TLDR
- Rep. Buddy Carter introduced the Fair Tax Act (H.R. 25) to replace all current taxes with a national consumption tax
- The bill proposes complete abolition of the IRS and elimination of personal, corporate, death, gift, and payroll taxes
- Several Republican representatives have backed the proposal, citing simplification of tax administration
- The Act includes specific provisions regarding unauthorized immigrants’ tax obligations
- Simultaneously, crypto industry groups are suing the IRS over new digital asset reporting requirements for brokers
Representative Earl “Buddy” Carter has introduced a bill that could reshape the American tax system. The Fair Tax Act (H.R. 25), presented on January 9, 2025, proposes to eliminate the Internal Revenue Service and replace all current federal taxes with a national consumption tax.
The bill aims to remove several types of taxes that Americans currently pay. These include personal income tax, corporate income tax, death tax, gift taxes, and payroll tax. In their place, the legislation would create a single national consumption tax system.
Under the proposed system, Americans would keep their entire paycheck without any deductions. Instead of paying taxes on income, people would pay taxes when they purchase goods or services. This represents a fundamental shift in how the government would collect revenue.
The Fair Tax Act has gained support from multiple Republican representatives. Among its backers are Andrew Clyde, John Carter, Scott Perry, and Eric Burlison. These lawmakers argue that the current tax system is too complex and burdensome for average Americans.
Representative Barry Loudermilk, one of the bill’s supporters, emphasized the need for simplification. “Hardworking Americans should not need a team of lawyers or accountants to fill out their taxes,” he stated, highlighting how the current system creates unnecessary complications for taxpayers.
The legislation includes specific provisions regarding unauthorized immigrants. While they would be required to pay taxes under the new system, they would not receive the consumption allowance that would be available to legal U.S. residents.
This is not the first time such a proposal has appeared in Congress. The Fair Tax Act was originally introduced in 1999 by former Georgia Congressman John Linder. The current version maintains many of the core principles from the original proposal.
Representative Andrew Clyde voiced his support for the bill, describing it as a “commonsense solution” that would eliminate what he termed a “weaponized IRS.” The statement reflects Republican concerns about the size and power of the tax collection agency.
While this legislative effort unfolds, the IRS faces another challenge from the cryptocurrency industry. The agency recently published new regulations requiring digital asset brokers to report transactions through 2027.
These regulations classify platforms that facilitate digital asset transactions as brokers, even if they operate through smart contracts. The IRS estimates this would affect between 650 and 875 decentralized finance (DeFi) brokers.
The new reporting requirements have prompted legal action from several cryptocurrency industry groups. The Blockchain Association, DeFi Education Fund, and Texas Blockchain Council have filed a lawsuit against the IRS to contest these rules.
Critics of the IRS’s crypto regulations argue that the rules create privacy concerns for users. They also contend that the requirements pose major operational challenges for DeFi platforms.
Industry representatives worry that these regulations might push cryptocurrency businesses to operate outside the United States. They point out that the decentralized nature of DeFi makes it fundamentally different from traditional financial systems.
The crypto industry’s main argument centers on the definition of a broker. They maintain that DeFi platforms, which often operate without intermediaries, should not fall under the same reporting requirements as traditional brokers.
The lawsuit represents the latest development in an ongoing debate about how to regulate cryptocurrency transactions. It highlights the challenges of applying traditional financial regulations to new forms of digital commerce.
