State Rep. Mike Holmes (R-Wetumpka) on Monday announced that he has prefiled legislation for the 2020 regular session that would eliminate Alabama’s traditional income tax and sales tax system and replace it with a “FAIR Tax” system based on consumption.

Holmes’ bill, known as the “Alabama Economic Freedom Act,” would repeal current state income and state, county and municipal sales tax levies, replacing all with a straightforward 8.03% tax rate on every purchase of new products and services.  The new tax would be collected by merchants at the point of sale.

“For too long, Alabamians have been burdened by a tax system that picks winners and losers in a never-ending maze of tax exemptions, deductions, and credits,” Holmes said in a statement.  “A system that is fair treats everyone identically by taxing them at the same rate when buying new goods or purchasing services.”

Under the legislation, legal Alabama citizens would receive a monthly rebate to offset the tax on spending. Read more about the rebate process here.

The new system would render the Income Tax Division of the Alabama Department of Revenue obsolete, while the Sales Tax Division would be redirected to collect the new consumption tax.

“The Alabama Economic Freedom Act is a simple plan that people can understand, get excited about, and support 100%,” Holmes concluded.  “It removes the heavy hand of government from your wallet and puts each individual in charge of their finances and life.”

The legislation is based upon H.R.25, the Congressional Fair Tax Act of 2019.

Sean Ross is a staff writer for Yellowhammer News. You can follow him on Twitter @sean_yhn