It’s a bill that is opposed by Speaker Kevin McCarthy (R-CA), unlikely to pass the GOP-controlled House of Representatives, and has approximately 0% chance of becoming law anytime soon.
But Democrats don’t want to stop talking about the Republicans’ proposal to replace income taxes with a national sales tax.
“This so-called fair tax plan is the craziest yet. It’s a real doozy,” Chuck Schumer said on Wednesday as the Senate Majority Leader took time out of his schedule to appear alongside House Democratic Leader Hakeem Jeffries (D-NY) for a press conference devoted to the subject. “Just the biggest lollapalooza I have ever seen around here.”
President Biden is also set to focus on the subject in a big way in a speech Thursday in Springfield, Virginia, with White House aides promising a contrast between the Democratic and GOP economic agendas that they hope voters will remember in coming years.
Rep. Earl L. “Buddy” Carter (R-GA) is the leading proponent of the idea and pushed back in a statement to Yahoo Finance, saying “Washington Democrats are fear-mongering about this bill because it takes power away from the federal government and puts it in the hands of the American people.”
Yet even voices sympathetic to Republicans urge the party to back away.
Grover Norquist, a tax reduction advocate, told Semafor it was “a political gift to Biden and the Democrats;” the conservative Wall Street Journal editorial page called it “masochism;” and Steve Forbes of flat tax fame called it a “belated, but huge Christmas present” for Democrats.
To top it off, Larry Kudlow, the former Director of Donald Trump’s National Economic Council, said it “really is a lousy idea” when he interviewed McCarthy on Tuesday.
What’s in the ‘Fair Tax Act’
The bill would eliminate all income taxes — from the payroll tax to corporate taxes to personal income taxes and more — and would also eliminate the Internal Revenue Service, just the latest salvo in the GOP’s feud with the tax-collection agency.
And while Americans may like the idea of no longer filling out tax forms each April, the bill would replace the trillions of dollars lost with a national sales tax.
The rate would begin at 23% in 2025 and could increase. An analysis of the plan from the Brookings Institution found that a rate around 30% — on top of existing state sales taxes — would be needed to cover the losses.
Economists have also criticized the plan for lowering the the tax burden from high-income earners and corporations and shifting the onus to middle- and lower-class Americans who spend a much higher percentage of their monthly income on goods and services.
The Tax Policy Center found the idea would be a hike for 80% of Americans and a tax cut for the richest Americans. The top 20% would go from paying 84.2% of all federal income taxes to 65.1% under a theoretical federal retail sales tax.
The plan has become high profile and controversial enough that Speaker McCarthy revealed his own personal opposition to the idea Tuesday during a brief exchange with reporters. That’s even after he reportedly agreed to a full vote in the House of Representatives in the weeks ahead as part of the deal with far-right Republicans who elected him Speaker.
But now, a full vote seems less likely in the near future. Three New York Republicans have already announced their opposition to the proposal and those “no” votes along with McCarthy would mean the bill would likely be defeated if put up for a full House vote.
Carter maintains that the bill removes complexity from the tax code, will encourage economic growth, and is better for working Americans. But the Georgia Congressman doesn’t seem to be expecting a floor vote soon.
“I’m excited for open debate on this legislation and for it to go through the committee process,” he said, adding it will be an opportunity for “a transparent discussion” about improving the tax system.
‘Go home and tell your moms’
Meanwhile, the unlikelihood of a national sales tax doesn’t seem to be dampening Democrats’ enthusiasm for discussing the issue.
During a recent speech, President Biden sarcastically proclaimed: “National sales tax, that’s a great idea…go home and tell your moms, they’re going to be really excited about that.”
On Capitol Hill, Sen. Jon Tester (D-MT) sent a letter to Senate leadership Tuesday, pledging “I will take on anyone” to stop the idea while his colleagues like Sens. Elizabeth Warren (D-MA) and Chris Murphy (D-CT) have taken to Twitter to mock the proposal.
“You wonder who is sitting in some dungeon, some laboratory, some basement cooking up these extreme ideas to try jam them down the throats of the American people,” added Leader Jeffries Wednesday.
It was former Georgia Congressman John Linder who first proposed the idea in 1999 and later co-authored a book called “The Fair Tax Book: Saying Goodbye to the Income Tax and the IRS.”
“The only tax collector that the consumer would ever see is the smiling face behind the register at the local grocery store,” Linder said in 2000 about the proposal that has been periodically revived over the last 20 year without ever gaining widespread Republican support.
Ben Werschkul is Washington correspondent for Yahoo Finance.