Fair Tax Act of 2023

While I will not hold my breath, I am thrilled to see the introduction of H.R.25 – FairTax Act of 2023 in the House of Representatives by Rep. Carter Earl L. “Buddy” (R-GA-1) on January 9.

“This bill imposes a national sales tax on the use or consumption in the United States of taxable property or services in lieu of the current income taxes, payroll taxes, and estate and gift taxes. The rate of the sales tax will be 23% in 2025, with adjustments to the rate in subsequent years. There are exemptions from the tax for used and intangible property; for property or services purchased for business, export, or investment purposes; and for state government functions.

Under the bill, family members who are lawful U.S. residents receive a monthly sales tax rebate (Family Consumption Allowance) based upon criteria related to family size and poverty guidelines.” “Fair Tax Act of 2023”

I have written a great deal about taxation, a necessary feature of government spending, and how to make it fair and economically neutral (minimal distortion of the allocation of resources in our economy). Income taxation—especially corporate income taxation—fail these tests. A universal consumption tax passes them. It is especially suitable for our globalized world where companies produce and sell in many countries. “Tax reform and the press”   “The corporate income tax”

But the issue of fairness is somewhat in the eyes of the beholder. I have also supported a Universal Basic Income (UBI), in place of our many safety net transfers including Social Security. “Our social safety net”  Not only does a UBI better fit American’s strong commitment to individual liberty and choice, but when combined with a flat consumption tax it produces a progressive impact on income that satisfies my notion of fairness. “Replacing social security with a universal basic income”

As I understand the new (actually a return to the old) and improved House rules, after consideration by the House Ways and Means Committee, the bill will be debated on the floor of the full House. This is a giant step in a very good direction.  

Author: Warren Coats

I specialize in advising central banks on monetary policy and the development of the capacity to formulate and implement monetary policy.  I joined the International Monetary Fund in 1975 from which I retired in 2003 as Assistant Director of the Monetary and Financial Systems Department. While at the IMF I led or participated in missions to the central banks of over twenty countries (including Afghanistan, Bosnia, Croatia, Egypt, Iraq, Israel, Kazakhstan, Kenya, Kosovo, Kyrgystan, Moldova, Serbia, Turkey, West Bank and Gaza Strip, and Zimbabwe) and was seconded as a visiting economist to the Board of Governors of the Federal Reserve System (1979-80), and to the World Bank's World Development Report team in 1989.  After retirement from the IMF I was a member of the Board of the Cayman Islands Monetary Authority from 2003-10 and of the editorial board of the Cayman Financial Review from 2010-2017.  Prior to joining the IMF I was Assistant Prof of Economics at UVa from 1970-75.  I am currently a fellow of Johns Hopkins Krieger School of Arts and Sciences, Institute for Applied Economics, Global Health, and the Study of Business Enterprise.  In March 2019 Central Banking Journal awarded me for my “Outstanding Contribution for Capacity Building.”  My recent books are One Currency for Bosnia: Creating the Central Bank of Bosnia and Herzegovina; My Travels in the Former Soviet Union; My Travels to Afghanistan; My Travels to Jerusalem; and My Travels to Baghdad. I have a BA in Economics from the UC Berkeley and a PhD in Economics from the University of Chicago. My dissertation committee was chaired by Milton Friedman and included Robert J. Gordon.

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