When Rep. Kevin McCarthy (RCalif.) finally secured the votes necessary to become the next House speaker, it required concessions to dissenters within his party. Members of the House Freedom Caucus demanded, among other things, a vote on the Fair Tax Act, which has been introduced in the current session.
The Fair Tax Act, while likely doomed by a Democratic Senate and White House, represents the first serious challenge to the American tax code in recent memory. Versions of the act have been proposed since at least 1999. While it has never been voted on in the House, it has been endorsed by multiple Republican presidential candidates and Libertarian presidential candidate Gary Johnson.
The bill would overhaul the nation’s entire tax code, scrapping all federal taxes in favor of the FairTax, a 23 percent national retail sales tax. Proponents argue that the 23 percent number is comparable to a 15 percent income tax plus the 7.65 percent payroll tax rate employers pay. In return, taxpayers would keep every cent of their paychecks and only pay taxes on the money they spend.
That shift would have major and immediate consequences. Annual tax returns and W-2s would cease to exist. People who make their money on the black market would be taxed at the same rate as anyone else. The enormous compliance costs currently associated with filing one’s annual taxes would be cut significantly. With only one tax and no deductions, the entire process of funding the government would be more precise and transparent.
There are also tradeoffs. For one, around 40 percent of American households currently pay no federal income taxes, most of whom are in the bottom two-fifths of income earners. Under a FairTax system, those households would marginally increase their take-home pay but take it on the chin at the grocery store.
To account for the regressive structure of a pure consumption tax, the Fair Tax Act provides for a monthly stipend, which supporters call a “prebate.” All American citizens, regardless of need or income level, would receive a “sales tax rebate” to offset their estimated monthly tax liability for essential purchases. Currently, the Social Security Administration dispenses monthly benefits to nearly 70 million people; the Fair Tax Act would increase that number to include every single adult.*
The bill’s sponsor, Rep. Earl “Buddy” Carter (RGa.), said, “Instead of adding 87,000 new agents to weaponize the IRS against small business owners and middle America, this bill will eliminate the need for the department entirely.” Abolishing the IRS is central to FairTax supporters’ message: The cover of 2006’s The Fair Tax Book featured the agency under a red circle-slash.
Under the FairTax, however, another federal agency would have to take its place to adjudicate which purchases qualify. A retail purchase is taxed, but buying manufacturing equipment to produce retail goods is not; if a manufacturer purchases equipment but then later decides to resell it, then that would require a payment of sales tax after the fact. This post hoc transaction would presumably require a central compliance authority similar to the IRS.
The Fair Tax Act is a featured bill in the pantheon of longshot legislation. Even if supporters could get it through both houses of Congress and signed by a president, it couldn’t into effect until the 16th Amendment, which officially gave Congress the authority to tax income, was repealed. Amending the Constitution requires the assent of three-fourths of all U.S. states. The Constitution has not been amended since 1992.
*CORRECTION: Under the FairTax, the prebate would be given to every American.
Over a third of people think Rachel Reeves exaggerated economic bad news in the run-up to the budget – twice as many as thought the chancellor was being honest, a new Sky News poll has found.
Some 37% told a YouGov-Sky News poll that Ms Reeves made out things were worse than they really are. This is much higher than the 18% who said she was broadly honest, and the 13% who said things were better than she presented.
This comes in an in-depth look at the public reaction to the budget by YouGov, which suggests widespread disenchantment in the performance of the chancellor.
Just 8% think the budget will leave the country as a whole better off, while 2% think it will leave them and their family better off.
Some 52% think the country will be worse off because of the budget, and 50% think they and their family will be worse off.
This suggests the prime minister and chancellor will struggle to sell last week’s set-piece as one that helps with the cost of living.
Some 20% think the budget worried too much about help for older people and didn’t have enough for younger people, while 23% think the reverse.
The poll found 57% think the chancellor broke Labour’s election promises, while 13% think she did not and 30% are not sure. Some 54% said the budget was unfair, including 16% of Labour voters.
And it arguably gets worse…
This comes as the latest Sky News-Times-YouGov poll showed Labour and the Tories are now neck and neck among voters.
The two parties are tied on 19% each, behind Reform UK on 26%. The Greens are on 16%, while the Liberal Democrats are on 14%.
This is broadly consistent with last week, suggesting the budget has not had a dramatic impact on people’s views.
However, the verdict on Labour’s economic competence has declined further post-budget.
Asked who they would trust with the economy, Labour are now on 10% – lower than Liz Truss, who oversaw the 2022 mini-budget, and also lower than Jeremy Corbyn in the 2019 election.
The Tories come top of the list of parties trusted on the economy on 17%, with Reform UK second on 13%, Greens on 8% and Lib Dems on 5%. Nearly half, 47%, don’t know or say none of them.
Only 57% of current Labour voters say the party would do the best job at managing the economy, falling to 25% among those who voted Labour in the 2024 election.
Some 63% of voters think Ms Reeves is doing a bad job, including 20% of current Labour voters, while just 11% of all voters think she is doing a good job.
A higher proportion – 69% – think Sir Keir Starmer is doing a bad job.
The Pope has urged Donald Trump not to try to oust Venezuelan President Nicolas Maduro using military force.
Leo, the first American pontiff, said it would be better to attempt dialogue or impose economic pressure on Venezuela if Washington wants to pursue change there.
The Trump administration has been weighing options to combat what it has portrayed as Mr Maduro’s role in supplying illegal drugs that have killed Americans.
The socialist Venezuelan president has denied having any links to the illegal drug trade.
Image: Pope Leo XIV aboard a flight to Rome. Pic: Reuters
Asked during a news conference about President Trump’s threats to remove Mr Maduro by force, the Pope said: “It is better to search for ways of dialogue, or perhaps pressure, including economic pressure.”
He added that Washington should search for other ways to achieve change “if that is what they want to do in the United States”.
The Pope was speaking as he flew home from a visit to Turkey and Lebanon – his first overseas trip in the role.
Image: Venezuela’s President Nicolas Maduro in Caracas. Pic: Reuters
The president held a rally in Caracas amid heightened tensions with Mr Trump’s administration, which has been targeting what it says are boats carrying drug smugglers.
Mr Trump met his national security team on Monday evening, having warned last week that land strikes would start “very soon”.
It’s not been confirmed what was discussed at the meeting, but White House press secretary Karoline Leavitt told reporters: “There’s many options at the president’s disposal that are on the table – and I’ll let him speak on those.”
US forces have carried out at least 21 strikes on boats it claims were carrying narcotics to its shores over the last few months.
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1:55
‘The president has a right to take them out’
Mr Maduro – widely considered a dictator by the West – said on Monday that Venezuelans are ready “to defend [the country] and lead it to the path of peace”.
“We have lived through 22 weeks of aggression that can only be described as psychological terrorism,” he said.
Venezuela has said the boat attacks, which have killed more than 80 people, amount to murder – and that Mr Trump’s true motivation is to oust Mr Maduro and access its oil.
This breaking news story is being updated and more details will be published shortly.
Nicolas Maduro has said Venezuelans are ready to defend their country as the US considers a land attack.
The president held a rally in Caracas amid heightened tensions with Donald Trump’s administration, which has been targeting what it says are boats carrying drug smugglers.
Image: An image of an alleged drug boat being targeted by the US military. Pic: Truth Social
It’s not been confirmed what was discussed at the meeting, but White House press secretary Karoline Leavitt told reporters: “There’s many options at the president’s disposal that are on the table – and I’ll let him speak on those.”
US forces have carried out at least 21 strikes on boats it claims were carrying narcotics to its shores over the last few months, and the White House has accused Mr Maduro of being involved in the drugs trade – a claim he denies.
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1:55
‘The president has a right to take them out’
‘Psychological terrorism’
Mr Maduro – widely considered a dictator by the West – said on Monday that Venezuelans are ready “to defend [the country] and lead it to the path of peace”.
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“We have lived through 22 weeks of aggression that can only be described as psychological terrorism,” he said.
Venezuela has said the boat attacks, which have killed more than 80 people, amount to murder – and that Mr Trump’s true motivation is to oust Mr Maduro and access its oil.
Concerns have been raised over the legality of the US attacks, which the Pentagon has sought to justify by designating the gangs as foreign terror organisations.
Image: Maduro was championed by supporters as he spoke on Monday. Pics: Reuters
Controversy over US strikes
Tensions remain high over America’s large deployment in the Caribbean Sea and eastern Pacific, which includes its flagship aircraft carrier and thousands of troops.
The US has released videos of boats being blown up but has not provided evidence – such as photos of drugs – to support the smuggling claims.
Controversy also surrounds the first incident, on 2 September, in which 11 people were killed – with a follow-up strike targeting the boat after the first attack left two survivors in the water.
US media reported defence secretary Pete Hegseth gave an order that everyone on board should be killed.
However, there are concerns about the legality of the second strike if the survivors posed no threat.
Mr Hegseth dismissed the reporting as “fake news” and insisted all actions in the region are compliant with US and international law.
“Every trafficker we kill is affiliated with a Designated Terrorist Organization,” he said on X.
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8:25
Is US about to go to war with Venezuela?
Mr Trump said on Sunday he would not have wanted a second strike and that Mr Hegseth had denied giving such an order.
Ms Leavitt confirmed on Monday that the boat had been hit by a second strike – but denied Mr Hegseth gave the order for the follow-up.
Instead, she said he had authorised US navy vice admiral Frank Bradley to attack, and the admiral acted “well within his authority and the law, directing the engagement to ensure the boat was destroyed and the threat to the US was eliminated”.
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Trump: Maduro call neither ‘went well or badly’
As the US weighs its next steps, Mr Trump said on Sunday he had spoken to Mr Maduro by phone and that the conversation went neither “well or badly”.
In recent days, he also stated that Venezuela’sairspace should be considered closed – with the South American nation calling it a “colonial threat” and “illegal, and unjustified aggression”.