Revenue Neutral Personal Consumption Tax

Floor Speech

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Mr. CARTER of Georgia. Mr. Speaker, today could be the last tax day our country ever has. Let that sink in. Today could be the last tax day our country ever has.

Monday, April 15, 2024, could be just another spring day if Congress acts now and passes the only tax reform proposal to ever make it to The New York Times best seller list, the FairTax Act.

H.R. 25, the FairTax Act is a simple, fair, and preferred alternative to our current tax system which puts bureaucrats before the basic needs of hardworking Americans.

The bill would eliminate, as in do away with, the Federal income, the Federal payroll, the estate, and gift taxes, replacing them with a revenue neutral national 23 percent consumption tax.

Mr. Speaker, nobody likes taxes, but given the choice between a payroll tax, an income tax, an estate tax, a gift tax, or a consumption tax, people would prefer a consumption tax because they are in control then.

It would also eliminate the need for the IRS. It would eliminate tax day. No more tax day.

How many people out there right now in this country are sweating as a result of today being tax day, or just sitting at home thinking, oh, if I can just get through this day?

It would allow you to take home 100 percent of your paycheck so that you could control where your hard-earned dollars go. The best part about this is you don't need a law degree or a CPA license to understand it. It is simple. It is fair. It is preferred.

For every dollar you pay for a new good or service, 23 cents will go to the Federal Government and 77 cents will go to the business. It is that simple. I agree, 23 percent is too high, but it is much better than what you are paying now.

Have you ever looked at your paycheck? Have you ever looked at how much you get paid and how much you get to take home? It is ridiculous.

No more, no less, no legal or financial expertise would be required.

As I said, a 23 percent consumption tax is a lot. No one likes paying taxes, me included. I don't like paying taxes. I understand it and I am certainly willing to do my part, but I would surely prefer to have control over it instead of some unelected bureaucrat in Washington, D.C., as it is now, having control over it.

What many consumers fail to realize and what Washington Democrats conveniently ignore is that today's sticker prices are already inflated to cover corporations' tax burdens.

Every tax imposed on businesses, whether it is corporate, FICA, or other taxes is passed down to the consumer. You are already paying taxes every time you purchase a good or service. Under the FairTax Act you are only paying yours, not anyone else's. That is right. On the FairTax Act you will only be paying for what you consume. That is what a consumption tax does.

Mr. Speaker, I am going to pause right now and then I will come back and finish what I have to say about this.

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Mr. CARTER of Georgia. Mr. Speaker, I thank the gentleman from Arizona for his insightful comments. I think we have all had that aha moment when we got our first paycheck, and we said: Wait a minute, I was supposed to make X-amount, but I am only taking home this amount. Why is that?

The reason why is because you are having to pay an income tax, a payroll tax--you have to pay all these taxes. With a consumption tax, the FairTax Act, you decide. If you want to buy a boat, you are going to pay taxes. If you don't want to pay taxes, don't buy the boat. That is all there is to it.

I appreciate the gentleman mentioning this about every time you buy something you are paying taxes, every time you purchase a good or a service. Under the FairTax Act you are only paying for your goods or services. You are only paying your tax, not someone else's.

There is no other tax proposal--serious tax proposal--that would overhaul the largest and the most regressive tax that the majority of Americans pay, the payroll tax, while making the United States the most competitive place in the world to do business.

It honestly baffles me that my friends on the other side of the aisle haven't embraced this proposal with open arms because it will save taxpayers time, money, and headaches while ensuring that those with more money to spend, AKA the wealthy, pay more taxes. After all, when they buy a boat, it is a big boat--usually a yacht--and the taxes on the yacht are a lot bigger.

Now, I am going to buy a jon boat. Taxes aren't going to be as much on it. But they buy yachts, and the taxes are high on that. So they are going to pay their fair share.

That is one of the criticisms I always hear: Oh, the wealthy don't pay their part.

Let me tell you, Mr. Speaker, they consume a lot more.

Who is going to benefit the most from this?

The people making between $30,000 and $50,000 a year. Those are the people who are going to benefit from this. Those are the people whom I am talking about here.

Under this proposal, every legal American family will receive a prebate, as was mentioned, on their taxes up to the national poverty level.

So, Mr. Speaker, don't tell me this about: Oh, this is going to penalize the very least money earners.

No. That is not the case at all because the prebate is going to take care of that.

This means that a family of four can spend $30,000 a year without paying a penny--without paying a penny--in taxes. That is an effective tax rate of zero. Close your eyes, Mr. Speaker. That is how much it is: zero.

No matter how you slice it, this bill is a much better deal for middle- and low-income earners than it is for those at the top.

That is what I don't understand, Mr. Speaker, from those on the other side of the aisle who are always saying: Oh, the rich don't pay their fair share.

This is why we have the FairTax Act. This is why we have a consumption tax, so they will be paying their fair share.

I hear this about: Oh, the illegals here don't pay taxes.

If they are going to buy something here, then they are going to be paying taxes now. They are going to be paying the fair tax. We will be able to capture that underground economy, if you will.

As distasteful as it may be, the pimps and the prostitutes are going to be paying taxes because they consume. They go out, and they buy groceries. They go out, and they buy stuff. That is what you are going to be paying the taxes on.

No matter how you slice it, Mr. Speaker, this bill is a much better deal for middle- and low-income earners than it is for those on the top.

The FairTax Act provides freedom to choose when you pay your taxes, Mr. Speaker, and how much you spend. You are in control. Don't let Washington, D.C., decide how much you are going to pay in taxes. You decide.

That is why the administration and that is why those on the other side of the aisle don't like it. It is because they lose control of you, and you have control, Mr. Speaker. Instead of taking money from every single dollar you earn, you are only paying taxes on the money you spend, leaving more room for paying down debt, retirement, college, savings, and more.

All of us speaking in support of this legislation today know that this is a big idea. It is a big idea. It is a big change. Although, as Mr. Biggs mentioned, there are nine States that do it. Oh, by the way, Florida, Texas, and Tennessee don't have an income tax. They are doing fine. Some of the strongest economies in the world are right there, and they are doing fine.

We know that overturning an entrenched Tax Code with thousands of special interests invested in keeping their carve-outs poses significant challenge. It does pose a significant challenge. But we didn't come to Congress to maintain the status quo--at least that is not why I came here. I thought we were here for big ideas. This is a big idea.

For those who are just turning it off saying: Oh, no. I remind them that a closed mind is a dead mind. You have got to have an open mind with this, Mr. Speaker. That is why this is so good.

The only people with something to lose are those who gain their power and money on the back of this convoluted, broken system. There are those who know how to play it. I know that, and you know that as well, Mr. Speaker. That is why it is time for the FairTax Act. That is why it is time to put Americans first.

I know he does. He has had an experience with taxes too, like many of us have.

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Mr. CARTER of Georgia. Mr. Speaker, I thank the gentleman for bringing up some great points.

Mr. Speaker, I want to very quickly go over a couple of myths, if you will. I know you find it hard to believe, but there are some myths out there about the FairTax Act.

First of all, the myth is that the FairTax Act rate is really 30 percent, not 23 percent. I agree. Twenty-three percent is too high. We wish it could be lower, but it is not 30 percent.

Our current income tax as expressed is an inclusive tax. When directly comparing the FairTax Act to our current income tax, the FairTax Act rate is 23 percent. Under the FairTax Act, if you would pay $100--this is simple math, now--if you pay $100 for a good, $77 goes for the good, and there is an inclusive $23 tax.

If you take the $23 as a percentage of the $100, Mr. Speaker, then the tax rate is 23 percent.

Unfortunately, opponents of the FairTax Act--unbelievably there are some out there--typically speak about the FairTax Act in terms of an exclusive tax simply because the rate sounds higher to consumers.

It is 23 percent. It is simple math: 23 percent.

Not only do opponents of the FairTax Act fail to admit that the exclusive and inclusive rates have consumers paying the same amount of money, but they also compared the exclusive FairTax Act rate to the inclusive income tax rate. That is unfair, and that is misleading. That is a myth. It is 23 percent. Again, I get it. I know that is too high. I wish it would be lower, but it is not 30 percent. It is 23 percent.

The only other thing I want to mention at this point is the myth that the FairTax Act--and we mentioned this earlier--would hurt the poor and give the rich a huge tax cut.

Baloney.

The FairTax Act is the only progressive tax reform bill currently pending before Congress.

Each household, as I mentioned earlier, will receive a monthly prebate based on Federal poverty levels and household size that will allow families to purchase necessary goods such as food, shelter, and medicine essentially tax-free--zero percent. This is similar to our current individual exemption and refundable tax credit system. It is essentially the same thing, but it is far simpler.

Further, the FairTax Act is not riddled with shelters and loopholes, meaning wealthy taxpayers cannot minimize what they pay in taxes regardless of how many lawyers and accountants they hire to advise them.

It is simple, it is fair, and it is preferred.

Representative Mike Collins is a great new member of our delegation who certainly knows a thing or two about taxes, having been in business for many years himself.

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Mr. CARTER of Georgia. Mr. Speaker, again, here you have a businessowner. He knows all about taxes. When he talks about a business that is one of the most regulated in the country, he and our previous speaker, Representative Clyde, boy, you talk about regulated businesses, both of them have regulated businesses. Both of them understand firsthand and have personal experience, real-life experience, about the IRS and taxes.

I will address one more myth here, the myth that the FairTax Act will unfairly punish senior citizens living off their retirement income. Unfairly punish senior citizens living off of their retirement income? Wrong. Retired individuals living on fixed incomes will benefit from the FairTax Act, just like all other Americans will benefit.

The new system will eliminate the current income tax on Social Security benefits. Have you looked at your Social Security check lately? It is not what it started out at because they take out taxes on it.

It will also eliminate the income taxes on investment income, something a lot of retirees have and depend on.

It eliminates taxes on pensions, benefits, and individual retirement account, IRA, withdrawals.

It eliminates all of that, so don't tell me it is going to punish retirees. It is going to do just the opposite.

The monthly prebate will offset the taxes paid by seniors on essential goods. I hear this: Old people aren't going to be able to afford groceries, and they are not going to be able to afford shelter.

Wrong. They will be able to afford it. That is what the prebate is about. Essentially, up to $30,000 a year for a family of four, your essential tax rate is going to be zero, nil.

Again, senior citizens living off of their retirement income, after the initial implementation of the FairTax Act, if prices increase, penny for penny, seniors will receive additional Social Security benefits until prices return to or below pre-FairTax Act levels.

This is simple. It is fair. It is preferred.

He has paid enough taxes in his life, I am sure.

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Mr. CARTER of Georgia. Mr. Speaker, one more myth: The FairTax Act will make new homes too expensive, and it will eliminate incentives like the mortgage interest rate deduction. I hear this all the time. Again, wrong.

Under the current system, every time a new home is purchased, a home buyer is paying an increased price that results from embedded costs. See, that is what people don't understand. Taxes are embedded. They are embedded in the prices that you are paying right now.

Under the FairTax Act, when you buy a new home, these embedded costs are eliminated, meaning the cost for consumers can fall relative to the price of home construction and compliance costs.

Additionally, under the FairTax Act, mortgage interest rates are expected to drop as interest income falls toward the tax-free bond rate. Mortgage interest rates are expected to fall under the FairTax Act. Wow.

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Mr. CARTER of Georgia. Mr. Speaker, did you hear what he just said? Unleash American growth. Unleash American growth. Wow. What great words.

Mr. Speaker, the bottom line: Our current tax system is broken. It is broken, and it is oppressive. The FairTax Act allows Americans to keep 100 percent of their paycheck, of their hard-earned paycheck, and it ends the IRS headache.

A family of four earning $30,000 a year is going to pay zero, not one penny, in taxes. Further, this bill will save small businesses hundreds of billions of dollars a year in compliance costs, making it easier to start and grow a business here in America--we need that; we need more small businesses--by capturing the underground economy.

Almost every speaker has talked about this. We are going to be capturing the underground economy--tourism dollars, purchases made by illegal immigrants.

This bill will save Social Security while leaving more money in the hands of the American people and revolutionizing our economy.

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Mr. CARTER of Georgia. Mr. Speaker, I thank the gentleman for his very insightful comments. I appreciate that very much. I thank all of my colleagues for their support and for speaking in favor of America's favorite tax proposal. Yes, it has been around. It has been around for quite a while now, but its time has come.

This bill, in fact, was first proposed by Representative John Linder, a member of the Georgia delegation whose chief of staff, Rob Woodall, took over the bill when he was elected to Congress, another Georgian. When Rob retired, he asked me if I would take over this legislation, and I was honored to do so because I made a commitment when I became a Member of Congress that this would be the first bill I would cosponsor as a Member of Congress, and it was. It has been ever since I have been a Member of Congress.

Cosponsoring this bill was my first act as a Member of Congress, and I am eager to see this landmark bill finally get the attention and legislative action it deserves. It is fair; it is simple; it is preferred. You are in control. You decide how much you want to pay in taxes, not some unelected bureaucrat, not some Member of Congress who decides they need a loophole or a tax break for something. No, you are going to decide. You are going to decide what you are going to pay taxes on and what you are not going to pay taxes on.

Again, as I started out tonight, today could be the last tax day our country ever sees. Let that sink in. Today could be the last tax day our country ever sees. All we have to do is adopt the FairTax Act, a consumption tax.

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