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Republicans Push National Sales Tax, Abolishing The IRS

House Republicans are pushing to pass a bill that would eliminate the tax code and replace income taxes with a 30% national sales tax.

Democrats are worried that this would be a “political gift” for them, and that it would increase the federal deficit.  

Republicans, on the other hand, are pushing for a national sales tax to replace the current income taxes as a way to eliminate the complex tax code. 

House Minority Leader Kevin McCarthy is preparing his caucus for a push to replace the federal income tax with a single national sales tax. 

This would abolish payroll taxes, estate and corporate taxes, and completely abolish the IRS. The plan also calls for eliminating national income taxes and replacing them with state-level sales taxes that would be collected by businesses. This would effectively replace the current bill and make it easier for people to file their taxes. 

Although this proposal has been met with some resistance from Democrats, it could be a political win for Republicans if it passes in Congress. Kevin McCarthy and the Republican leadership are confident that they can make this happen if they can get enough support in both chambers of Congress.   

The idea of a national sales tax to replace the imposed federal income tax has been a long-standing Republican priority, but it has also been historically unpopular. Republicans worry that if they pass such a bill, it would be a “political gift” for Democrats. 

The Sixteenth Amendment, ratified in 1913, levied an income tax on individual incomes. The Revenue Act of 1942 established corporate taxes as well.  The latest proposal, however, is a National Sales Tax that would collect unpaid federal taxes from individuals and businesses. 

Republicans hoped that party lawmakers on Capitol Hill would embrace the idea as a way to come up with new revenue without creating additional inflation. 

The proposed legislation included funds for enforcement by the Internal Revenue Service (IRS) and funding for climate packages and other Democratic health care initiatives. But many Republicans are concerned that a national sales tax bill could be seen as a “political gift” to the Democrats rather than an equitable solution for all taxpayers.   

They worry that by targeting money from wealthy individuals and businesses, Democrats could use it to pursue their election pledge to raise taxes on the wealthy and corporations. 

This could undermine tax collections from those who already pay the highest rate of tax, leading to a decrease in additional tax revenue for the federal government. 

The Senate Finance Committee has been pushing for a national sales tax, but many Republicans are worried that if it were to pass, it could lead to an increase in the federal deficit. 

They are also concerned that credits and subsidies given out by Congress would be slashed if additional money was not available through income tax collections.

With President Joe Biden’s economic agenda heavily reliant on increased taxes on wealthy individuals and businesses, Republicans worry that additional money they receive as part of a national sales tax bill would be used to fund his agenda. 

Any legislative package needs Republican votes in both chambers of Congress – Senate and House – before it can be passed into law. Many Republicans worry that such a bill could weaken the Internal Revenue Service (IRS) by reducing its resources for pursuing tax cheats and consequently reducing funding for IRS enforcement activities.   

Additionally, Republicans worry a national sales tax bill would be a ‘political gift’ for Democrats who could use the new revenue to fund their own tax cutting agenda and any tax law changes they want. 

The Republican’s primary concern is that such a bill would balloon the large federal deficit because standard (conventional) scoring does not take into account the true macroeconomic effects of such legislation.    

Rep. Nancy Mace of South Carolina, said Sunday that she was “on the fence” about the proposal. 

“We don’t have any idea what promises were made or what gentleman’s handshakes were made. We just have no idea at this point,” she said. “And it does give me quite a bit of heartburn.”

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