Congressman proposes IRS elimination

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On January 9th, 2025, Congressman Earl Carter suggested a legislative proposal that aimed to revamp the U.S. tax system by introducing a national sales tax and phasing out the Internal Revenue Service (IRS). Recently, the IRS has been embroiled in a lawsuit filed by Blockchain Association due to the implementation of a fresh reporting regulation.

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New tax system

In 2025, Representative Earl “Buddy” Carter (R–GA) introduced the H.R. 25 bill, also known as The Fair Tax Act. This legislation seeks to overhaul the current U.S. tax system and challenge existing taxation policies. Its goal is to foster freedom, fairness, and economic growth. The Fair Tax Act plans to abolish income, payroll, estate, and gift taxes. Instead, it proposes implementing a national sales tax as an alternative.

Proposed legislation called the Fair Tax Act:

– Eliminates the Internal Revenue Service (IRS)
– Overturns the existing Tax Code
– Gives Americans control over their own tax rates
– Enforces tax payment for undocumented immigrants
– And more, see details below 👇

— Buddy Carter (@RepBuddyCarter) January 10, 2025

As a researcher studying economic policies, I find that, based on the bill’s assertions, the current Federal income tax system is believed to hinder the economic growth and competitive edge of the United States in the global market. It allegedly discourages small businesses and farms, and potentially lowers the quality of life for Americans by decreasing their savings and investment rates.

Additionally, the proposed legislation clearly shows that the current excessive administrative and compliance costs imposed on both individual and corporate taxpayers is problematic. Furthermore, concerns about privacy breaches and a lack of clarity in taxation procedures are common issues with Federal income tax. As stated by the Fair Tax Act, obstacles such as Social Security, Medicare payroll taxes, and self-employment taxes can negatively impact employment rates.

The suggested plan in the legislation is a nationwide consumption tax levied on all purchased goods and services intended for final use. This proposal aims to impose a single tax on U.S. consumption, thereby eliminating issues related to double, multiple, or sequential taxation.

Based on this legislation, it aims to simplify savings and investing, enhance the quality of life for American citizens, support businesses, and address the negative aspects inherent in the current tax structure. Furthermore, the Fair Tax Act offers guidelines on how the government can effectively guide policy reforms.

IRS abolition

One significant shift suggested by the Fair Tax Act is the idea of dismantling the Internal Revenue Service (IRS). This action aims to alleviate the bureaucratic pressures experienced by both individual and corporate taxpayers. As proposed by Carter, the new tax system within this legislation makes the IRS unnecessary because it simplifies taxes to a point where people can easily understand and file them without professional help. The taxes are designed to be straightforward and transparent.

A significant number of Republican representatives, among them Barry Loudermilk, Eric Burlison, John Carter, Scott Perry, John Rutherford, Warren Davidson, Andy Biggs, Dale Strong, Rich McCormick, Andy Harris, and Andrew Clyde, back the bill.

The second person pointed out that this action offers a common-sense approach to disarm the weaponized IRS, streamline our tax system, and promote economic growth.

Rep. Strong adds that the proposed taxation system will make illegal immigrants pay taxes fairly. 

IRS vs the crypto community

On December 28, 2024, the Internal Revenue Service (IRS) faced a lawsuit as soon as new reporting rules they implemented went into effect. The lawsuit was initiated by several organizations such as Blockchain Association, Texas Blockchain Council, and DeFi Education Fund.

From my perspective as an analyst, the recently established reporting regulations pose a potential risk to the thriving DeFi sector, as they seem to reshape the traditional concept of a broker. Under these rules, DeFi platforms are classified as brokers, requiring them to disclose transaction data and proceeds to the Internal Revenue Service (IRS) until 2027. However, it’s important to note that DeFi platforms are inherently different from traditional brokers due to their peer-to-peer nature, which eliminates the need for intermediaries. Consequently, I believe these regulations may not be appropriate for DeFi platforms, as they could inadvertently stifle innovation within this sector.

The plaintiffs argue that these regulations are both unconstitutional and detrimental to the growth and dominance of the U.S. in the cryptocurrency sector. They caution that if implemented, these rules could potentially drive prominent industry players towards seeking opportunities in other countries rather than operating within the United States.

Looking at the current situation, some people might view the potential dissolution of the IRS as a step towards halting its interference with Decentralized Finance (DeFi) systems. Nevertheless, it remains uncertain whether the Fair Tax Act of 2025 will actually be enacted, given that its origins date back to 1999. So, will 2025 mark a turning point? Time will tell.

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2025-01-15 02:06