Few Republican lawmakers have publicly supported a bill to replace most federal taxes with a national sales tax, a plan that has almost no chance of becoming law, or even passing in the GOP-led House of Representatives — certainly not in the 118th Congress.
But that has not stopped several Democratic leaders from suggesting that the bill has wide support among congressional Republicans.
“And the so-called FairTax Act is another example of the extremist agenda that Republicans are trying to jam down the throats of the American people,” House Minority Leader Hakeem Jeffries said in a Jan. 25 press conference. “This legislation is extreme and it is functionally the GOP tax scam part two.”
Senate Majority Leader Chuck Schumer, who joined Jeffries at the joint press briefing, called the bill “the craziest yet” and “a real doozy.” “It’s hard to believe they came up with it,” Schumer said of Republicans. He later said: “We have to fight this plan now before it gains any more steam. Too many Republicans support it.”
In an economic speech the following day, President Joe Biden said Republicans “want to impose a 30% national sales tax on everything from food, clothing, school supplies, housing, cars — a whole deal.”
We do not know the total number of House Republicans who support the plan, but more than five — including House Speaker Kevin McCarthy and House Majority Leader Steve Scalise — have said they do not. That is already enough “no” votes to keep the bill from passing in the House, assuming that all House Democrats would oppose it as well.
Here we provide some basic information about the proposal and what we know about who is — and is not — backing it.
The FairTax Act
The bill, H.R. 25, was introduced by GOP Rep. Earl “Buddy” Carter of Georgia on Jan. 9. It is the latest version of a plan that some Republican lawmakers have introduced in successive Congresses since 1999.
“This bill imposes a national sales tax on the use or consumption in the United States of taxable property or services in lieu of the current income taxes, payroll taxes, and estate and gift taxes,” according to a Congressional Research Service summary of the current legislation.
“The Fair Tax would repeal the current tax code and replace it with a single national consumption tax that is pro-growth and allows Americans to keep every cent of their hard-earned money,” Carter said in a statement. “It is the only tax system that is simple, efficient, friendly to economic growth, non-discriminatory, unintrusive, and FAIR.”
The tax would start at 23% in 2025, and it would be adjusted in future years. That’s the tax-inclusive rate, meaning that prices for goods under the tax system would include the national sales tax.
“Under the FairTax, if you pay $100 for a good, you pay $77 for the good and an inclusive $23 tax,” Carter’s office explained in a blog post. “If you take the $23 as a percentage of the $100 tendered, the tax rate is 23 percent.”
But because $23 is about 30% of $77, some tax analysts — and Democrats, like Biden — say the actual sales tax rate would be 30%. That 30% is what is known as the tax-exclusive rate, which is the tax applied to an item’s listed price. That is arguably how most people are used to thinking about sales taxes.
“Although there is no single correct way to report a sales tax rate, it is crucial to understand which approach is being used,” the Tax Policy Center says.
To help cover the cost of essential items, the bill would provide qualifying households with a monthly rebate based on household size and federal poverty guidelines. Carter said the payment “will allow families to purchase necessary goods, such as food, shelter, and medicine, essentially tax-free.”
The sales tax would be collected by states and transferred to the Treasury Department, reducing the role of the IRS, whose funding would be eliminated entirely after fiscal year 2027 under the legislation.
However, even if implemented, the national sales tax would be terminated after seven years if the 16th Amendment to the U.S. Constitution authorizing a federal income tax is not repealed, the bill says.
How Much Republican Support?
It is unclear how much support there is for the proposal, despite suggestions from Democrats that the bill is popular among Republican lawmakers.
As of Jan. 27, the FairTax Act had 24 Republican co-sponsors. That is six fewer co-sponsors than the version Carter introduced in January 2021, during the 117th Congress — when the bill was referred to the House Committee on Ways and Means but went no further.
In a Jan. 25 post, John Kartch of the conservative Americans for Tax Reform, wrote that support in the House for the FairTax “has been dwindling for the past decade, dropping by two-thirds since 2013.”
In order to obtain the votes necessary to become House speaker, McCarthy, according to some news reports, promised some of his more conservative, FairTax-supporting detractors that he would bring the latest bill to the House floor for a vote. But another report, citing top Republican leaders, said McCarthy only promised the bill would receive a committee hearing, which does not guarantee the bill will advance to a vote by the full House.
Furthermore, McCarthy recently indicated that the bill does not have his support. On Jan. 24, when a CNN reporter asked him if he backs the FairTax Act, McCarthy said “no.”
In addition to McCarthy, Scalise, the No. 2 Republican in the House, has said he would not vote for the bill. That was after three Republican representatives from New York — Marc Molinaro, Nick LaLota and Mike Lawler — said they too opposed the effort to make the national sales tax law. Republican Rep. Matt Rosendale of Montana also has come out against the tax plan.
Since Republicans hold a slim 222-213 majority in the House, as few as five “no” votes from fellow Republicans could keep the bill from passing — if every Democrat also votes against it.
Even if the bill were to somehow pass the House, Schumer, who determines which bills receive consideration in the Senate, has made it clear that the bill would be dead on arrival in the upper chamber of Congress.
“As long as I am majority leader, this devastating, unfair, nasty and almost crazy plan is not going to pass. Not going to happen in the Senate,” he said in the Jan. 25 press conference.
If Schumer did allow a vote, the bill likely would not garner the 60 votes necessary to invoke cloture and avoid a potential filibuster.
Biden, if necessary, also has promised to veto the bill. And it takes a two-thirds majority vote in both houses of Congress to override a veto.
So, while we do not know how many Republicans would support the bill in a potential floor vote, we do have an indication that it would not pass in the House or the Senate and the president would not sign it. That means it cannot become law.
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