While in Congress, Billy Long, Up for Internal Revenue Commissioner, Supported Replacing the Progressive Income Tax With Regressive 30% Sales Tax

Billy Long, nominated to head the Internal Revenue Service (IRS), as a member of Congress co-sponsored a bill to abolish the income tax and the agency that administers it and replace them with a 30% national sales tax. The Trump administration seeks to abolish other parts of the federal government–such as the Education Department–and has proposed cutting IRS staffing by half. His Commerce Secretary has announced Trump’s goal is “to abolish the Internal Revenue Service.” So it’s reasonable to assume that Long was tapped for IRS commissioner for the purpose of eliminating it. Swapping the IRS-administered income tax with a sales tax would dramatically raise costs for average families while handing the wealthy huge tax cuts.

Source: Americans for Tax Fairness

Long is a controversial nominee for other reasons. Since leaving Congress, he’s promoted pandemic-era employer tax credits that have been widely abused and been associated with firms peddling fraudulent “tribal tax credits.” Long falsely claimed that “everybody qualifies” for the employer credit, and pursued a $3.6 million payout for a company that ultimately dropped its claim because it realized it was ineligible. 

Several individuals connected with both schemes were among the recent contributors to the campaign committee of Long’s unsuccessful Senate race in 2022. Those late donations, made after Long was nominated to run the agency that would police such schemes, allowed Long to pay himself back $130,000 he had loaned his own campaign.                     

But as essential as ethics are in an IRS commissioner, Long’s biggest impact on average Americans if he is confirmed in his job would be his apparent goal of abolishing the agency and the tax system it runs–replaced by a national 30% sales tax.

Source: Americans for Tax Fairness

Sales taxes impact lower-income households harder than those with higher incomes because lower-income people spend more of their income on essential consumption like food and gas. They don’t have the luxury of putting off purchases like richer households do or investing significant amounts in savings. Also, since sales taxes are almost always a single flat rate–like Long’s proposed 30%–they are “regressive” because after paying it lower-income people have less disposable income left than do richer people. Example: if a family making $1,000 a week pays $300 in federal sales tax, it only has $700 left over; while a family making $10,000 a week paying the same $300 would have $9,700 left to spend. 

The income tax that Long wants to abolish, on the other hand, is “progressive” because it demands higher shares from those with higher incomes. That family making $1,000 a week might be charged 10% income tax, leaving them with $900; while the $10,000-a-week household might be charged 35%, leaving them with $6,500. The higher-income household still comes out well ahead, but the income tax has narrowed the inequality. 

Abolishing the income tax would be a huge windfall for high-income households. Those making between $500,000 and $1 million would, based on recent tax filings, save on average $155,000 every year. The average household with income of $10 million and up would save $7.6 million in income tax annually.

The income tax is not all that would be abolished under Long’s presumed plan. The estate tax–the only federal curb on the creation and expansion of economic dynasties–would also go away; as would corporate taxes and the payroll taxes that fund Social Security and Medicare. 

Elimination of the estate tax would save billionaire families trillions of dollars and accelerate the already worrying consolidation of economic power in fewer and fewer hands.

Source: Americans for Tax Fairness

The harm to ordinary families from Billy Long’s sales tax would undoubtedly be greater  than a 30% hike in the cost of living. That’s because experts have determined that in order for the sales tax to raise the same amount of revenue as all of the other taxes that would be eliminated the rate would need to be higher than 30%–maybe as high as 60%, based on analysis of a similar plan put forward two decades ago.  If the rate was not set high enough to replace the existing tax revenue, then either the federal government would run up more debt or public services would have to be cut. Judging by recent history, if the Republican regime that would install such a sales tax needed to cut spending, it would be on services workers and families rely on, like healthcare, education and housing. 

Under Long’s plan, low-income families would receive a “prebate” to partially compensate for the higher retail prices his sales tax would create. But his plan would also eliminate worker tax credits–the Earned Income Tax Credit and the Child Tax Credit–so it’s very possible that low-income people would be net losers in terms of government transfers. And families with low incomes but not low enough to qualify for the prebate would be hit particularly hard.

NOTE: The bill Long co-sponsored describes the sales tax rate as 23%, but that’s the “inclusive” rate, meaning what share of the total cost (the item’s price plus the tax) the tax would represent. But that’s not the right way to figure sales taxes: the typical approach is to determine the tax rate by what share of the item’s price alone the tax represents. Thus, the bill’s sponsors claim a total purchase price of $1.30 on an item priced at a dollar means a 23% sales tax has been applied. Most people would say the sales tax was 30%.