What is national consumption tax?- Check out in detail

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A group of House Republicans is looking to raise sales taxes with the Fair Tax Act, which would abolish the Internal Revenue Service.

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Consumption tax is a tax on goods or services – what you spend rather than what you earn. In the U.S., consumption tax comes in the form of retail sales tax and excise tax

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A national consumption tax would create a federal tax on consumer goods, perhaps emphasized over income tax, which funds Social Security, Medicare and other government programs.

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The U.S. does not currently have a national consumption tax. Other countries do, including Japan, which has a 7.8% standard and 6.24% reduced tax rate for items like food, drink and some newspapers.

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Over 170 countries, including all of Europe, impose a Value-Added Tax, which taxes goods and services at each stage of production.

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Consumption taxes in the U.S. are on a state-by-state basis. Almost every state imposes sales tax except for Alaska, Delaware, Montana, New Hampshire, and Oregon, which instead allows cities to charge a local sales tax.

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California boasts the country’s highest state sales tax rate at 7.25%.

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Some House Republicans are trying to change this. The Fair Tax Act would eliminate most current federal taxes in favor of a 23% federal sales tax.

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