New GOP national sales tax bid is a nonstarter

A sweeping proposal under discussion by the new Republican House majority would radically overhaul the U.S. tax system. If it were to happen, the move would be the largest shift in the system of federal revenue collection in more than a century.

Proposals of this kind have kicked around for decades. Essentially, this one aims to kill the current levies on federal income, payrolls, and estates. Wages, capital gains, and corporate profits would be tax-free. Proponents say this would liberate investment from the drag of income taxes.

But the U.S. isn’t planning to go out of existence. It needs to pay its debts, support the military, and run the government. The revenue would have to come from somewhere. That’s where the flip side of this proposal — backed by loose-cannon lawmakers — would have its visceral impact. It would impose a first-of-its-kind national sales tax — totaling approximately 30% — on a full range of purchases including food, medical care, and new homes.

Supporters say it would be so easy to administer that you wouldn't need the Internal Revenue Service. Abolishing the IRS is a fashionable holy grail for the libertarian right. The sales tax would end after a certain period, if the nation hasn’t abolished the 16th Amendment authorizing income taxes — which means approval of the repeal by a two-thirds majority in both the House and Senate, followed by approval of two-thirds of the states.

Now for the reality check: This whole suggestion is poisonous politically and economically.

Even anti-tax conservatives acknowledge that middle-income earners would pay significantly more than they do now and that those with higher incomes would pay less. Knowing this, Democrats greeted the GOP effort with the same enthusiasm Republicans mustered when some Democratic elected officials entertained “defunding the police.”

“I love their 30% sales tax,” President Joe Biden quipped. “We want to talk about that a lot.” Senate Majority Leader Chuck Schumer calls the proposal “a doozy.” House Minority Leader Hakeem Jeffries terms it a “scam.” At least this time, none of the three is exaggerating. Even the nation’s foremost anti-tax cheerleader, Grover Norquist, calls the idea "a political gift to Biden and the Democrats."

If the new House majority is really committed to exploring alternative tax systems, they should do so — with common-sense analysis and credible numbers. Fortunately, chances for this sloppy, anti-populist tax sit somewhere between slim and none. Even House Speaker Kevin McCarthy, who must palliate his more extreme members, isn’t ready to advance it, though his Ways and Means Committee might give it an airing. 

This one’s a nonstarter — no matter how much time the House chooses to waste on it.