LOL House Republicans' 'Fair Tax' LOLOLOL Rick Santorum Wanking Dot Gif

A Wonkette LOLsplainer.

As the price of becoming House speaker, Kevin McCarthy had to make a bunch of awful concessions to far-right Republicans, like giving Marjorie Taylor Greene a seat on the House Oversight Committee, agreeing to let any Republican call a no-confidence vote, and perhaps most controversially, letting the Pigeon drive the bus . McCarthy was desperate. Among those deals was an agreement to let the House vote on something laughably called the "Fair Tax" plan, which must always be written with irony quotes because it would give the wealthiest Americans even greater advantages than our already unfair tax system already does.

Various versions of the "fair tax," which would allegedly replace the income tax, payroll taxes, and all other federal taxes with a 30 percent national sales tax, keep getting introduced by wacko Republicans every session of Congress since 1999, and most of the time they promptly die in committee because not even most Republicans think it's a good idea. But the current sponsor, freshman Rep. Earl L. "Buddy" Carter (R-Georgia) , had a price for his support of McCarthy, so here we are explaining once again why a flat sales tax would be very stupid and wrong and bad.

So Bad A Six-Year-Old Can Debunk It

Actually, not to brag too much, but my kid figured that out when they were only six years old. A friend's mom had for some reason had to attend some meeting where a guy was advocating the "fair tax" — like almost any terrible idea, it has a national organization to push it — so she took Kid and her own daughter along. The guy explained that a flat tax would be fairer because everyone pays the same percentage, simplifying by telling Kid and Friend how it would work: If someone had a hundred dollars, they'd pay just ten dollars in tax, and if someone had a thousand dollars, they'd pay a hundred dollars.

Kid raised their hand and pointed out that only having $90 left to get by on would be a lot harder for the first person, while having $900 is pretty comfortable for the second, and that's why we have progressive income taxes you fool, and the workers should throw off rule by the bourgeoisie and seize the means of production. (I may have embellished the story a bit.)

A Plan Only A Motherfucker Could Love

So what exactly is in this zombie proposal? Mother Jones explainses:  

The “fair tax” is a complete makeover of the federal tax system. It repeals payroll taxes, gift and estate taxes, capital gains taxes, and personal and corporate income taxes. In their place, it institutes a 30 percent levy on all new, finished goods and services. (So that $10 six-pack would run you $13, and the feds get three bucks.)

Sales taxes are regressive—harder on the poor than the rich. To offset that, the proposal calls for monthly government “prebate” checks for all US citizens, payments that would be proportionately more meaningful to lower-income families.

Now, even with the "prebate" — stop snickering, you! — this would still amount to a massive tax cut for the rich, who already pay a far lower portion of their real income in taxes, as Mother Jones senior editor Michael Mechanic notes:

“The main problem,” UC Berkeley economist Gabriel Zucman told me in an email, “is that it would turbocharge inequality. Because the rich save most of their income.” In other words, replacing income taxes with a consumption tax amounts to a tax cut for the wealthy, whereas folks living paycheck to paycheck would face a substantial tax increase. [...] Zucman and his Berkeley colleague Emmanuel Saez have found that when all of our taxes (federal, state, and local) are combined, the result is something like a flat tax—averaging 28 percent across income categories. The poorest Americans pay a bit less than average (~25 percent) while most very high earners pay more (30 to 35 percent), but the wealthiest of all, the billionaires, enjoy the lowest overall rate (23 percent). Under a “fair tax” plan, they might pay even less.

This is where we once again take a breath and remind you this bill will be DOA in the Senate, and that Joe Biden has already promised to veto it, which he won't have to because of the aforementioned DOA in the Senate.

Built-In Self Destruction

Also too, those payments to taxpayers that would supposedly offset the hugely unequal benefit to the rich would be prohibitively — even prebatably — expensive, costing some $900 billion to $1.2 trillion annually. Needless to say, even if the cockamamie plan were enacted, you can see that Republicans would immediately call for the prebates to be cut, since look at how they've created dependency on another "entitlement." Why don't you lazies pay your 30 percent sales tax like good Americans?

But wait! There's more! The Institute on Taxation and Economic Policy points out that the "fair tax" plan to have states collect 30 percent federal sales taxes, on top of their own sales taxes, would be incredibly confusing, especially since five states simply don't have sales taxes, and the rest all have different exemptions for what's subject to sales tax. Shoppers who don't pay taxes on food in some states, for instance, would suddenly be paying 30 percent more for all their groceries.

And just sorting all that out and collecting the taxes from the states would require a federal agency to make sense of it, so look at that, we still have an IRS.

Homer Simpson Math!

Bizarrely, as ITEP explains, the bill's proponents pretend the 30 percent tax wouldn't really be a 30 percent tax, but instead a 23 percent tax. Look at this numerical shell game bullshit!

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

How true. When I calculate a 20 percent tip on a restaurant order, I always add 20 percent to my bill and then tip the waitstaff 20 percent of the total. (As a onetime waitroid, I do overtip, but not with that math.)

Then there's this kicker: A 30 percent sales tax wouldn't come close to replacing the revenue that would be lost, either. For just one thing, if we eliminate payroll taxes, we'd have to start funding Social Security and Medicare out of the new sales tax, too. As ITEP notes,

Back in 2004 William Gale at the Tax Policy Center estimated that simply replacing the taxes eliminated under the plan would require that the national sales tax have a rate of 60 percent .

But maybe not, since Congress would surely cut spending to match. Mmm hmm.

Happily, this all remains an argument about how many groomers could dance on a Laffer Curve, because this thing won't pass in this Congress or under this president. It's worth keeping in mind just how terrible it is, though, since if Republicans take Congress and the presidency in 2024, this madness will come up again, and there's no telling whether Democrats and relatively sane Republicans — should there be any — would be able to stop it.

Gee, and we didn't even have room for the fun history fact that the plan was originally dreamed up by the Church of Scientology when it feared the IRS wouldn't extend its religious tax exemption.

[ Mother Jones / ITEP / CBS News ]

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