GOP national sales tax rhetoric backfires, as Democrats see political gold

Various forms of legislation, dubbed the “Fair Tax Acthave been around for decades and have received little attention from Republican leaders. But a spokesman for Rep. Andre Clyde of Georgia, one of the 21 holdouts in the GOP who initially blocked McCarthy’s bid for president and is a co-sponsor of the legislation, said McCarthy promised the legislation would go through the committee process.

Forcing discussion on the unpopular tax puts the GOP in a political stalemate that seems doomed to repeat itself for the slim majority in the House. McCarthy must walk a tightrope between appeasing renegade factions in his caucus and disassociating the party from policy proposals that could hurt Republicans at the ballot box.

The newly appointed chairman of the House Ways and Means Committee, Rep. Jason Smith (R-Mo.), said he is committed to holding a committee hearing on the bill where MPs can have an open and transparent debate.

Proponents of the legislation argue that it would create a fairer and more transparent tax system. This would eliminate federal income, payroll and estate taxes and replace them with a national sales tax of 23% – or depending on how you calculate it, 30% –.

But many Republican members of Ways and Means so far are treating the legislation as if it were radioactive.

“I don’t have an opinion yet,” said Rep. Carol Miller (RW.Va.) Asked about the bill.

“Let me hold that for now,” Rep. Randy Feenstra of Iowa, who is one of 10 new GOP members to join the committee for this Congress.

Others were more direct.

“There will never be a vote for this,” said Rep. David Schweikert (R-Arizona), a committee policy expert who gave his opinion on how technically flawed FairTax is. Schweikert said a more efficient version of the idea would involve taxing goods at each point at which value is added to them in the supply chain, rather than all at once at the point of sale.

Sensing the political peril of the legislation, longtime tax critics from the Wall Street Journal’s editorial board to Grover Norquist’s Americans for Tax Reform launched their own offensive against the legislation.

“The Fair Tax is not happening and will not survive the regular order, despite claims by Democrats like Chuck Schumer and President Biden,” ATR said in an email. “In fact, House of the Fair Tax Act co-sponsorship is at a 20-year low. Support has declined over the past decade, dropping by two-thirds since 2013.”

But the main sponsor of the legislation, Rep. Boyfriend Carter (R-Ga.), published his own campaign challenging what he called the “myths” surrounding the bill.

Picking up on one of the biggest criticisms – that a national sales tax would particularly hit low-income people as well as retirees, while the wealthy would benefit disproportionately – Carter’s statement said: “The FairTax is the only progressive tax reform bill currently pending before Congress.”

“Each household will receive a monthly rebate based on federal poverty levels and household size that will allow families to purchase necessary goods, such as food, shelter and medicine, essentially tax-free. This is similar to our current system of individual exemption and refundable tax credit.

Democrats waste no time debating the fine points.

Senate Majority Leader chuck schumer and House Minority Leader Hakeem Jeffriesat a news conference Wednesday, described the legislation as part of an extreme Republican agenda that would also target Social Security and other benefits.

“I believe it would cause the next Great Depression if we forced it. Thank goodness there are firewalls in Leader Jeffries and the Democrats in the House.” Schumer said of the national sales tax, claiming that data shows the tax would increase the cost of a household by $125,000, the cost of a car by $10,000 and the average grocery bill by $3,500 per year.

A hearing on the FairTax bill would not be unprecedented. The Ways and Means Committee held one in 2011 when former Republican Rep. Dave Camp chaired the panel. He mostly disappeared from view after that.

Camp, who is now at PwC, cited pressing issues he said the legislation raises.

“Will this fill the revenue? Is it regressive? And what about state income tax? he said in an interview this week.