The Council of Economic Advisers Supports Consumption Taxe
The Council of Economic Advisors (CEA) is an agency within the Executive Office of the President that provides objective economic analysis and advice on both domestic and international policy.The CEA is considered one of the most prestigious appointments an economist can receive in the United States.
In the world of academia and policy, it is often viewed as the "pinnacle" of a career in applied economics. Unlike other government agencies that are often led by political operatives, the CEA is almost exclusively staffed by top-tier academic economists.
By law (the Employment Act of 1946), members must be "exceptionally qualified" to interpret economic developments.
Even the "junior" staff economists are typically promising Ph.D. students or professors from Ivy League or top-tier research universities (like Stanford, MIT, or Chicago) who take a leave of absence for a year or two to serve.
The prestige is cemented by the caliber of people who have chaired the council. Many of the most influential names in modern economics have "CEA Chairman" on their resume, including several Nobel Prize winners.
This is why reports issued by the CEA are taken seriously by both politicians and economists.
The January of 2026 report by the CEA is labeled The Economic Impact of State Income Tax Elimination.
The Executive Summary of this paper states:
- “The quantitative analysis in this paper is done on an individual state-by-state level, studying the impact of these two reform scenarios on key economic outcomes like GDP, wages, business startup activity, and the migration of high-income taxpayers.
- This paper also reports the sales tax rate needed to accomplish the reform under each scenario (base broadening only; base broadening coupled with spending growth limits).”
The CEA Executive Summary then states:
- Income taxes are more economically damaging than sales or property taxes;
- The harmful economic effects of state income taxes include outmigration, brain drain, stifled innovation and entrepreneurship, and reduced GDP;
- The harmful fiscal effects of state income taxes include revenue volatility with “feast and famine” cycles, with states often gaining little or no new tax revenue from income tax hikes because of the negative economic effects they unleash.
Key findings from CEA’s analysis of state income tax phase-outs include:
- A 1 to 1.6 percent increase in the level of GDP for the average state;
- A 16 to 19 percent increase in new startups for the average state;
- A $4,000 increase in the average wage;
- A significant influx of new high-income taxpayers;
- An average state sales tax rate of under 8 percent under full revenue replacement with no limits on spending growth;
- An average state sales tax rate of 6.2 percent under a scenario with spending growth limits.
The remainder of this CEA report discusses extensively each of the above points and is written is a clear manner.
While the economists who have done studies for the FAIRtax have pointed out many of these points, it is great to see a group of economists as prestigious as the CEA make a compelling case for the elimination of state income taxes and replacing them with consumption taxes.
Conclusion
This CEA report is an indicator that serious people are paying attention to what is a growing movement among the states—elimination of their state income taxes.
What is missing from the CEA analysis is the effect of a family consumption allowance (FCA), the prebate. The FCA allows purchases up to the poverty level to be not subject to the state sales tax.
Alabama and Georgia are contemplating passing a state version of the FAIRtax. One of the reasons that the plans are gaining favorable attention from both sides of the aisle, the included FCA ensures that people in the lower income levels are not adversely affected.
The momentum is growing—the life span of the income tax is limited and being eliminated in many states. As of now, Mississippi, Oklahoma, Kentucky, Iowa and Georgia have passed legislation targeting the full elimination of the state income tax.
Other states are moving to greatly reduce or eliminate the state income tax.
The other thing not directly considered by the CEA report is the effect that repeal of the federal income/payroll tax system and replacement by a consumption tax, like the FAIRtax, will have on the U.S.
If elimination of the state income tax has these benefits, the benefits on the national level will be even more pronounced than at the state level.
THE FAIRTAX IS THE ANSWER.
The FAIRtax, a national retail sales tax on new retail goods and retail services which provides a family credit so that all purchases up to the poverty level for each family are not taxed. There is no withholding from your paycheck and YOU NEVER HAVE TO FILE A TAX RETURN TELLING THE GOVERNMENT HOW MUCH YOU EARNED AND HOW MUCH YOU SPENT, AND YOU’LL NEVER BE HARASSED BY THE IRS EVER AGAIN.
Many of you have labored tirelessly for freedom from the federal income tax and the IRS. You deserve a great deal of credit for your efforts to educate the American people on the need to fund the American government in a way that is good for America and returns freedom to the American people.
It is imperative, though, that we don’t replace the current income tax and the IRS with an alternative system that can still be manipulated by the Ruling Elite. We must let Congress and the President know that the best way to replace the income tax and the IRS is with the FAIRtax.
Make no mistake about it. The FAIRtax is a grave threat to the Ruling Elites. It will strip them of their power and their ability to control us though the tax system. Their opposition to the FAIRtax will be fierce and unrelenting. And don’t think for an instant that they won’t use half-truths, deception and downright lies in their desperate attempt to hang on to their power.
However, with the support of this President, we can finally eliminate the income tax and the IRS!!!
Of course, the best course of action is to not only repeal the income tax and abolish the IRS but to repeal the 16th Amendment as well so no future administration can ever shackle the American people with an income tax again.
We must come together and ensure that real tax reform, the FAIRtax, is not subverted by the Elites in D.C.
This will take the diligent efforts of all of us. We need your financial assistance, and we need your grass roots assistance.
If you have contacts that will allow us to get more information to President Trump about the FAIRtax please let us know.
Please email us at info@fairtax.org and we will give you some options on how you can best help us.
At a minimum, please call your Congressional representative and ask if he or she supports the FAIRtax. If so, thank him/her for their support and suggest they become a cosponsor of HR-25 if they’re not one already. If not, ask why not. If your representative claims to be unfamiliar with the FAIRtax, offer to have someone come to their office and explain it to them.
Please go to this link to invest in AFFT and help us pass the FAIRtax. It’s an investment in your and your family’s future.
THE SOLUTION—PASS THE FAIRTAX!
Why would D.C. pass the FAIRtax and give up this almost unlimited source of donations? The only way that they will is if the rest of us demand it!
Isn’t it time to end this ludicrous tax collection system and the IRS?
HELP BRING ABOUT REAL TAX REFORM AND STOP FUTURE IRS ABUSES
By contributing (investing) $10.40 per month, you help provide a financial base to AFFT. If you can make larger contributions (investments), these will be used not for salaries, as we are all volunteers, but for the needed updates to our economic studies which will be vital for all future years.
Please go to this link to invest in AFFT and help us pass the FAIRtax. It’s an investment in your and your family’s future.