Trump wants to eliminate our income tax,but...

Trump wants to eliminate our income tax,but there are some major misconceptions about the Bill that is supposed to do that and replace it with a consumption tax.

The first is the tax rate.

The Bill states that 23% of every $100 spent will be taxes.That is being misinterpreted that the tax rate will be 23%.The tax rate is actually 30% because $23 on $77 of spending is a 30% rate.

The second misconception is that things like rent and groceries will not be taxed. The Bill specifically says that it will be taxed. Which means that if you have a two thousand dollar a month rent, you're now going to pay 26 hundred dollars. And thirdly is that there will be a rebate to cover essential spending.

That's not true.

There is a rebate for consumption up to the poverty line, but any spending above that, even if it's your rent or clothing or food, will be taxed at the full 30%. And what's ironic is that more Americans would actually be better off without the rebate. And that's because with the rebate you have to increase the tax rate to cover this new expense for the government. Without the rebate, the tax rate could be 24.4% to cover all federal tax revenue, but with the rebate it has to be 30% and this changes the income required to benefit.

Without the rebate you will start to benefit around $60,000. But with the rebate because the Tax rate has to be high You have to earn about $63,000 before you start to see a benefit.

If you spend the average PCE, which is your personal consumption expenditure.