Good morning. Have an extra shot of caffeine. We’re abolishing the IRS.
Okay, not really — but that is what Congressman Buddy Carter is proposing.
Not only does he want to say goodbye to the constant and unwavering theft Internal Revenue Service, but he also aims to:
- repeal income taxes,
- eliminate payroll taxes,
- and say sayonara to estate and gift taxes.
We’re not mathematicians, but that is a large number of compulsory contributions meeting their kleptomaniacal maker.
Carter’s bill would fundamentally alter the United States tax system, as well as Social Security and Medicare, making it easier to understand the 800+ different tax forms that float around every April.
Mainly because we could just shred them. Paper shreds don’t need to be read (but they do make excellent kindling).
Supporters of this bill (hello!) argue that it will shrivel up the monster that is the US tax code and increase transparency.
(Admit it — you’d be pretty excited if you didn’t have to walk your overflowing manila folder over to H&R Block this year. We know Tax Lady Lucy is sweet and wants to hear about your trip to Mexico, but does that mean you want to pay her hundreds of dollars to decode your finances so you don’t go to prison? No. No, it does not.)
But ultimately, Carter’s bill will never survive without broader congressional and public support. And to get there, people need to understand the proposed alternative to all these taxes.
What we’re looking at is a national sales tax, or “Fair Tax.” Basically, a federal sales tax would apply to most products and services, generating the same (or greater) revenue than the current tax system. Retailers would collect tax at the point of sale and remit it to the creature from Jekyll Island fed.
Sounds pretty straightforward, right? Straightforward enough that you wouldn’t have to worry about getting audited for, you know, doing your best not to get put behind bars.
We also like that it would:
- Replace progressive income tax with a single-rate consumption tax
- Incentivize Americans to save and invest
- Encourage wealth accumulation and transfer
- Allow people to see exactly how much they’re paying in taxes (no. more.
secret codes.complicated forms.)
Of course, such a massive overhaul is bound to draw the attention of haters critics. They worry that this change would disproportionately affect low- and middle-income households. They also say that:
- Sales tax revenue could fluctuate with economic cycles, so federal funding would be less predictable. (Maybe the fed should learn how to budget — just a thought.)
- Implementation would be kind of a nightmare. (The only constant in life is change. If we want to create a better tax system, we’ll have to get a little uncomfortable first.)
So, how would all of this affect the mortgage industry?
For starters, it would be much easier for people to save for a down payment and qualify for a mortgage. On the other hand, if the national sales tax applies to houses, it could significantly increase upfront costs for buyers.
As far as estates are concerned, without prohibitive taxes weighing on them, families could more easily pass down (their own, already purchased, already taxed) property. This would encourage intergenerational wealth-building through real estate. We love to see it.
Now, without income tax records, borrowers would need to rely on other financial data (e.g., bank statements or sales tax records) to qualify for home loans. Different… but not so bad, right?
Essentially, instead of saying, “This is how much money I let the government steal from me paid in taxes this year,” you’d say, “This is how much money I make.” Plain and simple.
So, is Carter’s bill likely to pass? Unfortunately, probably not.
Similar proposals have been circulating for decades to no avail… but it’s fun to imagine a world without the IRS.
