February 21, 2023
The Honorable Jeff Duncan
The Honorable Ralph Norman
Washington, DC 20515
Dear Representatives Duncan and Norman,
The South Carolina Small Business Chamber of Commerce requests that you withdraw as co-sponsors of the “FairTax Act of 2023”, H.R. 25, filed by Representative Buddy Carter.
The “FairTax” is anything but fair both to consumers and to South Carolina small businesses.
The 30% federal income tax would depress consumer spending on Main Street thus pulling money out of local economies (and sending it to Washington) and severely decreasing the ability of small businesses to be profitable.
Most Americans are price sensitive when purchasing good and services. Increasing the cost of most products and services by 30% would result in customers walking away from a sale. Small businesses would respond, as they often do to help avoid sticker-shock, by absorbing part of the increased cost thus further decreasing their ability to be profitable. This massive sales tax would lead to many entrepreneurs closing their businesses with the blame lying solely with the federal government.
Adjustments to the federal income tax certainly might be justified. However, the elimination of the US Internal Revenue Service (ostensibly the goal of the “Fair Tax”) would not make our method of financing federal government services fairer. With around 60% of Americans having incomes too low to pay federal income tax, hitting these Americans with a 30% federal sale tax on goods and services is the opposite of fair.
While many small business owners lament the federal income tax they pay, this consternation would pale in comparison to the loss of sales resulting from a 30% federal sales tax. Small business owners will highly resent being turned into sales-tax collectors for the federal government and shouldering the financial responsibility and costly administrative burden of collecting the federal sales tax and remitting it to the federal government.
The “FairTax Act” acknowledges that a 30% federal income tax would be particularly onerous to lower income Americans by proposing:
Each household will receive a monthly prebate based on federal poverty levels and household size that will allow families to purchase necessary goods, such as food, shelter, and medicine, essentially tax-free. (Buddy’s Budget Blog, January 25, 2023)
The description of this “prebate” implies that while every household would receive a “Family Consumption Allowance” (as it is referred to in the bill), it will primarily be designed to cover the 30% federal income tax on “necessary goods” purchased by lower income families.
First, lower income families contribute more to local economies than simply purchasing food, shelter and medicine. Thus, the FairTax would be a tax increase on these customers. Again, collecting this tax increase at the point of purchase would drive these customers away from local small businesses.
Second, one can only imagine the public outrage and cries of “welfare” and “big brother” when the federal government puts everyone on a monthly “Allowance”. The “FairTax” will add to public anger and distrust toward the federal government worsening our public discourse and partisan politics.
The “FairTax” simply is not fair. It is not fair to consumers, particularly those of lower income. It is not fair to small businesses. It is not fair to relationship between Americans and the federal government.
The “FairTax” is really the “UnfairTax”.
We urge you to withdraw as a co-sponsor of this legislation and end your support for the bill.
Frank Knapp Jr.
President & CEO
1717 Gervais Street
Columbia, SC 29201