OPINION: Don’t blame Democrats if the ‘Fair Tax’ fails, blame Republicans

Credit: TNS

Credit: TNS

It’s been hard to imagine Democrats and Republicans in Washington agreeing on anything these days.

So you have to look twice when it happens, as it did last week when liberals and conservatives all came out swinging against the latest incarnation of the “Fair Tax” from U.S. Rep. Buddy Carter, R-Pooler.

If the single-rate tax idea sounds familiar to Georgians, that’s because it is. The Fair Tax was first introduced by U.S. Rep. John Linder nearly 25 years ago and has remained at the heart of GOP talking points ever since.

The bill has never had a floor vote in all that time, even with Republicans in charge of Washington, but Carter told reporters last month that a deal between Speaker Kevin McCarthy and the 20 holdouts against McCarthy’s leadership promises action on the bill soon.

Hearing the news, Democrats pounced. Senate Majority Leader Chuck Schumer said the bill could “cause the next Great Depression,” while President Joe Biden riffed to an audience, “You gotta be kidding me. What in God’s name is this all about?”

But they weren’t alone. The Wall Street Journal Editorial Board called renewed GOP focus on the proposal “masochistic,” and Grover Norquist, the conservative tax policy wonk, blasted the idea and said Republicans “need to kill the bill. Denounce it. In public. Loudly.”

Norquist guessed 90% of Republicans would vote against the bill, let alone Democrats. U.S. Rep. David Schweikert (R-Ariz.) predicted to Politico the bill will never come up for a vote.

Knowing how unpopular both the tax code and the IRS are, you have to ask yourself how much worse the Fair Tax could be than the current status quo to get that kind of response.

The first problem with the current Fair Tax seems to be the sales pitch behind it.

Although personal income taxes the IRS would indeed be abolished by the legislation, as its boosters claim, the IRS would be replaced by two new federal tax agencies — the “Sales Tax Bureau” and the “Excise Tax Bureau,” along with a new “Office of Revenue Allocation” to arbitrate tax disputes among states.

More surprises come when you see who is paying the Fair Tax — only individual taxpayers, while companies and corporations pay nothing. Republicans argue companies would pass those savings on to consumers, but it’s hard to imagine.

To replace the income tax, the bill levies a tax on the consumption of “all goods and services.” Carter says the rate is a “23% inclusive rate,” since a $77 product would have a $23 tax on it, for a total of $100. But Money magazine calculates the rate at 30% since a $100 item would have a $30 tax on top, for a total of $130. The calculations are roughly the same, with different labels attached, so choose your own adventure here.

The tax will apply to goods you’re used to seeing taxed, like clothes, cars and guns, and also goods and services you’re not — think groceries, tuition, rent, insurance premiums, and all services from child care to yard work.

Are you prepared to save for college and the sales tax on top of it? The idea is daunting.

One huge area of exemption is investment. That means that stocks and investment products steer clear of the sales tax, as does real estate, as long as the property is an investment. But if a person buys the same new home to live in with their family , calculate the 30% sales tax on top of the sales price, too.

Along with understanding how the tax would be paid, the legislation also lays out how it would be collected and distributed, which is when things really start to get weird.

The bill creates “prebates” for eligible taxpayers, who would get a monthly check from the government to cover the sales tax on basic necessities.

But the checks would be sent to individuals regardless of income or work status, which Norquist argues amounts to a guaranteed universal income, a progressive’s dream that Norquist says is “completely antithetical to conservative principles.”

Finally, to receive the monthly checks, taxpayers must register with the federal government annually, declaring each person who lives in their home and certifying that they are lawful U.S. residents, have not been incarcerated for six of the last 12 months, and are not in a mental health facility at the time of the registration (they won’t be eligible).

Buried in the fine print are more surprises. The new sales tax won’t apply to vending machines or non-profit sales, but it will apply to the services of gaming sponsors. How would that affect the Georgia Lottery?

The most puzzling piece of the agreement between Speaker McCarthy and 20 far-right holdouts that led to a potential vote on the Fair Tax is that it happened at all.

That the realities inside the legislation — the Orwellian privacy violations, the new federal agencies, the potential peril to Social Security and Medicare —should have outweighed the need for McCarthy to get his Speakership and for the far-right 20 to get their message bill, which has turned out to be a dud of a message in the light of day.

You almost hate to blame Carter for this fiasco, since the Fair Tax was not his brainchild to begin with and he was not among the 20 who pushed for a vote this year. Carter has plenty of new and innovative ideas of his own they could have pushed for instead.

But if this is what happens with the GOP House majority with bills that have no chance of passage, imagine what’s coming for the bills that might actually become law.

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