Committee for a Responsible Federal Budget

Could the FairTax Get Rid of the IRS?

Aug 7, 2015 | Taxes

When discussing how he would reduce the size of government, Gov. Huckabee stated that he’s “still the one who says that we can get rid of the Internal Revenue Service (IRS) if we would pass the FairTax, which is a tax on consumption rather than a tax on people’s income.”

While the tax system could be restructured to eliminate the IRS, there would still need to be some mechanism in place to administer tax collection. In the case of the FairTax, the duties of the IRS are shifted to state tax agencies or to the Social Security Administration (SSA), which would need to perform similar roles.

The FairTax proposes to abolish the IRS by mandating that state agencies collect taxes in the form of a flat 23 percent consumption tax, and send the revenues to the U.S. Treasury. The plan also includes a “prebate” check sent each month to individuals and families a check each month for an amount that equals one-twelfth of the federal poverty line, administered by the Social Security Administration.

While the IRS could be abolished, many of its functions – tax administration, enforcement, and sending rebate checks – would be shifted to state agencies and SSA, including to some states that do not currently collect sales tax. FairTax calculates that this would impose a cost of $9.66 billion on states while saving the federal government $9.38 billion in IRS funding - a net cost of $280 million.

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