A National Sales Tax Is a Terrible Idea

A small minority of House Republicans can force a vote on creating a national sales tax. It will give Democrats a needless political cudgel in exchange for a flawed bill with no hope of passage.

The Fair Tax Act has been introduced by a small handful of Republicans in every Congress since 1999. The bill proposes to abolish the Internal Revenue Service and eliminate federal income tax. So far, so good. Unfortunately, the bill would replace income tax with a 30% national sales tax on all goods and services and establish a giant new duty program. Problem.

Several, in fact. Replacing our current tax code with a national sales tax would create a system of double taxation for retirees. Take, for example, a 65-year-old person who has spent his life saving after-tax income and has retired expecting to withdraw that income without paying further taxes. Instead, they would now face a 30% sales tax on everything they buy. Representatives seeking re-election may want to remember that people over 65 tend to vote.

The Fair Tax Act would also remove any work requirement from the tax code, an approach completely contrary to conservative principles. Under the bill’s plan, all households would receive a monthly check from the federal government, regardless of their earned income. Americans are still living with the negative effects pandemic stimulus checks have had on labor markets and supply chains; this plan would make these types of payments a permanent feature. In fact, save in name, the fair tax “prebate” system would establish a universal basic income, one of the left’s favorite policies.

Proponents of a fair tax generally define the prebate as a replacement for the current standard deduction allowed under the federal income tax code, as well as an early refund on sales taxes that will be paid. But this argument carries little weight since these payments would be independent of taxpayers’ actual consumption expenditures. At first glance, it’s hard to see how the prebate system isn’t just a huge new rights program.

The Fair Tax Act would also do nothing to reduce the size of government. The bill would give the job of processing payments to the Social Security Administration. Transferring IRS responsibilities and staff to the SSA does nothing to reduce unnecessary bureaucracy, much less make it small enough to drown in a bathtub.

Proponents of fair taxation make two good points. They understand the need to end the double taxation of saving and investing in the current system, and they want to depoliticize the IRS workforce, whose union pays 95% of its political contributions to national Democratic candidates. But both issues are already addressed by other laws widely supported by members of the Republican House.

The first vote of the new Republican House majority was to strip the IRS of most of the $80 billion pledged by Joe Biden; Republicans have also called for investigations into the politicization of the IRS. And a pre-existing Conservative policy goal would allow Individual Retirement Accounts to offer tax-free savings for all purposes, not just retirement, solves most double taxation problems.

Despite all these shortcomings, the main sponsor of the Fair Tax Act, Representative Buddy Carter of Georgia, recently stated journalists that as part of a deal to drop their opposition to Kevin McCarthy’s bid for the presidency, recalcitrant members of the House had been privately promised a yes or no vote on the bill. But, fortunately, the Fair Tax Act has no hope of being passed in the House.

In the 24 years of the fair tax proposal, House Republicans have refused to hold a single committee hearing or scoping session, let alone a floor vote. The number of lawmakers sponsoring the bill has actually declined with each Congress, from a peak of 76 House Republicans in 2015 to 24 today. The effort for fair taxation is not gaining momentum but is losing it.

The bill probably won’t even get a vote in committee: Republican opposition would be so strong that Carter is likely to slow the bill down to avoid the embarrassing sight of Republican committee members unanimously rejecting it. But if the bill somehow makes it to the House floor, it’s reasonable to assume that about 90 percent of Republicans will vote against it. Additionally, the bill would not stand a chance in the Senate, and the President said he would veto it.

None of this has stopped Democrats from seizing the opportunity to claim that Republicans now want to raise taxes on the poor and middle class. President Biden bludgeoned Republicans from the presidential podium a week after it was announced the bill would receive a vote. “The national sales tax is a great idea,” he said sarcastically. “It would raise taxes on the middle class by taxing thousands of everyday items, from groceries to gasoline, while lowering taxes on the wealthiest Americans.”

Later, Biden’s chief of staff openly mocked Carter on Twitter for his statement that if consumers don’t want to pay 30% sales tax on an item, then “don’t buy it.” It’s as simple as that.” Democrats are right to believe they have the winning message there.

In fact, the Fair Tax Act has long proven to be politically toxic. In 2010, The Wall Street JournalThe editorial board of noted that Democrats had made effective use of the question against Republican proponents of the fair tax: “These Democratic attacks are unfair and do not mention the tax cut side of the proposal, but the attacks seem to be working…voters rightly suspect that any new sales tax regime will simply be piling on the current code.

This past election cycle has shown how Democrats still manage to tag mainstream GOP candidates with unrepresentative minority positions on tax policy. Before the midterms, Senator Rick Scott of Florida released a list of policy ideas that included a remark that all Americans “should have a say” in federal income tax. (Currently, only about half of U.S. households pay federal income tax in any given year.)

Even though Scott ultimately dropped the point, his status as Senate Republican campaign committee chairman gave Democrats what a Democratic operative called a fundraising “windfall,” allowing attack ads that portrayed all Republicans as plotting to raise taxes for retirees and low-mids. – Income Americans. Republican candidates were forced to spend time and money distancing themselves from a proposal they did not support.

Such episodes risk undoing Republicans’ painstaking work over three decades of creating a clear contrast with Democrats on taxes: Republicans won’t raise your taxes; Democrats will.

Keep in mind that eight states already have no personal income tax, nine states have a flat income tax, and 10 states have a Republican leadership committed to phasing out personal income tax. , first to a lump sum tax, then to none. These states are paying for these policies with long-term efforts to keep spending below what can be sustainably funded by economic growth and sales and property tax revenues. The model of success over the past 10 years is North Carolina. More states exempt from income tax will eventually raise the question for voters nationwide: why do we need a federal income tax?

All of this progress could be undermined if the proponents of a fair tax had their time. Imagine what Democrats will be able to do if they have the chance of a real vote in the House on a federal sales tax. The Democratic Congressional Campaign Committee has already targeted House Republicans in competitive seats in recent elections with negative ads focused on the fair tax.

To mitigate the political damage already done, Republicans need to kill the bill. Denounce. In public. Loudly. It may sound harsh, but it is no less than the Fair Tax deserves.

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