However, the real value of everything would remain the same. ![]() "If the price level suddenly increased by 10% tomorrow, everything denominated in dollars would rise in price by 10 percent (goods and services, wages, profits, etc). In an email, Pomerleau said that the simplest way to understand the mismatch was in terms of inflation. That adds nearly $10 trillion to the deficit over 10 years, according to Gale and Pomerleau. Gale and Kyle Pomerleau argue in their Brookings article that the FairTax's proponents don't deal with how prices would change for consumers and businesses in a consistent way adjusting for that inconsistency would lead to a much higher tax rate needed to match current tax revenues, even under favorable assumptions like a lack of tax evasion and no changes in government spending. There's just one problem, according to a new report out of the Brookings Institute: That "FairTax" proposal, which would amount to a 30% markup on just about everything's sticker price, making the tax 23% of an item's total price including the tax, would actually add nearly $10 trillion to the deficit over the next 10 years - running counter to Republicans' insistence that the deficit should be reduced. ![]() Republicans want to slash taxes and government spending, and their big plan to do just that hinges on abolishing the IRS and replacing most federal taxes with a flat 23% national sales tax. Account icon An icon in the shape of a person's head and shoulders.
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