On January 9, 2025, Congressman Earl Carter proposed a bill to replace the U.S. tax code with a national consumption tax and abolish the IRS. Earlier this month, the IRS was sued by Blockchain Association over the new reporting rule.
New tax system
The HR 25 bill, or The Fair Tax Act of 2025was introduced by Representative Earl “Buddy” Carter (R–GA). The bill challenges existing U.S. tax law and the tax policy status quo and aims to promote freedom, fairness and economic opportunity. The Fair Tax Act calls for the repeal of income, wage, estate, and gift taxes. Instead, the law proposes to introduce sales tax.
According to the bill, the existing federal income tax slows U.S. economic growth and international competitiveness, discourages small businesses and farms, and lowers Americans’ living standards, lowering savings and investment rates.
Furthermore, the bill highlights the harmful consequences of the existing unnecessary burden on administrative and compliance costs for individual taxpayers and companies. Privacy violations and lack of tax transparency are other issues associated with federal income tax. According to the Fair Tax Act, Social Security, Medicare payroll taxes, and self-employment taxes hinder employment.
The alternative proposed in the bill is a broad national sales tax on goods and services purchased for final consumption. The law proposes to tax all consumption of goods and services in the US once, preventing double, multiple and cascading taxation.
According to the bill, it will facilitate saving and investing, improve Americans’ living standards, help businesses, and undo all other evils associated with the actual tax system. The Fair Tax Act also provides notes on how the government should promote policy change.
Abolition of the Tax Authorities
One of the most radical changes proposed in the Fair Tax Act is the elimination of the Internal Revenue Service. The move is aimed at removing bureaucratic burdens on individual and corporate taxpayers. According to Carter, the tax system introduced in the legislation eliminates the need for the IRS. Taxes should be simple and transparent so that people do not need professional help in filing their taxes.
The bill is supported by a number of Republican members of Congress, including Barry Loudermilk, Eric Burlison, John Carter, Scott Perry, John Rutherford, Warren Davidson, Andy Biggs, Dale Strong, Rich McCormick, Andy Harris and Andrew Clyde.
The latter noted that the law “provides a common-sense solution to eliminate the need for the weaponized IRS, simplify our tax code, and promote economic prosperity.”
Rep. Strong adds that the proposed tax system will ensure that illegal immigrants pay taxes fairly.
IRS vs. the crypto community
The IRS was sued over the new reporting rules introduced by the agency on the day the rules were implemented, which is December 28, 2024. complaint has been signed by several organizations including Blockchain Association, Texas Blockchain Council and DeFi Education Fund.
The new reporting rules threaten the well-being of the DeFi sector as they redefine the term broker. Under the new rules, DeFi platforms will be considered brokers. They will have to provide the transaction information and proceeds to the IRS until 2027. The complaint makes it clear that DeFi platforms are not brokers, and that makes them unique and innovative. As peer-to-peer systems, they don’t rely on brokers or other intermediaries, so the IRS’s new rules shouldn’t apply to them, but they do.
The plaintiffs argue that the rules are unconstitutional and harmful to American development and leadership in the crypto industry. They note that if the rules come into effect, it could impact many leading industrial brands to find better jurisdictions rather than operating in America.
Considering this, the abolition of the IRS can be seen as an opportunity to end the agency’s attacks on the DeFi ecosystems. However, it is not yet clear whether the Fair Tax Act of 2025 will be passed. The history of the act began in 1999. Will 2025 be a breakthrough year? We’ll see.
