Fair Tax Act 2023: What a 30% GOP Excise Tax Would Do

On Jan. 10, US Representative Buddy Carter (R-Ga.) introduced a bill called the FairTax Act that would make significant changes to the US federal tax system.

But folks on social media say the proposed 30% national sales tax, also known as ‘excise tax’, would be in the bill harmful to the middle class and would abolish the IRS. Show Google Trends data People were looking for what the consumption tax would do.

VERIFY viewer Michael emailed us asking if a national sales tax law was indeed being proposed.

Have House Republicans introduced a bill to create a national sales tax and eliminate the need for the IRS?

Yes, House Republicans have introduced a bill creating a national sales tax that they believe would make the IRS obsolete

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the Fair Tax Act of 2023 was presented to the House of Representatives Jan. 9 by Rep. Buddy Carter (R-Ga.). If passed, it would repeal all federal taxes, including the federal income tax, abolish the Internal Revenue Service, and enact a national sales tax.

The bill says federal income taxes, payroll taxes, and estate and gift taxes would be eliminated. It would also eliminate taxes on corporate income and capital gains. A national sales tax of 23% would be levied in place of these taxes.

Even if the invoice states that the tax would be 23%, the institute for tax and economic policy (ITEP), says it is actually 30%. This is due to how sales tax is calculated at the point of purchase.

“If you buy something that costs $100 before tax, the invoice says you pay $30 in national sales tax. Most of us would call that a 30 percent sales tax. However, proponents call it a 23 percent tax because that $30 is 23 percent of your “gross” payment of $130, your payment including sales tax. Proponents claim this method of calculation is more akin to our idea of ​​income tax, but the main result is widespread confusion,” says ITEP.

A national sales tax means that anyone in the US would pay extra for goods or services purchased. To help with this increase in costs, the bill says eligible households could receive an “upfront payment,” a monthly cash allowance for households falling below the federal poverty line.

The IRS would not be the agency responsible for collecting or managing collected sales tax money, the bill said. The Treasury would manage the money.

A consumption tax office and a sales tax office would be created within the Treasury Department, the bill said, to administer all taxes collected at the state and federal levels. This would render the IRS obsolete as administration and enforcement would fall under the purview of the Treasury Department.

When he introduced the legislation, Rep. Buddy Carter issued a statement addressing the bill would simplify tax laws, be “growth-friendly, and allow Americans to keep every penny of their hard-earned money.”

Carter also cited unsubstantiated claims about IRS funding, saying, “Rather than add 87,000 new agents to arm the IRS against small business owners and Central America, this bill will completely eliminate the need for the department.”

In this fact check, VERIFY confirmed claims that the IRS was stepping up middle-class audits by hiring 87,000 new agents were false.

The bill has been referred to the House Ways and Means Committee for review. Even if it passes the House of Representatives – and the Senate passes the bill – President Joe Biden said he would not sign it

During his January 12 remarks on the economy, he said a national sales tax would only make things more expensive for working-class families, and he would veto the bill.