anti-rivalrous" consumption. The additional definition matrix shows the four common categories alongside providing some examples of fully excludable goods, Semi-excludable goods and fully non-excludeable goods. Semi-excludable goods can be considered goods or services that
32118-419: The most it had held in history. The Party also held 33 governorships, the most it had held since 1922. The party had total control of government in 25 states; it had not held total control of this many states since 1952. The opposing Democratic Party held full control of only five states in 2017. In the 2018 elections , Republicans lost control of the House of Representatives, but strengthened their hold on
32320-467: The national debt hiked considerably under Bush's tenure. In contrast, some social conservatives expressed dissatisfaction with the party's support for economic policies that conflicted with their moral values. The Republican Party lost its Senate majority in 2001 when the Senate became split evenly; nevertheless, the Republicans maintained control of the Senate due to the tie-breaking vote of Bush's vice president, Dick Cheney . Democrats gained control of
32522-406: The national level to attract votes from minorities and young voters. In March 2013, Republican National Committee chairman Reince Priebus issued a report on the party's electoral failures in 2012, calling on Republicans to reinvent themselves and officially endorse immigration reform. He proposed 219 reforms, including a $ 10 million marketing campaign to reach women, minorities, and gay people;
32724-422: The nine current U.S. Supreme Court justices were appointed by Republican presidents. Its most recent presidential nominee is Donald Trump , who served as the 45th president of the United States and was the party's candidate again in the 2024 presidential election . There have been 19 Republican presidents, the most from any one political party. The Republican Party's founding members chose its name as homage to
32926-426: The number of tax filers by about 86% (from 100 million to 14 million) and reduce the filing complexity to a simplified state sales tax form. The Government Accountability Office (GAO), among others, have specifically identified the negative relationship between compliance costs and the number of focal points for collection. Under the FairTax, the federal government would be able to concentrate tax enforcement efforts on
33128-549: The party establishment is interventionist, while the populist faction supports isolationism and in some cases non-interventionism . In 1854, the Republican Party was founded in the Northern United States by forces opposed to the expansion of slavery , ex- Whigs , and ex- Free Soilers . The Republican Party quickly became the principal opposition to the dominant Democratic Party and the briefly popular Know Nothing Party. The party grew out of opposition to
33330-615: The party, campaigning heavily for Frémont in 1856 and making a bid for the Senate in 1858 , losing to Democrat Stephen A. Douglas but gaining national attention from the Lincoln–Douglas debates it produced. At the 1860 Republican National Convention , Lincoln consolidated support among opponents of New York U.S. senator William H. Seward , a fierce abolitionist who some Republicans feared would be too radical for crucial states such as Pennsylvania and Indiana , as well as those who disapproved of his support for Irish immigrants. Lincoln
33532-695: The passage of the Civil Rights Act of 1964 and Voting Rights Act of 1965 , the southern states became more reliably Republican in presidential politics, while northeastern states became more reliably Democratic. The GOP went on to control the White House from 1969 to 1977 under 37th president Richard Nixon , and when he resigned in 1974 due to the Watergate scandal , Gerald Ford became the 38th president, serving until 1977. Ronald Reagan defeated incumbent Democratic President Jimmy Carter in
33734-500: The poverty level. In addition, it was estimated for 2005 that the Internal Revenue Service was already sending out $ 270 billion in refund checks. Sales and income taxes behave differently due to differing definitions of tax base, which can make comparisons between the two confusing. Under the existing individual income plus employment (Social Security; Medicare; Medicaid) tax formula, taxes to be paid are included in
33936-498: The poverty level. The income taxes on capital gains, estates, social security and pension benefits would be eliminated under FairTax. In addition, the FairTax legislation adjusts Social Security benefits for changes in the price level, so a percentage increase in prices would result in an equal percentage increase to Social Security income. Supporters suggest these changes would offset paying the FairTax under transition conditions. The FairTax would be tax free on mortgage interest up to
34138-402: The poverty level. The tax would be levied on all U.S. retail sales for personal consumption on new goods and services . Critics argue that the sales tax rate defined in the legislation would not be revenue neutral (that is, it would collect less for the government than the current tax system), and thus would increase the budget deficit , unless government spending were equally reduced. During
34340-501: The presidency in a landslide in the 1988 election . However, his term was characterized by division within the Republican Party. Bush's vision of economic liberalization and international cooperation with foreign nations saw the negotiation and, during the presidency of Democrat Bill Clinton in the 1990s, the signing of the North American Free Trade Agreement (NAFTA) and the conceptual beginnings of
34542-467: The previous fiscal year. A household's effective tax rate on consumption would vary with the annual expenditures on taxable items and the fixed monthly tax rebate. The rebate would have the greatest effect at low spending levels, where they could lower a household's effective rate to zero or below. The lowest effective tax rate under the FairTax could be negative due to the rebate for households with annual spending amounts below poverty level spending for
34744-479: The price. Common-pool resources are rival in consumption and non-excludable. An example is that of fisheries, which harvest fish from a shared common resource pool of fish stock. Fish caught by one group of fishermen are no longer accessible to another group, thus being rivalrous. However, oftentimes, due to an absence of well-defined property rights , it is difficult to restrict access to fishermen who may overfish. Club goods are excludable but not rivalrous in
34946-431: The rate approaches 23% of total spending. Thus, according to economist Laurence Kotlikoff , the effective tax rate is progressive on consumption . An unreviewed paper by Kotlikoff and David Rapson states that the FairTax would significantly reduce marginal taxes on work and saving, lowering overall average remaining lifetime tax burdens on current and future workers. A study by Kotlikoff and Sabine Jokisch concluded that
35148-411: The rate could adjust annually based on federal receipts in the previous fiscal year. With the rebate taken into consideration, the FairTax would be progressive on consumption , but would still be regressive on income (since consumption as a percentage of income falls at higher income levels). Opponents argue this would accordingly decrease the tax burden on high-income earners and increase it on
35350-420: The rebate does not consider marital status) spending $ 30,000 a year on taxable items would devote about 3.4% of total spending ([$ 6,900 tax minus $ 5,888 rebate]/$ 30,000 spending) to the FairTax after the rebate. The same household spending $ 125,000 on taxable items would spend around 18.3% ([$ 28,750 tax minus $ 5,888 rebate]/$ 125,000 spending) on the FairTax. At higher spending levels, the rebate has less impact and
35552-406: The removal of the remaining embedded costs, including corporate taxes, compliance costs, and the employer share of payroll taxes. This decrease would offset a portion of the FairTax amount reflected in retail prices, which proponents suggest as the most likely scenario. Bruce Bartlett states that it is unlikely that nominal wages would be reduced, which he believes would result in a recession, but that
35754-487: The right in the Republican Party. The Republicans returned to the presidency in the 1920s, winning on platforms of normalcy , business-oriented efficiency, and high tariffs. The national party platform avoided mention of prohibition, instead issuing a vague commitment to law and order . Warren G. Harding died in 1923 and Calvin Coolidge easily defeated the splintered opposition in 1924. The pro-business policies of
35956-604: The sales tax rate is in the single digits. Tax publications by the Organisation for Economic Co-operation and Development (OECD), IMF, and Brookings Institution have suggested that the upper limit for a sales tax is about 10% before incentives for evasion become too great to control. According to the GAO, 80% of state tax officials opposed a national sales tax as an intrusion on their tax base. Opponents also raise concerns of legal tax avoidance by spending and consuming outside of
36158-448: The same. Decreases in production cost would not fully apply to imported products; so according to proponents, it would provide tax advantages for domestic production and increase U.S. competitiveness in global trade (see Border adjustability ). To ease the transition, U.S. retailers will receive a tax credit equal to the FairTax on their inventory to allow for quick cost reduction. Retailers would also receive an administrative fee equal to
36360-464: The seat had been held for decades by Democrat Ted Kennedy . In November, Republicans recaptured control of the House , increased their number of seats in the Senate , and gained a majority of governorships . The Tea Party would go on to strongly influence the Republican Party, in part due to the replacement of establishment Republicans with Tea Party-style Republicans. When Obama was re-elected president in 2012 , defeating Republican Mitt Romney ,
36562-414: The service itself, but may involve transfer of ownership of goods developed or marketed by a service provider in the course of the service. For example, sale of storage related goods, which could consist of storage sheds, storage containers, storage buildings as tangibles or storage supplies such as boxes, bubble wrap, tape, bags and the like which are consumables, or distributing electricity among consumers
36764-519: The setting of a shorter, more controlled primary season; and the creation of better data collection facilities. Following the 2014 elections , the Republican Party took control of the Senate by gaining nine seats. With 247 seats in the House and 54 seats in the Senate, the Republicans ultimately achieved their largest majority in the Congress since the 71st Congress in 1929. In the 2016 presidential election , Republican nominee Donald Trump defeated Democratic nominee Hillary Clinton . The result
36966-463: The studies difficult. The choice between static or dynamic scoring further complicates any estimate of revenue-neutral rates. A 2006 study published in Tax Notes by the Beacon Hill Institute at Suffolk University and Dr. Laurence Kotlikoff estimated the FairTax would be revenue-neutral for the tax year 2007 at a rate of 23.82% (31.27% tax-exclusive). The study states that purchasing power
37168-411: The tax burden on low-income families. The FairTax would use a monthly rebate system instead of the common state exclusions.) Internet purchases would be taxed, as would retail international purchases (such as a boat or car) that are imported to the United States (collected by the U.S. Customs and Border Protection ). The FairTax's effect on the distribution of taxation or tax incidence (the effect on
37370-445: The tax. "Even at an average rate of around five percent, state sales taxes are difficult to administer." University of Virginia School of Law professor George Yin states that the FairTax could have evasion issues with export and import transactions. The President's Advisory Panel for Federal Tax Reform reported that if the federal government were to cease taxing income, states might choose to shift their revenue-raising to income. Absent
37572-491: The transition effect on some taxpayers who have accumulated significant savings from after-tax dollars, especially retirees who have finished their careers and switched to spending down their life savings. Supporters of the plan argue that the current system is no different, since compliance costs and "hidden taxes" embedded in the prices of goods and services cause savings to be "taxed" a second time already when spent. The rebate would supplement accrued savings, covering taxes up to
37774-569: The transition, many or most of the employees of the IRS (105,978 in 2005) would face loss of employment. The Beacon Hill Institute estimate is that the federal government would be able to cut $ 8 billion from the IRS budget of $ 11.01 billion (in 2007), reducing the size of federal tax administration by 73%. In addition, income tax preparers (many seasonal), tax lawyers, tax compliance staff in medium-to-large businesses, and software companies which sell tax preparation software could face significant drops, changes, or loss of employment. The bill would maintain
37976-403: The underground economy would continue to bear the same tax burden as before. They state that replacing the current tax system with a consumption tax would not change the tax revenue generated from the underground economy—while illicit income is not taxed directly, spending of income from illicit activity results in business income and wages that are taxed. Proponents state the FairTax would reduce
38178-477: The values of republicanism promoted by Democratic-Republican Party, which its founder, Thomas Jefferson, called the "Republican Party". The idea for the name came from an editorial by the party's leading publicist, Horace Greeley, who called for "some simple name like 'Republican' [that] would more fitly designate those who had united to restore the Union to its true mission of champion and promulgator of Liberty rather than propagandist of slavery". The name reflects
38380-475: The war, but they did not attempt to do away with Social Security or the agencies that regulated business. Historian George H. Nash argues: Unlike the "moderate", internationalist, largely eastern bloc of Republicans who accepted (or at least acquiesced in) some of the "Roosevelt Revolution" and the essential premises of President Harry S. Truman 's foreign policy, the Republican Right at heart
38582-553: Was a rare break between Democratic presidents and he presided over a period of increased economic prosperity after World War II . Following the 1960s era of civil rights legislation, enacted by Democrats, the South became more reliably Republican, and Richard Nixon carried 49 states in the 1972 election , with what he touted as his " silent majority ". The 1980 election of Ronald Reagan realigned national politics, bringing together advocates of free-market economics, social conservatives , and Cold War foreign policy hawks under
38784-548: Was a zealous radical. Gingrich's strategy of " constitutional hardball " resulted in increasing political polarization . The Republicans maintained their majority for the first time since 1928 despite Bob Dole losing handily to Clinton in the presidential election . However, Gingrich's national profile proved a detriment to the Republican Congress, which enjoyed majority approval among voters in spite of Gingrich's relative unpopularity. After Gingrich and
38986-415: Was counterrevolutionary. Anti-collectivist, anti-Communist , anti-New Deal, passionately committed to limited government , free market economics , and congressional (as opposed to executive) prerogatives, the G.O.P. conservatives were obliged from the start to wage a constant two-front war: against liberal Democrats from without and "me-too" Republicans from within. After 1945, the internationalist wing of
39188-515: Was elected president in the general election . This election result helped kickstart the American Civil War , which lasted from 1861 until 1865. The 1864 presidential election united War Democrats with the GOP in support of Lincoln and Tennessee Democratic senator Andrew Johnson , who ran for president and vice president on the National Union Party ticket; Lincoln was re-elected. Under Republican congressional leadership,
39390-592: Was established to decide who would be awarded the states' electors. After the Commission voted along party lines in Hayes' favor, Democrats threatened to delay the counting of electoral votes indefinitely so no president would be inaugurated on March 4. This resulted in the Compromise of 1877 and Hayes finally became president. Hayes doubled down on the gold standard , which had been signed into law by Grant with
39592-537: Was held on July 6, 1854, in Jackson, Michigan . The party emerged from the great political realignment of the mid-1850s, united in pro-capitalist stances with members often valuing Radicalism . The realignment was powerful because it forced voters to switch parties, as typified by the rise and fall of the Know Nothing Party , the rise of the Republican Party and the splits in the Democratic Party. At
39794-476: Was increasingly controversial, as he implemented a family separation policy for migrants , deployed federal law enforcement forces in response to racial protests and reacted slowly to the COVID-19 pandemic before clashing with health officials over testing and treatment. Trump was impeached by the House of Representatives in 2019 on charges of abuse of power and obstruction of Congress. On February 5, 2020,
39996-399: Was made speaker, and within the first 100 days of the Republican majority, every proposition featured in the Contract was passed, with the exception of term limits for members of Congress. One key to Gingrich's success in 1994 was nationalizing the election, which in turn led to his becoming a national figure during the 1996 House elections , with many Democratic leaders proclaiming Gingrich
40198-460: Was successful in the North, and by 1858, it had enlisted most former Whigs and former Free Soilers to form majorities in almost every northern state. White Southerners of the planter class became alarmed at the threat to the future of slavery in the United States. With the 1860 election of Abraham Lincoln , the first Republican president, the Southern states seceded from the United States. Under
40400-469: Was the only Democrat to cosponsor the bill. A number of congressional committees have heard testimony on the FairTax, but it has not moved from committee since its introduction in 1999. The legislation was also discussed with President George W. Bush and his Secretary of the Treasury Henry M. Paulson . To become law, the bill will need to be included in a final version of tax legislation from
40602-454: Was to prioritize drug rehabilitation programs and aid for prisoner reentry into society, a move intended to capitalize on President Clinton's tougher crime initiatives such as his administration's 1994 crime bill . The platform failed to gain much traction among members of the party during his presidency. The Republican Party remained fairly cohesive for much of the 2000s, as both strong economic libertarians and social conservatives opposed
40804-486: Was unexpected; polls leading up to the election showed Clinton leading the race. Trump's victory was fueled by narrow victories in three states— Michigan , Pennsylvania , and Wisconsin —that had been part of the Democratic blue wall for decades. It was attributed to strong support amongst working-class white voters, who felt dismissed and disrespected by the political establishment. Trump became popular with them by abandoning Republican establishment orthodoxy in favor of
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