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Comment by jleyank | Hacker News Reader

Would this eliminate the federal income tax leaving state and lower taxes? Or is it going to be nothing but one rather impressive vat?

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> Would this eliminate the federal income tax leaving state and lower taxes?

The proposal “gets rid of the national personal and corporate income taxes and abolishes the IRS…as well as implements a national sales tax. Additionally, the bill gets rid of the death, gift, and payroll taxes.”

The rate seems to be 23%, and given that this is only a sales tax this would mean the federal government is taxing at maybe 10-15% of GDP. If I remember correctly, federal government expenditures are around 30% of GDP.

So 23% consumption tax? Or would you be talking higher?

I'm not sure 23% would be enough to offset the loss of the federal income tax.

23% is what is in the bill as the initial starting rate.

If that’s across the board and there’s no relief for lower income or retirees it’s going to suck hard. My income tax rate is lower than that…. And I asked about state/local taxes as removing state revenue from source a will replace it with source b. Remove existing taxes, and the national vat will sit on top of state or provincial vats as in Canada and I assume elsewhere.

I think if you did a Roth IRA/401k and then retired, you'd be angry because you're effectively paying double taxes on consumption.

Same with money that you already took out of a regular 401k and paid taxes on it.

Same with money that was already taxed for the past 5 years.

Etc.

Every time the subject of a consumption tax or VAT comes up, people say it will replace the income tax. If anything like this ever gets mass appeal because they say it will replace the income tax, the implementation IMO will be in addition to the income tax. Governments rarely get rid of taxes.

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