As some Congressional Republicans push for a bill that would abolish the Internal Revenue Service and replace income and other taxes with a national sales tax, U.S. Sen. Tommy Tuberville also voiced support for overhauling the U.S. tax system in a press call Thursday morning.
Consumption tax
Known as the Fair Tax Act, the bill would abolish the IRS and replace income, payroll, estate and gift taxes with a national 23% sales or consumption tax, though when combined with additional taxes on property and services, the true rate would be closer to 30%. Introduced in January, the bill currently has 25 cosponsors in the U.S. House, including Alabama Reps. Barry Moore and Gary Palmer.
Criticism for Biden’s speech
Tuberville’s comments regarding revamping the U.S. tax system were made in response to President Joe Biden’s State of the Union address on Tuesday, specifically toward the president’s comments on job creation.
“It’s impossible for President Biden to address the weakened state of our union when he doesn’t seem to be living in the difficult reality that he’s created,” Tuberville said. “He’s praised job growth, but failed to mention that any wage gains seen in paychecks are wiped out by prices that are still too high because of inflation.”
Alabama Daily News asked Tuberville if, given his criticisms of rising costs under Biden’s administration, he would support the Fair Tax Act if the bill were to be approved by the House and make its way to the Senate.
While not affirmatively pledging support for the bill, Tuberville echoed the same critiques of the current tax system often cited by the bill’s supporters, and called for a complete overhaul of the tax system.
‘What’s best for the American taxpayer’
“Our taxes need to be overhauled… I don’t think the IRS is there for the taxpayer, I think it’s an institution that’s been corrupted,” Tuberville said.
“It’s an institution that’s gaining momentum in terms of overseeing a lot of things that they shouldn’t be. They’re very powerful, [and] the Democrats just gave them an opportunity in one of their bills to hire 87,000 more IRS agents. I definitely do think that we need to find out something that’s better for this country and our tax system.”
Tuberville’s critiques of the IRS are shared by many of his Republican colleagues who have voiced concerns of the government agency’s proposed requirement that all electronic transactions of more than $600 be reported. As of February, this new IRS requirement is not yet in effect and has been delayed until 2024.
While he didn’t offer particulars regarding what changes he’d like to see in the current tax system, Tuberbille did push back on Biden’s calls for the wealthiest Americans to ‘pay their fair share.’
“We only have close to half the people in the country that work (and) actually pay taxes at the end of the day,” Tuberville said. “There’s so much out there from the Democrats that say the elite, the 1%, don’t pay any taxes; the 1% in this country pay 50% of the taxes.”
In 2020, the top 1% of U.S. earners paid 42.3% of all federal income taxes, whereas the bottom 50% paid 3%, according to the IRS. However, according to a 2022 study from the Congressional Budget Office, the top 1% of earners hold more than 33% of the total wealth in the U.S., whereas the bottom 50% hold 2%. The top 10% hold 72% of total wealth in the U.S., and are responsible for paying 74% of income taxes.
Regarding the wealthiest Americans within the 1% of earners, a 2021 White House study found that the 400 richest families (placing them in the .00002% of earners) paid an estimated average federal income tax rate of 8.2%. Compared with the average American tax rate of 13.3%, this relatively low rate is made possible by high earners’ income coming primarily from investments rather than salaries, with taxes on dividends and stocks capped at 20% in most cases.
Leaked IRS data obtained by the investigative nonprofit ProPublica found that billionaires like Warren Buffett and Jeff Bezos paid even less, with them having a true effective tax rate of just 0.10% and 0.98%, respectively.
Tuberville said that while he has yet to commit to a model for changing the tax system, a change was needed nonetheless.
“There needs to be a discussion in Washington, D.C. (between) Republicans and Democrats [to] see what’s best for the American taxpayer to make it fair, make sure that we pay off our debt, and make this country stronger, and it’s going to come through taxes,” Tuberville said.
“Nobody likes taxes, but we have to pay them because we have to make sure our country is safe and secure.”