What is the 30% sales tax Republicans are pushing?

US President Joe Biden calls it 'fiscally demented', with claims of inequality amid increasing prices

A woman shops for eggs at a grocery store in Washington. AFP
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US Republicans are discussing a national sales tax to try to abolish the country's federal tax agency, but Democrats and President Joe Biden have criticised the idea.

Representative Earl Carter this month presented a bill to shut down the Internal Revenue Service, which processes taxes and enforces tax laws.

The proposed legislation also calls for a national 23 per cent sales tax after eliminating current taxes on income, payroll and estates.

Such a retail tax, commonly seen in Europe, has been discussed in the US since the 1990s but has not gained traction in Congress.

Joe Biden slams Fair Tax Act

Mr Biden tweeted on Sunday that the "Fair Tax Act" would lead to "increasing the prices of everything from groceries and gas to food and medicine".

"American families need more breathing room. Not less."

Mr Carter's legislation sets the tax at 23 per cent but a Brookings Institution analysis in 2005 suggested that it would have to be at least 30 per cent for the country to receive the same amount of tax revenue it does now.

And Democrats and other critics say the move would keep poor Americans even more financially strapped while not affecting wealthier people, despite the legislation's name.

The White House suggested it may have been one of the back-room deals Representative Kevin McCarthy made with his staunch opposition to be elected as House Speaker.

But Mr Biden last week pledged to veto any such legislation, should it reach his desk.

"These guys are fiscally demented," Mr Biden said in a tone of disbelief. "They don't quite get it."

Updated: January 24, 2023, 5:26 PM
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