A white paper from the Jack Kemp Foundation, published on March 24, proposes a tiered sales tax model aimed at reducing the financial burden on working families. The document argues that flat-rate taxes exacerbate economic inequality and outlines how a tiered approach can maintain the efficiency of consumption-based taxes while offering relief to lower-income households.
According to economists Erik Bergren and Ike Brannon, who introduced the paper, states can create more equitable sales taxes by exempting low-cost goods and increasing rates on higher-priced items. The report highlights the disproportionate impact of current flat-rate sales taxes on working families and presents policy alternatives inspired by recent efforts in New York. Bergren and Brannon believe these reforms could serve as a blueprint for progressive consumption taxes at both state and federal levels.
Some Republicans in Congress, led by Representative Buddy Carter of Georgia, have proposed replacing the federal income tax with a national consumption tax known as the FairTax. Critics argue that this plan would disproportionately burden low-income households unless modified to include exemptions or progressive rates. Bergren and Brannon’s model addresses this concern by proposing tiered sales tax rates and exemptions for low-cost goods.
Consumption taxes are often seen as efficient alternatives to income taxes; however, their flat nature disproportionately impacts lower-income households. Bergren and Brannon argue that introducing tiered rates and exemptions for necessities could make a consumption-based tax system more equitable.
Unlike income taxes, consumption taxes do not discourage saving and investment and are often viewed as more efficient. The Tax Foundation notes that while consumption taxes may slightly affect work incentives, they encourage behaviors that support long-term economic growth.
The Jack Kemp Foundation is a nonprofit organization promoting pro-growth public policy based on free enterprise, economic mobility, and equal opportunity. It was established to carry on the legacy of former Congressman and Housing Secretary Jack Kemp.
