On January 9, 2025, Congressman Earl “Buddy” Carter (R–GA) introduced a radical proposal to overhaul the U.S. tax system. The bill, known as the Fair Tax Act of 2025 (H.R. 25), calls for the repeal of the current federal income, payroll, estate, and gift taxes, replacing them with a national consumption tax on goods and services. This shift would also lead to the elimination of the Internal Revenue Service (IRS), aiming to simplify the tax process and reduce bureaucratic burdens on taxpayers.
New Tax System
The Fair Tax Act advocates for a consumption-based tax model, arguing that the existing income tax system has hindered U.S. economic growth, reduced global competitiveness, and burdened small businesses and farmers. The proposed sales tax would be applied only to final consumption, ensuring that goods and services are taxed once, preventing multiple or cascading taxes. The bill’s proponents believe that this change will promote savings, increase investment, and improve Americans’ standard of living. Additionally, the new system aims to eliminate administrative and compliance costs, privacy violations, and issues with transparency in taxation.
IRS Abolition
One of the most contentious aspects of the Fair Tax Act is the proposed abolition of the IRS. Supporters argue that the new tax system will be simple and transparent, removing the need for the IRS or professional tax assistance. The bill’s supporters, including several Republican congressmen, believe this reform will reduce the bureaucratic burden on both individuals and businesses, providing a more efficient and streamlined tax process.
IRS vs. the Crypto Community
The IRS has recently been at odds with the cryptocurrency community, particularly with the implementation of new reporting rules that target decentralized finance (DeFi) platforms. The rules, introduced on December 28, 2024, redefine “brokers” to include DeFi platforms, requiring them to report transactions and proceeds to the IRS. This has sparked a lawsuit from organizations such as the Blockchain Association and the Texas Blockchain Council, which argue that DeFi platforms should not be classified as brokers and that the new regulations could stifle innovation in the sector.
Some believe that eliminating the IRS could help end its oversight of the DeFi ecosystem, though it remains uncertain whether the Fair Tax Act will gain enough support to pass. The bill’s origins trace back to 1999, and while the idea has been debated for years, it remains to be seen whether 2025 will mark a breakthrough for the proposal.
Conclusion
As of now, the Fair Tax Act is still a proposal, and its adoption remains uncertain. However, its potential to reshape the U.S. tax system and eliminate the IRS has generated significant attention, particularly from those advocating for less government intervention in both traditional and cryptocurrency sectors. Whether the bill will succeed in the 2025 legislative session is still to be determined.
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