The Democrats in control of Congress and the presidency seek to transform our county. If they are successful in passing and signing into law the $3.5 trillion reconciliation package that is being forced through Congress via arcane budget procedures, to the objections of both Republicans and Democrats, Americans will see the biggest expansion of government accompanied by the largest tax increase in a generation.
While the specifics have not been finalized, expect to see the corporate tax rate get raised from 21% to 28%, the highest business tax rate in the developed world. The top marginal rate would go up as well, while the income threshold would be lowered, breaking the president’s promise to not raise taxes on anyone making under $400,000. And the elimination of a “stepped-up basis” would devastate family businesses. This is all to provide some funding for the Democrats’ expensive policies, adding trillions of dollars to our already significant debt over the next 10 years.
To add to the damages, the package promises to pay for more of its expensive policies through increased enforcement by the IRS. It doubles the size of the IRS by hiring almost 87,000 new agents over the next decade and increases IRS funding by $80 billion for the explicit purpose of increased enforcement. Now, anyone familiar with the agency’s history will know that this will result in the weaponization of the agency to harass and squeeze money out of taxpayers.
People across America already collectively spend more on taxes than they do on food, clothing, and housing combined, only to see partisan gridlock over how their taxpayer dollars are spent. At the same time, 61% of U.S. residents, or more than 100 million, paid no federal income taxes last year. No wonder trust in government is on the decline.
Instead of debating who pays their fair share of taxes, let us take another approach. Let me introduce the FairTax.
The FairTax would eliminate the federal income, payroll, and estate and gift taxes, replacing them with a revenue-neutral national 23% consumption tax. This dramatic overhaul of our tax code would allow people to keep every cent of their hard-earned money and give them the freedom to spend as much or as little in taxes as they decide.
Instead of pumping the IRS full of cash to hound taxpayers and invite political abuse, the FairTax would rid us of the need for an IRS, and the Gordian knot of credits and loopholes in our tax code would be a thing of the past. This means no more IRS, threats of audits, and hours that citizens and businesses spend on filing taxes.
The FairTax would capture tax revenue from anyone spending money in the United States. This means not just Americans, but also visitors, illegal immigrants, and that 61% of people who paid no federal income tax last year. Through the FairTax, it is a certainty that everyone pays their taxes.
While normally such a tax would disproportionately affect lower-income people, the FairTax accounts for that by providing a “prebate.” The “prebate” is an advance tax refund to every legal American family up to the national poverty level at the beginning of every month to purchase goods and services tax-free.
The FairTax actually taxes everyone, American or not, while encouraging economic growth, being more efficient, and being more productive. Many states have already seen success with this approach. States such as Florida and Texas, two of the fastest-growing states, have no income tax and are attracting more and more people from higher-taxed states, such as California and New York.
The Democrats’ plan is to raise taxes, but there’s little doubt that the effects of such increases will cost everyday families and be a drain on our economy — just as similar policies were under the Obama administration.
One only has to look at the effects of the Tax Cuts and Jobs Act of 2017 to see what happens when we allow people to keep more of their income instead of forking it over to bureaucrats in Washington. After the passage of the TCJA, America’s growth in 2018 was 2.9%, which was nearly twice that of Germany’s 1.5% and more than twice that of Britain’s 1.3%. Up until the COVID-19 pandemic, unemployment was at record lows, and wages were rising.
These are the themes the FairTax seeks to build upon. With a corporate tax rate of zero, the U.S. would be the most business-friendly country on the planet and the center of global innovation.
While dramatic, this overhaul of our tax code is simple and fair. It would allow people to keep every cent of their hard-earned money and allow our economy to explode with prosperity.
Buddy Carter represents Georgia’s 1st Congressional District in the U.S. House of Representatives.
