Guest Editorials, Opinion

‘Fair Tax’ won’t pass, but debate an ominous omen about McCarthy

There is a 0% chance that a proposal to eliminate the federal income tax and replace it with a massive national sales tax will even get out of the Republican-controlled House, let alone become law. But the fact that such a bluntly soak-the-poor idea is even getting an airing under new House Speaker Kevin McCarthy should stand as ominous confirmation that he is basically a hostage to his caucus’s crazy-right flank.

The grotesquely misnamed Fair Tax Act comes up perennially and usually dies a quick and appropriately ignoble death. This time, though, it’s expected to actually get a House vote. The idea is to do away with all current federal taxes completely — personal and corporate income taxes, payroll taxes, estate taxes, all of it — and run the government entirely with a hefty federal sales tax on all goods and services.

Proponents say it would be a 23% tax (which would be bad enough), but that’s based on a misleading “tax inclusive” calculation of the rate. The actual checkout-counter reality would be more like 30%. Add local and state sales taxes (9.68% combined in St. Louis), and you’re quickly approaching $40 in sales tax on every $100 spent on goods or services.

In what distant galaxy does anyone believe it’s “fair” to let Exxon and Amazon pay not one red cent in taxes on their massive incomes, while making up the difference to the treasury by charging typical American families an extra 30 cents on the dollar for bread and milk?

The “Fair Tax” crowd’s contention that abolishing the Internal Revenue Service would make things simpler for everyone is also nonsense. Even they understand that families living in poverty can’t absorb what amounts to an almost one-third increase in the price of everything they buy, so the legislation would create a monthly “prebate” cash reimbursement of the tax for every taxpayer, up to the amount of the federal poverty line. The bureaucracy necessary to run such a system — even if it could reach people on the margins who would have to pay the tax as they eat and live, but won’t realistically be able to access the “prebate” — would rival the IRS in complexity. No wonder even the conservative Wall Street Journal editorial page labels this idea “tax masochism.”

So why are we even discussing an utterly indefensible idea that has no chance of passage? Because it reportedly is going to soon get more debate than it deserves (which is to say, any), for no reason except that McCarthy had to sell his soul to the most deranged people in his caucus to win his speakership this month. The vote is certain to fail — even today’s radicalized GOP mostly isn’t that radical — but it should prompt Americans to wonder about what other deals McCarthy has made.

This editorial first appeared in the St. Louis Post-Dispatch. This commentary should be considered another point of view and not necessarily the opinion or editorial policy of The Dominion Post.