A controversial proposal introduced by the newly elected, Republican controlled, House of Representatives has been making some headlines.
It involves a scheme to get rid of the income tax in favor of a national consumption tax.
Called the Fair Tax Act, introduced Jan. 10 by Rep. Buddy Carter, R-Ga., it would go so far as to abolish the Internal Revenue Service (IRS).
“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 wrote in a press release.
Biden Says It’s Not Going to Happen
President Joe Biden weighed in on its chances for becoming law on Jan. 12.
“House Republicans are preparing to vote on a national sales tax bill,” Biden said in remarks published by the White House. “National sales tax, that’s a great idea. It would raise taxes on the middle class by taxing thousands of everyday items from groceries to gas, while cutting taxes for the wealthiest Americans.”
Biden was very clear in his statement regarding the proposed legislation.
“If I’m not mistaken, what they’ve introduced — it also would totally eliminate the IRS,” he said. “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.”
“Come on,” he continued. “Is this how House Republicans are starting the new term: cutting taxes for billionaires, raising taxes for working families, and making inflation worse?”
And then he clarified his stance in official terms.
“Well, let me be clear: If any of those bills make it to my desk, I will veto them. I will flat veto them.”
The Proposed Legislation Has Complexities
The bill, in addition to eliminating the IRS, would seek to replace the federal income tax with a national consumption tax. This means that states would be in control of the administration of the tax.
It would be a regressive tax, meaning that it would impose taxes on goods and services that would cost lower income families a higher percentage of their expenses than it would for more well off families.
States exempt some purchases that a national sales tax would not. Often times, for example, groceries are not taxed while prepared food and alcoholic beverages are.
The proposed tax program would have provisions for a “prebate,” understood to act as a monthly stipend for those living under the federal poverty line. In order to administer such a policy, a new (presumably federal) agency would need to be created.
Opponents say this is similar to what the IRS would be capable of doing. So, naturally, they wonder why abolishing the service would be necessary.
One think tank questions whether the “prebate” would satisfy the needs for families it professes to support.
“While the Fair Tax does provide families with rebates that could equal several thousand dollars a year, this is not nearly enough to offset the financial hit most Americans would face from the new national sales tax,” writes the Institute on Taxation and Economic Policy.
Source: https://www.thestreet.com/politics/biden-slams-house-republican-bill-to-abolish-irs-flat-veto?puc=yahoo&cm_ven=YAHOO&yptr=yahoo