House Republicans aim to abolish IRS, replace income tax

The new speaker of the House, Kevin McCarthy, R-California, agreed as part of a deal with conservatives in the Freedom Caucus to win the speakership to allow a vote on a bill that would abolish the Internal Revenue Service and institute a "Fair Tax" that would replace federal income taxes and other taxes with a national consumption tax administered by the states.

On Monday, House Republicans passed a bill to strip the IRS of much of the extra $80 billion in funding for enforcement enacted last year by Democrats' Inflation Reduction Act, although the bill is not expected to advance in the Senate, which is still controlled by Democrats. On Tuesday, Rep. Earl L. "Buddy" Carter, R-Georgia, introduced H.R. 25, The Fair Tax Act, to replace the current Tax Code with a national consumption tax known as the Fair Tax.

"Cosponsoring this Georgia-made legislation was my first act as a member of Congress and is, fittingly, the first bill I am introducing in the 118th Congress," Carter said in a statement. "Instead of adding 87,000 new agents to weaponize the IRS against small-business owners and middle America, this bill will eliminate the need for the department entirely by simplifying the Tax Code with provisions that work for the American people and encourage growth and innovation. Armed, unelected bureaucrats should not have more power over your paycheck than you do."

Andrew Harrer/Bloomberg

The 87,000 figure has been widely debunked, but has become a common talking point among Republicans, who have pointed out that it came from a Treasury Department study.

Fox News Digital reported the bill came out of a deal between McCarthy and the House Freedom Caucus, but said the White House is opposed to the bill. 

"President Biden adamantly opposes House Republicans' plans to force an unprecedented tax hike onto middle-class families in exchange for yet more tax welfare for the rich and big corporations," said White House deputy press secretary Andrew Bates. The administration argues it would "overwhelmingly shift the federal tax burden onto the American middle class and working people, while simultaneously causing prices to spike across the board."

The Institute on Taxation and Economic Policy, a Washington, D.C., think tank, pointed out the origins of the Fair Tax date back decades to an IRS dispute with the Church of Scientology over whether the church qualified for tax-exempt status, which it ultimately won after years of legal battles.

The Fair Tax was first introduced in Congress in 1999 by former Georgia Congressman John Linder. In addition to eliminating all personal and corporate income taxes, the estate tax, gift taxes and the payroll tax, the Fair Tax would also get rid of the IRS, repeal the current Tax Code and replace it with a single national consumption tax. Similar bills have been introduced in most congressional terms but rarely advance past the committee stage.

"The idea behind the proposal seems to be that it would facilitate abolition of the IRS because states already collect sales taxes and would be suited to collect additional sales tax for the federal government and remit the money to the U.S. Treasury," wrote ITEP federal policy director Steve Wamhoff. "But this strategy has problems. Five states do not impose a sales tax and every state exempts a range of purchases that would apparently be subject to the national sales tax. The bill allows the Treasury to administer the national sales tax in states that do not agree to administer it. This would suggest some sort of federal apparatus for tax collection is required, which, if you think too hard about it, sounds like it would involve something like the IRS."

The bill would impose a 23% sales tax according to the legislation, although Wamhoff believes the true costs could add up to 30% or higher.

Carter was joined by several members of the House Freedom Caucus as original cosponsors of the legislation, including chair Scott Perry of Pennsylvania, along with Rep. Andrew Clyde of Georgia, Jeff Duncan of South Carolina, Bob Good of Virginia, Ralph Norman of South Carolina, Bill Posey of Florida, and Gary Palmer of Alabama. Other co-sponsors include Rep. Kat Cammack of Florida, Thomas Massie of Kentucky, Jim Banks of Indiana, and Barry Loudermilk of Georgia.

"I support the Fair Tax because it simplifies our Tax Code," Good said in a statement. "This transforms the U.S. Tax Code from a mandatory, progressive, and convoluted system to a fully transparent and unbiased system which does away with the IRS as we know it. It is good for our economy because it encourages work, savings and investment."