A group of House Republicans is pushing for a sweeping overhaul of the federal tax code. In their push, they are sponsoring legislation that aims to abolish federal income, payroll, estate and gift taxes. 

Further, they want to do away with the IRS and institute a 23% national sales tax instead. Republicans are calling it a ‘FairTax’ — but Democrats say it is anything but fair. 

What You Need To Know

  • A group of House Republicans is pushing for a sweeping overhaul of the federal tax code

  • In their push, they are sponsoring legislation that aims to abolish federal income, payroll, estate and gift taxes. Further, they want to do away with the IRS and institute a 23% national sales tax instead

  • But New York Democrats, including Sen. Majority Leader Chuck Schumer and House Minority Leader Hakeem Jeffries, have condemned the proposal

  • House Speaker Kevin McCarthy told reporters he opposes the measure; Several moderate Republicans in swing districts also oppose it, raising questions about whether it can even make it out of the House

Conservative members of Congress want to dramatically restructure how Washington taxes Americans. 

In the House, about two dozen Republicans, seven from Florida alone, have co-sponsored legislation to replace a slew of federal taxes with a 23% national sales tax and abolish the IRS.

"We need to really take a serious look at how we can simplify the tax code, how we can make it more fair so that everybody is paying in," Rep. Kat Cammack, R- Fla., said. 

If it passes both chambers and makes it to Biden’s desk, the so-called FairTax Act would take effect in 2025 and states would administer the new tax. There would also be a monthly sales tax rebate based on “family size and poverty guidelines.” Supporters argue the bill is “consumption-based.”

"For those that want to live a very extravagant lifestyle, they should be paying taxes as such. But for someone who's a little more frugal, they should have to pay the taxes based on their consumption, not based on their income," Cammack said. 

But New York Democrats, including Sen. Majority Leader Chuck Schumer and House Minority Leader Hakeem Jeffries, have condemned the proposal. In response to the proposal, President Joe Biden said he would veto it if it ever gets to his desk. 

"What this is at the end of the day is a massive shift in the tax burden in the United States, away from wealthy families to your typical low-income, middle-income family in the United States. We strongly oppose this bill," Bharat Ramamurti, the Deputy Director for the National Economic Council, told Spectrum News. 

"I believe it would be regressive on many of our constituents in our district," Rep. Darren Soto, D-Fla., said. "The median income in our district is $55,000 and a lot of those folks would not do well under such a plan."

According to the Tax Policy Center, many low-income households do not pay federal income tax because they owe no tax — they make less money than the standard deduction. About 72.5 million taxpayers are expected to owe no federal income tax from 2022, with more than half of those coming from the lowest 20% of income earners, according to TPC analyses.

One economist told Spectrum News that it’s unlikely the federal legislation would be enacted and some states, including Florida, already have a state sales tax instead of state income taxes.

"I think it remains to be seen what the world would look like if we made this significant change because we've just never done anything like that before. But again, we do have some examples at the state level, both Texas and Florida are kind of doing this already," said Victor Claar, an economic professor at Florida Gulf Coast University. 

House Speaker Kevin McCarthy told reporters he opposes the measure. Several moderate Republicans in swing districts also oppose it, raising questions about whether it can even make it out of the House.