Key Republicans oppose House GOP bill to abolish tax code

Republican supporters of a bill aimed at abolishing the tax code as we know it are running into an early barrier in the House: their own leadership.

The Fair Tax Act was thrust into the spotlight earlier this month as reports emerged that it was part of a deal made by Rep. Kevin McCarthy (R-Calif.) with his GOP detractors during the days-long process to elect him Speaker.

But as the bill becomes fodder for growing Democratic attacks from the White House down, some Republicans are distancing themselves from the legislation.

McCarthy made clear his opposition to the bill when pressed by reporters earlier this week. He said the bill “would have to go through committee” when asked on Wednesday if he planned to bring it up for a floor vote. 

House Majority Leader Steve Scalise (R) said Thursday that he didn’t support the bill, instead telling The Hill that he backs making permanent the tax cuts in former President Trump’s signature 2017 tax bill.

“We made the code more simplified and got rid of a lot of loopholes, and so I want to see us continue focusing on the fairness and simplicity of a tax code,” Scalise argued. 

The Fair Tax Act, introduced by Rep. Buddy Carter (R-Ga.), would constitute the largest change to the U.S. system in decades — maybe ever — and would all but abolish the tax code.

It would eliminate all income taxes, payroll taxes, estate taxes and gift taxes in favor of an outsized 30-percent sales tax that would be collected by states and then remitted to the federal Treasury. The new method of taxation would render the IRS, as it currently exists, all but obsolete.

Some Republicans have expressed interest in the idea of a national sales tax but have yet to sign onto the legislative effort. 

“It’s an interesting idea … if everybody pays in a portion, everybody has his skin in the game,” Rep. Randy Weber (R-Texas) said of the idea, adding that “it can be doable, but I have to see those parameters.”

However, the push has not gone without criticism from others in the conference.

“I don’t think it’s a wise thing,” Rep. Don Bacon (R-Neb.) told The Hill on Wednesday, saying he doesn’t think “it’s smart politics or policy.”

Bacon claimed the plan for the bill was initially understood to be that leaders would bring it “to the floor for a vote.” But said he called on GOP leadership to allow the measure to “go through regular order” instead.

“I asked that it be [brought] to committee and studied and marked up, not just brought on the floor,” he said, adding that “if you do it the normal way, bad bolts get rooted out or they get amended.”

Rep. Jason Smith (R-Mo.), who chairs the Ways and Means Committee, has said the bill will get a hearing, telling Axios earlier this week that McCarthy “believes everything should work in regular order.”

“We’re going to have a public, transparent hearing on that issue and we’ll see where it goes from there,” he said. 

Whether the bill will ever make it out of the House, or even survive in committee, is far from certain. 

“Any member can file a bill,” Scalise said. “That doesn’t mean the bill is going to pass the committee or pass the floor.”

“That’s why we went back to regular order,” he added. “We got rid of a lot of the [former Speaker Nancy] Pelosi [(D-Calif.)] rules, where a bill is written in the Speaker’s office and dumped on everybody. You know, take it or leave it. That’s not how we’re doing business.”

The bill has about 30 GOP co-sponsors and faces overwhelming opposition from Democrats, who have been taking hits at the novel legislation like it were a piñata.

“This ‘Fair Tax Act’ is truly foul stuff,” Senate Majority Leader Charles Schumer (D-N.Y.) said on the Senate floor Thursday. “The Republican tax plan would raise the cost of buying a house by $125,000. It would raise the cost of buying a car by $10,000. It would raise your average grocery bill by $3,500 a year at a time when people are already worried about the high price of groceries. How can they do this?”

“Things like eggs are already too expensive, but Republicans want to slap another $1.50 to that price. The plan would make a gallon of milk cost another $1.70 more,” Schumer added.

Democrats have been keen to ignore the fact that the bill cancels income and payroll taxes, focusing instead on the sticker shock of the cost increases in consumer goods that the flat sales tax would bring, in light of recent inflation.

“Eggs, gas, rent, child care, health insurance, cars, formula, diapers, urgent care visits, clothes, shoes, insulin, tampons, utilities, milk, bread, school supplies, life-saving medication, and more. All of this will cost 30 percent more if Republicans get their way,” Democrats on the chief tax-writing Ways and Means Committee wrote online on Thursday.

Analyses of similar tax reform proposals, which have floated around Capitol Hill since the 1990s, found that the bill would decrease taxes on the wealthy while increasing the tax burden on low- and middle-earners. This makes it a regressive tax, meaning that the taxes are greater for people who make less money. That’s because lower earners tend to spend most or all of their paychecks, making their entire income subject to sales taxes, while higher earners tend to be able to save parts of their income, effectively sheltering them from such taxes.

A study commissioned by the administration of former President George W. Bush, which also considered the sales tax reform, found that people making between $15,000 and $200,000 a year would see their taxes increase under the plan, while people making more than $200,000 a year would see their share of the national tax burden decrease by 7.6 percentage points.

The tax is so regressive that the legislation includes a “prebate” — a cash transfer program that would send out monthly checks to families to make sure the tax doesn’t eat too much into their monthly income.

Asked about the pushback his bill has received in recent weeks, Carter brushed off the criticisms, saying Washington “is about big ideas” while inviting his colleagues “who have reservations about this to help me.”

“Offer amendments. How can we make it better? Is it the perfect bill? No, but I have not seen a perfect bill since I’ve been up here,” said Carter, who came to Congress in 2015.

Mike Lillis and Mychael Schnell contributed.