The Fair Tax has been a staple in conservative circles for quite a few years. It is a national sales tax that is intended to replace the income tax. There is much to be said for the Fair Tax: as a tax on consumption, it would encourage saving and investment. It is relatively easy to administer; nearly all states already have a sales tax. And it would allow us to do away with the IRS (or most of it anyway), and end the regime of government snooping into your financial affairs.
The problem with the Fair Tax is that, unlike the income tax, it is not progressive. The federal income tax has become so progressive that, in effect, upper income people pick up the tab for the rest of us. The large majority of Americans are free riders or, at best, reduced-fare riders. In my opinion, this is unfair and even immoral.
But most people like progressivity, for obvious reasons. The Fair Tax is probably regressive: poor and middle income people need to spend more of their incomes than high-income people, so they will pay a higher percentage of their incomes in sales taxes.
After years of kicking around conservative circles, the Fair Tax has suddenly become relevant: House Republicans are going to bring it on for a vote:
House Republicans voted last night to strip the IRS of most of the extra funding it received when the Democrats and Biden Administration rammed through the Inflation Reduction Act.
But that’s not all they’ve done. Now they’re also going to vote on a bill that, if passed, would both abolish the IRS completely and eliminate the much-hated income tax. They’d be doing so by voting on Georgia Rep. Buddy Carter’s “Fair Tax Act,” which replaces the federal income tax with a national consumption tax and gets rid of the IRS, which would be made unnecessary by getting rid of the federal income tax.
This is one of the concessions earned by the House members who held out on electing Kevin McCarthy as Speaker:
The vote on the sure-to-be controversial and unlikely-to-succeed bill is happening because of the deal that Rep. Kevin McCarthy, now Speaker of the House, struck with members of the House Freedom Caucus who otherwise would not have voted for him to become Speaker of the House.
The Fair Tax is by no means an unreasonable proposal. If it actually replaced the federal income tax, I think I would support it. European countries raise their national revenues largely through VAT taxes, which are essentially sales taxes. But the idea that Congress will eliminate the progressive income tax in favor of a probably-regressive sales tax is fanciful.
So, yeah, bring it on. But without a public relations campaign to drum up substantial support for the Fair Tax, it will be portrayed in the press an another Republican giveaway to the rich–notwithstanding that most rich people are Democrats–and it will fail.
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