Fair Consumption-Based Taxation Act (FCBTA) - Updated with Luxury Goods and Expanded Tax Base
Section 1. Short Title
This Act may be cited as the “Fair Consumption-Based Taxation Act” or FCBTA.
Section 2. Findings and Purpose
Findings
Simplification of Taxation:
1.1. The current federal income tax system is complex and burdensome for taxpayers and businesses.
1.2. A national sales tax provides transparency and simplicity, aligning contributions with consumption.Expanded Tax Base:
2.1. Including luxury goods, entertainment, and non-essential medical services in the taxable base ensures fairness and increased revenue without burdening basic necessities.Preservation of Social Programs:
2.1. Social Security and Medicare payroll taxes shall remain unchanged, ensuring stable funding for these vital programs.
Purpose
- To replace federal income taxes with a fair, transparent, and consumption-based national sales tax.
- To broaden the tax base by including luxury goods, entertainment, and non-essential services while exempting basic necessities.
- To preserve essential social programs while fostering economic growth.
Title I: National Sales Tax Implementation
Section 3. Establishing a Federal Sales Tax
General Provisions:
1.1. A federal sales tax of 23% shall be applied to the sale of goods and services at the point of purchase.
1.2. The tax rate may be adjusted annually based on economic performance and revenue needs, subject to Congressional approval.Taxable Transactions:
1.1. All retail sales of new goods and services are subject to the federal sales tax.
1.2. Used goods are exempt from the tax to avoid double taxation.Expanded Tax Base:
1.1. Luxury goods, entertainment, and non-essential medical services are taxable under this Act, including:
- High-end electronics, designer clothing, yachts, and private jets.
- Movie tickets, concerts, sporting events, and streaming services.
- Cosmetic surgery, elective procedures, and non-medical therapies.Exemptions for Essentials:
1.1. Basic necessities such as unprocessed food, prescription medications, and housing rentals are exempt from the sales tax.
1.2. The Department of Treasury shall issue guidelines on exempt categories and review them annually.
Section 4. Prebate System
Monthly Rebate:
1.1. All U.S. citizens and legal residents shall receive a monthly prebate to offset the tax burden on basic living expenses.
1.2. The prebate amount is calculated based on the federal poverty level and family size.Eligibility:
1.1. Households must register with the Internal Revenue Service (IRS) or its successor agency to receive prebates.
Title II: Revenue Stability and Preservation of Social Programs
Section 5. Retaining Payroll Taxes for Social Security and Medicare
Unchanged Contributions:
1.1. Social Security and Medicare taxes shall continue to be withheld from employee paychecks and employer contributions.Preservation of Benefits:
1.1. Current benefits and funding mechanisms for Social Security and Medicare shall remain intact.
Section 6. Expanded Revenue Streams
Luxury Goods Taxation:
1.1. A luxury tax shall apply to items deemed non-essential and high-value, including:
- Designer clothing, jewelry, and high-performance vehicles.
- Recreational yachts, private aircraft, and high-end electronics.Entertainment Taxation:
1.1. Tickets for concerts, sporting events, theme parks, and streaming services shall be subject to the 19% federal sales tax.Non-Essential Medical Services Taxation:
1.1. Cosmetic procedures, elective surgeries, and non-medical therapies shall be taxed under this Act.
1.2. Medical services deemed essential by the Department of Health and Human Services (HHS) remain exempt.
Title III: Oversight and Enforcement
Section 7. Anti-Evasion Measures
Transaction Tracking:
1.1. Businesses are required to maintain accurate, electronic records of all taxable transactions.
1.2. Tax evasion shall result in penalties, including fines and potential imprisonment.Audits and Compliance:
1.1. The Treasury Department shall oversee audits and ensure compliance through a dedicated federal agency.
Section 8. Public Awareness and Prebates
Prebate Education Campaign:
1.1. A nationwide education campaign shall inform citizens about the new tax system, including prebate benefits and exemptions.Enhanced Prebates for Low-Income Households:
1.1. Households below 150% of the federal poverty line shall receive enhanced prebates to reduce their effective tax burden on necessities.
Title IV: Reporting and Accountability
Section 9. Annual Reporting and Adjustments
Annual Review:
1.1. The Treasury Department shall issue an annual report to Congress on sales tax revenue, compliance rates, and economic impact.
1.2. Recommendations for rate adjustments shall be included to ensure revenue stability.Independent Audits:
1.1. The Government Accountability Office (GAO) shall conduct biennial audits of the tax system.
Section 10. Effective Date and Severability
Effective Date:
1.1. This Act shall take effect two years after its enactment.Severability:
1.1. If any provision of this Act is found invalid, the remainder shall remain in effect.
Key Numbers for Proposed 22% Sales Tax System
1. Revenue from a 22% National Sales Tax
- Taxable Base: $12.375 trillion (includes consumer spending minus exemptions, luxury goods, entertainment, and non-essential medical services).
- Revenue:
- $12.375 trillion × 22% = $2.72 trillion.
2. Retained Payroll Taxes
- Social Security and Medicare Payroll Taxes: $1.5 trillion (unchanged under the plan).
Total Revenue Under the 22% Sales Tax System:
- Sales Tax Revenue: $2.72 trillion.
- Payroll Tax Revenue: $1.5 trillion.
- Total Revenue = $4.22 trillion.
Comparison to Current System
- Current Federal Revenue: $4.8 trillion.
- Revenue Under the New System: $4.22 trillion.
- Revenue Shortfall:
- $4.8 trillion (current) - $4.22 trillion (proposed) = $580 billion shortfall.
Additionally, we still have the $1.6 trillion federal spending deficit to address. Combined, this means we need to generate $2.18 trillion more revenue or make equivalent spending reductions.
Addressing the Shortfall in the 22% Sales Tax System
Step 1: Supplementary Revenue Streams
Corporate Income Tax (Low Flat Rate):
- A 10% corporate income tax could generate $250 billion annually.
Excise Taxes on Specific Goods:
- Alcohol, tobacco, and carbon emissions taxes: $100-200 billion annually.
Financial Transaction Tax:
- A 0.1% tax on financial trades (e.g., stocks, bonds) could raise $80-100 billion annually.
Luxury Excise Tax:
- Additional taxes on ultra-luxury goods (e.g., yachts, private jets): $50 billion annually.
Supplementary Revenue Estimate:
- $250 billion (corporate tax) + $150 billion (excise taxes) + $90 billion (financial transaction tax) + $50 billion (luxury excise tax) = $540 billion.
Step 2: Adjust the Sales Tax Rate
- Increasing the sales tax rate from 22% to 23%:
- $12.375 trillion × 23% = $2.85 trillion (additional $130 billion compared to 22%).
New Revenue Estimate:
- $2.85 trillion (sales tax) + $1.5 trillion (payroll taxes) + $540 billion (supplementary streams) = $4.89 trillion.
Step 3: Spending Reforms
To close the remaining gap from the spending deficit, targeted spending reductions could help:
Defense Spending Reform:
- Reduce inefficiencies and unnecessary programs (~$100-200 billion savings annually).
Healthcare Cost Reductions:
- Implement negotiation for Medicare drug prices (~$50-100 billion annually).
Waste Reduction in Discretionary Spending:
- Cut waste and improve efficiency (~$50-100 billion annually).
Spending Adjustments Estimate:
- $200-400 billion.
Final Revenue and Deficit Balance
- Revenue (with 23% sales tax and supplementary streams): $4.89 trillion.
- Estimated Spending Reductions: $200-400 billion.
- Total Available Funds = $5.09 trillion - $6.4 trillion spending = Balanced Budget or Small Surplus.
Conclusion
By adjusting the sales tax rate to 23%, adding supplementary revenue streams, and implementing targeted spending reforms, the proposed tax system can match or exceed the current system while addressing the federal deficit. Let me know if you'd like to finalize this plan or draft a formal bill!
