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Will the House GOP Really Walk the Plank for the Fair Tax?

In his desperation to win the speakership, Kevin McCarthy promised to put the gimmicky old idea up for a vote.
by Jim Swift
January 12, 2023
Will the House GOP Really Walk the Plank for the Fair Tax?
(Composite / Shutterstock)

Not all of Kevin McCarthy’s concessions to the House Freedom Caucus have been made public, but one that has gone largely unremarked deserves more attention: The new speaker of the House has agreed to grant the “Fair Tax Act” a vote on the House floor, its first since its conception in 1999 by talk-radio host Neal Boortz and Georgia politician John Linder.

The Fair Tax Act would replace income, payroll, gift, corporate, and death taxes with a federal consumption (sales) tax. To ensure that the legislation actually replaces rather than adds to existing taxes, the bill includes a provision that the new tax would expire in seven years if the Sixteenth Amendment, which allows for federal income taxes, is not repealed. (Keen-eyed readers will notice that this creates the bizarre possibility of federal tax revenue going down to zero after seven years, if income taxes are not collected but the Sixteenth Amendment remains on the books.)

The bill’s backer in the current Congress is Georgia Rep. Earl LeRoy “Buddy” Carter, who voted for McCarthy for speaker on all fifteen ballots last week. Carter is not a member of the Freedom Caucus. However, the Fair Tax (or “FairTax”) Act is popular with members of the Freedom Caucus: McCarthy had to promise a floor vote on it in exchange for their support in the speakership contest. Politico’s Sarah Ferris reports that bringing the bill to a vote was a demand from all twenty holdouts.

Whether McCarthy will deliver on this promise is unclear. On paper, the bill sounds like a messaging win for Republicans: Abolish the IRS using this one neat trick! You never lose with the base by bashing the IRS. But the political reality is more complicated—as is the math.

The Fair Tax idea has never really had any serious support because it’s not a serious proposal, but a bit of niche talk-radio kitsch from a generation ago. Yet it has become a right of passage for Georgia Republicans to introduce it as the panacea to big government—by means of a federal 23 percent tax inclusive sales tax. (That 23 percent number is misleading—calculated the normal way, the tax exclusive rate is actually 30 percent.) If a federal sales tax were to match current government tax revenues, the actual rate would have to be higher.

Sound regressive? It is! But don’t worry, like any talk-radio proposal, there’s an equally wacky solution to the problems posed by the wacky tax proposal itself: the “prebate,” a monthly check mailed to taxpayers. The Fair Tax organizers frame it this way: “This gives every legal resident household an ‘advance refund’ at the beginning of each month so that purchases made up to the poverty level are tax-free. The prebate prevents an unfair burden on low-income families.”

I know what you’re thinking: Mailing hundreds of millions of checks twelve times a year sounds complicated. But don’t you worry, talk-radio listener, because the big brains behind the Fair Tax have got you covered. . . with a smart card. Per the most recent House version of the bill: “The Social Security Administration may provide rebates in the form of smart cards that carry cash balances in their memory for use in making purchases at retail establishments or by direct electronic deposit.”

Oh, good, the money can go out by electronic deposit. Whew. Who knew that getting rid of the IRS meant turning one annual tax return into twelve opportunities for the federal government to fall down while spraying the American people with a money hose? Cross your fingers!

Bruce Bartlett, the former deputy assistant secretary of the Treasury, eviscerated the Fair Tax in a Wall Street Journal op-ed in 2007, when then-Gov. Mike Huckabee was campaigning on the idea. (Bartlett also wrote an in-depth research paper for Tax Notes, if you care to take a deep dive.) He concluded: “The FairTax is too good to be true, and voters should not take seriously any candidate who supports it.”

Indeed, nobody has ever taken the Fair Tax seriously.

Not in the years after the Tea Party wave, when the House Ways and Means Committee under Paul Ryan and Dave Camp dedicated years and numerous hearings to the subject of tax reform.

Not in 2011, when Texas Gov. Rick Perry briefly campaigned in support of the Fair Tax, only to quietly walk back his support and switch to a flat tax proposal.

Not in 2017, when the Republican-controlled Congress passed the Tax Cuts and Jobs Act.

Not in the last Congress, when Jamie Dupree wrote in the Atlanta Journal-Constitution that the proposal was “barely breathing,” with 21 co-sponsors, a big step down from the 75 supporters it had in 2016. (The version now apparently destined to come up for a vote in the House has 11 backers so far.)

No, not until the desperate Kevin McCarthy needed to cut every possible deal to become speaker did the Fair Tax get taken seriously.

Do moderate House Republicans really want to be forced to vote on the Fair Tax? Shouldn’t a major overhaul of the tax system of the world’s largest economy be subject to in-depth hearings by the House’s tax writers? The Bulwark asked the new Ways and Means chairman, Rep. Jason Smith, about the Fair Tax legislation and its future in his committee, where it was referred after its introduction on Monday. He wasn’t sure, answering: “I’ve been chairman for thirty hours,” before walking away.

The Fair Tax has never been popular in the Senate, having never garnered more than eight senators as cosponsors. (The Fair Tax Act of 1985, which had 11 cosponsors, was a different proposal entirely.) Assuming the Fair Tax has the votes in the House—a big, unwieldy assumption that could come crashing down at any moment—it will be dead on arrival in the Senate.

In light of all this, why promise a vote on such a loser? Going straight to the floor poses risks, given the slim GOP majority. It’s a lose-lose situation: Vote yes, and the House Republican Conference looks frivolous, to say nothing of the messaging gift they would give Democratic speechwriters in 2024 (“Republicans want to instate a 30-plus percent federal sales tax!”). Vote no, and invite primaries by far-right candidates who will accuse you of siding with Democrats when given a chance to abolish the IRS. There’s a reason Republicans have never brought any of the previous versions of the Fair Tax to a vote before.

It’s possible that McCarthy agreed to a floor vote expecting moderates to break ranks and the bill to fail by a spectacular margin. That would drive a stake through the heart of the Fair Tax. But this interpretation probably gives him too much credit.

What’s likelier is that McCarthy knew this was a promise he could break. He never said anything about when he would bring the bill to the floor, and he has plenty of more important votes ahead. It is certainly not lost on him that some of these upcoming votes could occasion a rebellion that might threaten his hard-won speaker’s gavel.

Joe Perticone contributed to this article.

Correction: A previous version of this article incorrectly stated that Rep. Buddy Carter was a member of the House Freedom Caucus. He is not.

Jim Swift

Jim Swift is a senior editor at The Bulwark.