IT’S BACK: All is fair in love and war, and by fair we specifically mean the 23 percent national sales tax known as the Fair Tax. If you recall, the proposal, which would get rid of federal income, payroll and estate taxes and replace them with a 23 percent tax on all things bought and sold, reared its head earlier this year after Speaker Kevin McCarthy promised GOP renegades a committee vote on the idea — much to the chagrin of mainstream fiscal conservatives who see the Fair Tax as a major political liability for Republicans. Now former President Donald Trump and Florida Gov. Ron DeSantis are trading jabs over their past support for the tax. The pro-Trump Super PAC MAGA Inc. in an ad newly released on Friday hit DeSantis for legislation he co-sponsored multiple times as a U.S. House member that would impose the national sales tax, as first reported by Semafor. “Trump cut taxes, DeSantis tried to raise them,” the ad thunders. But later that day DeSantis-aligned super PAC Never Back Down fired back with its own video compilation showing Trump signaling support for the Fair Tax himself, in addition to other proposals that Trump had said would simplify the tax code. “If Trump wants to steal pages from the establishment playbook to attack Ron DeSantis from the left, he has his own words to deal with,” Never Back Down tweeted. BUT FIRST: One tax proposal that DeSantis may look to tout going forward: a permanent tax exemption for diapers, in addition to other baby products like cribs and strollers, as included in Florida's $1.3 billion tax package for fiscal year 2024. That's a far cry from the 23 percent — or depending on the way you calculate it, 30 percent — charge diapers would be slapped with under the Fair Tax. Maybe there'd be a diaper carve-out, you never know. Tell us what's going on in your neck of the woods. Email: bfaler@politico.com, bguggenheim@politico.com and teckert@politico.com. Or Twitter: @tobyeckert, @brian_faler, @ben_guggenheim, @POLITICOPro and @Morning_Tax. BACK TO THE FAIR TAX: In any case, we’re sure that fiscal conservative groups won’t exactly be overjoyed that the biggest Republican heavyweights for the 2024 presidential nomination are going after each other on this. The conservative Americans for Tax Reform and the Wall Street Journal editorial board wrote scathing commentaries on the tax earlier this year, and McCarthy and top GOP tax writers were very happy to put the proposal in the rear-view mirror. That’s mostly because the tax would disproportionately impact lower-income folks and seniors surviving on social security, who generally have to spend most of the money that they have (though Fair Tax advocates like Rep. Buddy Carter (R-Ga.) point to a so-called monthly prebate check included in Fair Tax legislation that they say would compensate those households based on federal poverty levels). “For as long as I can remember, House GOP members have been cosponsoring the Fair Tax not because they support it, but because the Fair Taxers are rabid and members just want them off their backs,” remarked George Callas, a former tax counsel for House Ways and Means Republicans. FREE TAX FILING: Congress is expecting a report this week that was commissioned by the Inflation Reduction Act to study the feasibility of a free tax filing system run by the IRS, which means Democrats could soon be off to the races to get the project off the ground. In anticipation of that Weekly Tax has obtained new polling from progressive messaging firm Navigator Research that was developed exclusively in partnership with Economic Security Project to measure the popularity of a filing system run by the nation’s tax administration agency. The poll asked 1,000 registered voters whether they would support the IRS developing a free tax filing tool on its website, noting that commercial tax prep offerings would still be available along with the government-run option. According to the poll, 76 percent of voters supported the idea. Eighty-eight percent of Democrats, 69 percent of independents and 64 percent of Republicans said the IRS should go full steam ahead, while 23 percent of Republicans flat-out opposed the project. Important context: The poll shows more robust support for an IRS direct filing system than a February study by the government consultant MITRE, which asked people to state their preference for either tax prep software or an IRS-run system under the assumption that both options are free. You should know that the IRS already offers a free filing option in partnership with tax prep companies to taxpayers making $73,000 or less, but a government watchdog found that less than 5 percent of eligible taxpayers actually use the option. Meanwhile, TurboTax started sending out checks last week as part of a $141 settlement for allegedly misleading low-income Americans into paying for services they were eligible to receive for free. Republican tax writers argue that the IRS shouldn’t be both the filer and enforcer of taxes, pointing to past debacles in which the agency was accused of unfairly targeting conservative groups. The GOP also says that the report on the filing system expected to be delivered this week was rigged from the start, given that the tapped authors, left-leaning think tank New American and Professor Ariel Jurow Kleiman of Loyola Law School, have advocated for such a system in the past. THIS IS A FUN ONE: Last on our docket today, Brian Faler reports that both Republicans and Democrats are eager to forge some sort of tax agreement with Taiwan that would alleviate the double-taxation burden on Taiwanese companies doing business in America. But there's one minor hiccup: Lawmakers on the Senate Foreign Relations committee, who have jurisdiction over treaties, are getting into a turf war with tax writing lawmakers over who is entitled to craft the proposal. “If it were a treaty, it would go to Foreign Relations — but it’s not,” Finance Committee ranking member Mike Crapo (R-Idaho) said. “We’re trying to accomplish the same objective in the tax code — which makes it a Finance Committee issue.” The research angle: The development comes as Taiwanese companies doing semiconductor business in the U.S. are also potentially hit with sky-high tax bills from new rules that require companies to spread their research and development costs out over five years, as opposed to allowing businesses to immediately deduct them as they previously were. According to a letter going out today obtained exclusively by Weekly Tax, a group of companies represented by the Aerospace Industries Association is urging Congressional leadership to reverse the R&D laws. “We are already feeling the very real, punitive effects of this policy,” the coalition writes. "When filing our taxes last month, many of us were hit by alarming numbers.”
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