Fair Taxation Act of 2023: What the 30% GOP consumption tax would do

On Jan. 10, U.S. Representative Buddy Carter (R-Ga.) introduced a bill called the Fair Taxation Act that would make major changes to the U.S. federal tax system.

But people in social networks say the bill’s proposed 30% national sales tax, also called a “consumption tax,” would harmful to the middle class and would abolish the IRS. Google Trends data shows people were looking for what a consumption tax would do.

VERIFY viewer Michael emailed us asking if the National Sales Tax bill had actually been proposed.

Have House Republicans introduced a bill to introduce a national sales tax and eliminate the need for the IRS?

Yes, House Republicans have introduced a bill to create a national sales tax that they believe would eliminate the need for the IRS

The Fair Taxation Act of 2023 was introduced in the House on January 9 by Rep. Buddy Carter (R-Ga.). If passed, it would eliminate all federal taxes, including the federal income tax, abolish the Internal Revenue Service, and introduce a national sales tax.

The bill says federal income taxes, payroll taxes, and estate and gift taxes would be eliminated. It would also eliminate taxes on corporate income and capital gains. Instead of these taxes, a national sales tax of 23% will be collected.

In addition, although the bill states that the tax will be 23%, Institute of Tax and Economic Policy (ITEP), says it’s actually 30%. This has to do with how sales tax is calculated when you make a purchase.

“Under the bill, if you buy something that costs $100 before tax, you pay $30 in national sales tax. Most of us would call that a 30 percent sales tax. Proponents, however, call it the 23 percent tax because that $30 is 23 percent of your “gross payment” of $130, including sales tax. Proponents argue that this method of calculation is more comparable to how we think about income tax, but its main result is widespread confusion,” ITEP says.

A national sales tax means that everyone in the US will pay extra for any goods and services they buy. To help with that cost increase, the bill says eligible households could receive a “prebate,” a monthly cash assistance for households below the federal poverty level.

The bill states that the IRS will not be the agency responsible for collecting or administering the sales tax funds collected. The money will be managed by the Ministry of Finance.

A Bureau of Excise and a Bureau of Sales Tax would be created within the Treasury Department, the bill says, to administer any taxes collected at the state and federal levels. This would make the IRS obsolete because management and enforcement would fall under the Treasury Department.

When he introduced the legislation, Representative Buddy Carter released a statement addressing the bill to simplify tax codes, “promotes growth and allows Americans to keep every cent of their hard-earned money.”

Carter also referred to unsubstantiated IRS funding claims, saying, “Instead of adding 87,000 new agents to weaponize the IRS against small business owners and middle America, this bill eliminates the need for the department entirely.”

At the same time, the fact of verificationVERIFY confirmed claims that the IRS increased audits of the middle class by hiring 87,000 new agents were false.

The bill is sent to the committee of the House of Representatives for consideration. Even if it passes the House — and the Senate passes the bill — President Joe Biden has said he won’t sign it

During remarks on the economy on Jan. 12, he said the national sales tax would only make it more expensive for working-class families, and he would veto the bill.