Projected Revenue and Budget Impact
The U.S. could significantly simplify and stabilize its tax structure by replacing the current federal income tax system with a 25% national sales tax on all final consumer purchases and a 25% flat corporate tax on all business profits. Based on the latest data, this dual-tax model would generate approximately $5.5 trillion per year—around $4.5 trillion from consumption and $1 trillion from corporate profits (1)(2). In FY2023, the federal government spent about $6.2 trillion in total (4), meaning this system would fall short by about $700 billion. However, that’s still a $1 trillion improvement over the current $1.7 trillion deficit (5), making it a far more efficient and transparent funding approach.
Coverage of Core Government Services
This model would still fully cover the core of government obligations. Social Security ($1.4T), Medicare ($1.0T), and Medicaid (~$0.5T)—totaling roughly $3 trillion—would be funded with room to spare (3). The simplicity of taxing spending and profits instead of income could reduce administrative overhead, limit evasion through deductions, and allow Americans to see clearly what they’re contributing. Most importantly, it gives individuals more control over their tax exposure: you only pay more tax if you choose to spend more.
Discretionary Spending Across Income Levels
Critics often claim that a sales tax hits low-income earners harder, but current data on consumer behavior shows a deeper story. According to the Bureau of Labor Statistics, lower-income households (avg. income ~$15.6K) spend about $5,100 annually on non-essentials, including entertainment, dining out, and apparel—about 33% of their income (6). Middle-income households (avg. income ~$71K) spend $10,000 on non-essentials, which is 14% of their income, while higher-income households (avg. income ~$264K) spend $28,300, or only ~11% of their income on similar items (6). These numbers show that the less you spend on non-essentials, the less you pay in sales tax, regardless of income level.
Spending Behavior and Tax Exposure
In other words, if households—particularly those in tighter financial positions—cut back on unnecessary expenses, their sales tax burden would shrink significantly. The tax doesn’t penalize income; it responds directly to spending choices. Pairing this with a flat corporate tax ensures businesses contribute proportionally to their profits, while consumers retain autonomy over their financial behavior. In total, this model is fair, clear, and economically sustainable.
Detailed Revenue Breakdown
Revenue From a 25% National Sales Tax
A 25% federal sales tax on all final consumer purchases would generate approximately $4.5 trillion annually. In 2022, total U.S. personal consumption expenditures (PCE) reached $17.4 trillion, and increased to over $18.5 trillion in 2023 (1). Applying a flat 25% tax across this base yields a theoretical revenue of $4.6 trillion, assuming all consumption is taxed and no exemptions or compliance issues exist. This figure includes goods and services bought by households, covering the bulk of retail economic activity.
Revenue From a 25% Flat Corporate Profit Tax
A flat 25% tax on all U.S. corporate profits would add another $0.94–$1.01 trillion in annual revenue. According to 2023 BEA data, U.S. corporate profits (adjusted for inventory valuation and capital consumption) totaled $3.77 trillion (2). Taxing that full base at 25% produces $942 billion. Using the unadjusted figure of $4.05 trillion yields $1.01 trillion in potential tax revenue. This assumes the full tax applies equally across all industries and business sizes, with no deductions or loopholes.
Combined Revenue vs. Federal Spending
Together, the sales tax and corporate tax would generate around $5.5 trillion annually, which is enough to fund most of the federal government’s largest programs. In FY2023, the government spent approximately $1.4 trillion on Social Security, $1.0 trillion on Medicare, and over $0.5 trillion on Medicaid (3). Combined, these three programs totaled roughly $3 trillion, well within the revenue range from the proposed tax system. However, total federal outlays in FY2023 were about $6.2 trillion, including defense, infrastructure, interest on debt, and all other discretionary and mandatory spending (4). This leaves a shortfall of about $700 billion under the proposed model.
Still, this represents a significant improvement over the current system. In FY2023, the U.S. ran a $1.7 trillion deficit (5). A system built on a 25% sales tax and 25% corporate tax would reduce that deficit by nearly $1 trillion, while eliminating the federal income tax entirely.