Topline
Democratic leaders railed against GOP-backed legislation that would scrap some taxes and replace them with a steep national sales tax on Wednesday–a bill that has virtually no chance of passing, but has potential to become a prominent talking point for Democrats as they seek to balance the scale of power with the Republican-controlled House.
House Minority Leader Hakeem Jeffries (D-NY) listens as U.S. Senate Majority Leader Chuck Schumer … [+] (D-NY) speaks at a news conference at the U.S. Capitol Building on January 25, 2023 on the Fair Tax Act and the ongoing negotiations between the House, Senate and White House over the national debt ceiling. (Photo by Anna Moneymaker/Getty Images)
Key Facts
Senate Majority Leader Chuck Schumer (D-NY) and House Minority Leader Hakeem Jeffries (D-NY) attacked the “Fair Tax Act” in a press conference on Wednesday, with Schumer calling it “a real doozy” and Jeffries dubbing it a “scam,” while citing estimates that the legislation would cause taxes to rise for 90% of Americans.
The “Fair Tax Act,” sponsored by Rep. Earl “Buddy” Carter (R-Ga.), would abolish income, payroll, estate and gift taxes and replace them with a 30 percent national sales tax starting in 2025.
The legislation would also do away with funding for the Internal Revenue Service starting in fiscal year 2027, leaving tax collection authority to state governments.
Americans would receive a monthly rebate check according to the federal poverty level and family size that is designed to offset costs for low-income families who typically spend a larger share of their income on necessities.
The proposal would “simplify the tax code” and establish a “fully transparent and unbiased system,” Rep. Bob Good (R-Va.) said in a statement.
Good and Carter are among a dozen Republicans who back the proposal.
Key Background
The legislation has virtually no chance of passing the Democrat-controlled Senate and being signed into law by President Joe Biden. House Speaker Kevin McCarthy (R-Calif.) reportedly agreed in a deal with far-right Republicans to win the speaker election to hold a committee hearing on the Fair Tax Act, but he recently told reporters he is against the legislation. In addition to targeting the IRS through the “Fair Tax Act,” the first piece of legislation passed by the Republican-led House rolled back nearly $80 billion in funding for the IRS that Republicans claimed would have helped hire 87,000 new agents (in reality, it would have funded the hiring of about 87,000 IRS employees—not just agents—over the next ten years, according to a 2021 estimate from the Treasury Department).
Big Number
$75,000. That’s the average tax cut the top 1% of earners would see under the proposal, while taxes would rise for households in the bottom 90% of earners, according to the Brookings Institution.
Chief Critic
“This is a political gift to Biden and the Democrats,” anti-tax activist Grover Norquist told Semafor, referring to the Democratic talking points the legislation provides. “I think that this is the first significant problem created for the Republican Party by the 20 people who thought that there was no downside to the approach they took.”
What To Watch For
Biden is expected to target the proposal in a speech on the economy Thursday in Virginia, and has already ratcheted up criticism of GOP fiscal policies. “If I’m not mistaken, what they’ve introduced—it also would totally eliminate the IRS. It feels good, except all going to be sales tax. Go home and tell your moms. They’re going to be really excited about that,” Biden said earlier this month while delivering remarks on inflation earlier this month.
Surprising Fact
Versions of the bill have been around for decades. It was first introduced in 1999 by former Rep. John Linder (R-Ga.), whose proposal would have eliminated “all personal and corporate income taxes, the death tax, gift taxes, and the payroll tax,” Carter said in a press release announcing the bill’s re-introduction.
Further Reading
Biden’s new tax hammer (Axios)
Abolish The IRS – Sort Of – Then What? (Forbes)
The House GOP’s Vote To Cut IRS Funding Was Just The First Skirmish In A Long War (Forbes)
