President Biden and Democrats have found a new political punching bag in Republicans’ legislation to eliminate income taxes and the IRS in favor of a national sales tax.
Mr. Biden has seized on the issue to bludgeon Republicans in the perennial struggle to prove which party is doing more to help middle-class Americans.
“They want to raise taxes on the middle class by taxing thousands of everyday items from groceries, gasoline, clothing while cutting taxes for the wealthiest,” Mr. Biden said during a Monday appearance at the Rev. Al Sharpton’s National Action Network. “They want to supplant the money lost from taxes on the millionaires and billionaires with a sales tax on virtually everything in the country.”
Congressional Democrats, who hope to keep the Senate and take back the House in 2024, are following the president’s lead. Democratic Sen. Jon Tester, who faces a tough reelection campaign in Montana, is already pledging to oppose the “awful” plan.
“Montana has no sales tax and we don’t need the federal government imposing one on us,” said Mr. Tester. “House Republicans’ plan to tack a 30% national sales tax on every good from gas to groceries would skyrocket costs for Montana’s working families.”
Rep. Sean Casten, Illinois Democrat, even claims the bill is proof that Republicans believe “your grocery bill is too cheap and that you need to pay an additional 30%.”
Republicans say Democrats are misrepresenting their proposal. For one, they say, the bill would replace income taxes, payroll taxes, estate taxes, and gift taxes with a flat 23% sales tax — not 30% as claimed by detractors.
Rep. Buddy Carter, who introduced the bill this Congress, chalked up the 30% exaggeration to Democratic “fear-mongering.” The Georgia Republican said that contrary to opponents’ claims, his legislation would simplify the tax code and give citizens more control over how much they pay the government at the end of the year.
Critics who invoke the 30% figure point to an analysis of Mr. Carter’s bill by the Tax Policy Center. The think tank argues that legislation does not apply a flat 23% sales tax on goods but mandates that 23 cents of every dollar paid on a purchase would go to the U.S. Treasury.
The Tax Policy Center argues that companies would apply a 30% tax on items to not lose money.
Mr. Carter says critics are purposefully trying to complicate a simple bill that would give citizens more control over how much they pay the government at the end of the year.
“Let’s face it, people don’t like paying taxes,” he said. “But if they’re going to pay taxes, they would much rather pay a consumption tax. You can control what you want to pay, if you’re going to buy a boat you’re going to pay taxes, if you don’t want to pay taxes then don’t buy the boat.”
Mr. Carter‘s bill would create the national sales tax to replace taxes derived from individual and corporate income. Only goods and services purchased for personal use, and not for business, would be subject to the tax.
Not all Republicans are happy that the bill will likely receive a floor vote sometime this year. Several House Republicans told The Washington Times that they viewed Mr. Carter‘s bill as generating needless controversy, even as it fared little chance of passing the Democratic-run Senate or being signed into law by Mr. Biden.
“It’s a great idea if you’re sitting in some conservative think tank inside the Beltway,” said one House GOP lawmaker. “But pragmatically, it’s not going anywhere and it just opens us up to attacks. Biden is already saying we want to cut Medicare [and] Social Security using the debt limit, now he says we want to raise tax on grandma’s groceries.”
The national sales tax would fall on top of state and local sales taxes that consumers already pay, which range between 4% and 7%. While 32 states and the District of Columbia exempt most food purchases from local sales tax, Mr. Carter‘s bill would cover groceries.
To help cushion that added cost, households, regardless of income, would receive a monthly lump sum payment calculated on the sales tax rate and the federal poverty level. It would ensure a family of four can spend up to $26,000 annually without paying any taxes, according to Mr. Carter‘s office.
The bill further would abolish the IRS, with its collection being outsourced to state and local governments. For their trouble, local governments could keep 0.25% of the national sales tax.
Proponents argue there would be little need for the IRS if the multibracket tax code is replaced with a national sales tax.
“This transforms the U.S. tax code from a mandatory, progressive, and convoluted system to a fully transparent and unbiased system that does away with the IRS as we know it,” said Rep. Bob Good, Virginia Republican.
Apart from abolishing the IRS and giving citizens more control over their tax bill, supporters say the legislation will also help shore up Social Security and Medicare. The programs, which face insolvency, are currently funded by payroll taxes levied on 160 million workers annually.
Under Mr. Carter’s bill, approximately 300 million Americans and more than 50 million tourists visiting the country would be subject to the national sales tax. Mr. Carter‘s office also estimates under the current tax code, 33 cents of every dollar earned in the U.S. goes to the U.S. government via income taxes. That figure would drop to 22 cents for every dollar under the proposal.
Mr. Carter‘s national sales tax bill has been co-sponsored by at least 23 House Republicans. The number is deceptive because many of its key supporters overlapped with the group of GOP lawmakers that initially opposed House Speaker Kevin McCarthy’s leadership bid this year.
Among others, those supporters include Mr. Good, Florida GOP Rep. Matt Gaetz, and House Freedom Caucus Chair Scott Perry of Pennsylvania. The holdouts reportedly secured an agreement from Mr. McCarthy, California Republican, to put the sales tax bill up for a vote as part of a bigger deal to support his ascension to speaker.
“I wasn’t privy to those negotiations, but it looks like this will finally come up for a vote,” said Mr. Carter.
Mr. Carter said he recognized the bill faced long odds with a Democrat-run Senate and White House, but was frustrated by the naysayers in his own party.
“I recognize the political reality … But that doesn’t mean we still shouldn’t do our job in the House,” he said. “I’m not going to be intimidated by people saying ‘it’s never going to happen, you’re wasting your time.’”
“I’m not wasting my time, this is an idea whose time has come and it needs to be put forward,” he said.