Domestic Taxes

Rand Paul supports swapping income tax for fair tax

The Fair Tax essentially replaces income and payroll taxes with a national sales tax that would likely be collected at the state level. The tax has garnered the support of many Tea Party members since it would likely reduce the size of the federal government. But tax experts say the tax would be hard to implement since state agencies don’t have the manpower or technology to monitor all sales, which would likely lead to greater noncompliance in terms of taxpayers paying their fair share. 

Opponents of the tax said it would be regressive since lower-income taxpayers would be subjected to the same percentage level of tax on purchases. Questions also abound on what would have to be taxed. The Fair Tax carves out home or automobile purchases, but some say they would have to be included to sufficiently fund the government.

The Courier-Journal reports that the Fair Tax is becoming an election issue in states like Kentucky and Indiana, where Democratic incumbent Baron Hill has attacked his opponent, Republican contender Todd Young, for supporting the FairTax, which Hill argues could leave the country woefully unprepared for the coming onslaught of retirees or unexpected emergencies. 

While recent polling shows the Fair Tax is extremely popular with members of the Tea Party, the levy received little attention during the 2005 tax reform debate under then-President George W. Bush, who supported the idea of a smaller government. Experts participating in the discussion concluded that the tax would raise less revenue than the current system and would force drastic cuts in the size of the federal government.

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