Some GOP lawmakers have demanded the “Fair Tax” as a condition for supporting McCarthy’s bid for speaker. The legislation has not been taken seriously for almost 20 years.
The Fair Tax Act, introduced by Rep. Buddy Carter, R-GA on January 10, would abolish the Internal Revenue Service (IRS) and replace the federal income tax with a national consumption tax.
“Instead of adding 87,000 new agents to weaponize the IRS against small business owners and middle America, this bill will eliminate the need for the department entirely by simplifying the tax code with provisions that work for the American people and encourage growth and innovation,” Carter said in a press release.
The effective national sales tax of 30% or more would be required on all consumed goods, including housing, medical care, prescription drugs, groceries, gas, and cars. To make the proposal revenue neutral as a replacement for the income tax, the rate would need to be as high as 60%, per a 2004 report by the Brookings Institution.
A consumption tax “…would have a devastating impact on consumer spending and retail jobs.”
