What is this National Freedom Tax?

The National Freedom Tax represents a revolutionary approach to funding the federal government that would eliminate income tax and replace the IRS with a simple consumption-based system. 

This comprehensive tax reform proposal promises to restore economic freedom while providing immediate financial relief to American workers and businesses.

Key Takeaways

Before diving deeper, here are the essential points about this groundbreaking tax reform:

• Complete elimination of individual and business income taxes
• 15% consumption tax collected at point of sale on goods and services
• States collect the tax using existing sales tax infrastructure
• Prefund system protects low-income families from tax burden
• 23% take home pay increase for workers (tax-free)
• Seven-year phase-out of the IRS
• Constitutional compliance with original founding principles

Understanding Your Current Tax Burden

How Much Are You Really Paying?

Most workers don't realize how much the current system takes from their earnings. Let's break down what happens to your paycheck.

First, your employer withholds income taxes. The national average is 23% of your gross pay. This is money you earned but will never see.

Additionally, your employer deducts Social Security and Medicare taxes. However, there's more to this story. Your employer also matches these deductions and sends that money to the IRS too. Together, this totals about 16% of your gross pay.

Combined, these deductions take almost half of your gross income before you even receive your paycheck. Therefore, the current system creates a massive burden on working families.

What is this National Freedom Tax System?

The Basic Structure

The National Freedom Tax operates on a simple principle. Instead of taxing what you earn, it taxes what you spend on personal consumption.

Every retail purchase would include a 15% consumption tax. However, this isn't just another sales tax added to existing burdens.

The tax completely replaces:

• All individual income taxes
• All business income taxes
• Current withholding from paychecks

How Consumption Taxes Work

Unlike the complex income tax code, consumption taxes are straightforward. You pay tax when you buy something for personal use. Businesses pay no tax when buying supplies or equipment for their operations.

For example, when you buy groceries, you pay the 15% tax. When a restaurant buys those same groceries to prepare meals, they pay no tax because they're reselling the product.

National Freedom Tax vs FairTax Differences

Key Distinctions

While both propose eliminating income tax, there are important differences between the National Freedom Tax and the FairTax.

The FairTax includes several exemptions that create loopholes. Education gets a complete tax-free pass. Churches and charities receive special treatment that could be abused.

Furthermore, the FairTax uses a 22% rate because it tries to replace Social Security taxes through the general fund. This creates complications and increases the tax burden.

In contrast, the National Freedom Tax keeps Social Security separate. It maintains dedicated trust funds for these programs. Consequently, the consumption tax rate stays at a manageable 15%.

Benefits for Workers and Families

Immediate Take-Home Pay Increase

Workers would see an immediate 23% increase in take-home pay. This increase is completely tax-free because there's no income tax to pay.

No more withholding from your paycheck. No more quarterly estimated payments. No more April 15th deadline stress.

Instead, you keep everything you earn. You only pay tax when you choose to spend money on personal items.

Protection for Low-Income Families

The prefund system for low income families ensures fairness. Every family receives a monthly payment covering the consumption tax on basic necessities.

This payment is based on the federal poverty level for your family size. For a family of four, this equals $390 per month in 2024.

If you spend less than the poverty level, you actually come out ahead. The effective tax rate becomes negative for low-income families.

How to Eliminate the IRS Permanently

Seven-Year Phase-Out Plan

The plan includes a systematic approach to eliminate the IRS permanently. The process takes seven years to complete safely.

Year 1-2: Establish state collection systems and prefund programs Year 3-5: Resolve existing tax disputes and wind down operations
Year 6-7: Destroy all records and repeal the 16th Amendment

During this transition, no new income taxes accrue. Workers immediately benefit from increased take-home pay.

State Collected Federal Taxes

States would collect the National Freedom Tax using existing sales tax systems. Forty-five states already operate these systems successfully.

States receive compensation for this service. They earn 0.25% of collections as an administrative fee. Retailers also receive 0.25% for collecting the tax at point of sale.

This creates a partnership between federal and state governments. Moreover, it eliminates the need for a federal tax collection agency.

Business Tax Burden Relief

Ending the Unpaid Tax Collector Role

Currently, employers serve as unpaid tax collectors for the government. They must withhold taxes, file quarterly reports, and face penalties for mistakes.

The National Freedom Tax eliminates this burden completely. Businesses no longer withhold income taxes from employee paychecks.

Small business tax relief becomes immediate and substantial. Companies can focus on growth instead of tax compliance.

Economic Growth Impact

When businesses keep their earnings, they invest in expansion. This creates jobs and increases wages naturally.

The underground economy tax losses disappear because everyone pays at the point of purchase. Drug dealers and other criminals can't avoid the tax when they buy goods.

Constitutional Tax Reform

Returning to Founding Principles

The Constitution originally prohibited direct taxes like income taxes. The founders understood that taxing income gives the government too much power over citizens.

The 16th Amendment changed this in 1913. However, it didn't remove Congress's ability to choose constitutional taxation methods.

Constitutional conservative taxation means funding the government without violating individual rights. The National Freedom Tax achieves this goal.

FAQ Section

Q: What happens to Social Security and Medicare under the National Freedom Tax? A: These programs continue unchanged. Employers still collect these deductions but send them to dedicated trust funds instead of the general treasury.

Q: How does this affect imports and exports? A: Imports pay the consumption tax when sold to final consumers. Exports face no tax burden, making American products more competitive globally.

Q: What about tax preparation companies? A: The eliminate tax preparation industry effect is intentional. These resources can shift to productive economic activities instead of navigating complex tax codes.

Q: How do we know states can handle collection? A: States already collect sales taxes efficiently. The system leverages existing infrastructure rather than creating new bureaucracy.

Q: What about federal employees' retirement? A: Federal employee retirement under new tax systems continues with existing benefits. The change only affects how taxes are collected, not benefit structures.

Moving Forward with Tax Reform

The National Freedom Tax offers a clear path to economic freedom through tax reform. It eliminates the complex tax code problems that burden families and businesses today.

This conservative tax reform plan aligns with Make America Great Again tax policy goals. It reduces government overreach while maintaining necessary revenue.

Working family tax freedom becomes reality when we eliminate the income tax system corruption that has plagued America for over a century.

The National Freedom Tax represents more than policy change. It's a return to constitutional principles and individual liberty that made America great.

The book is available on Amazon, Amazon Kindle, Barnes & Noble, and Apple Books.

If you'd like to speak with Earl Long about implementing this transformative tax reform, contact him here.