Lie #1: taxes would be voluntary under the FairTax
Absolutely correct, and not a lie at all. If you refrain from purchasing taxable services or new goods, you avoid the tax. Unlike some people's preferred plans, the individual has first claim on his own money, and gets the choice of when to subject himself to taxes. Certainly, in modern society, there is no way to completely avoid taxable activity under an NRST, but the FCA offsets this as one of its many functions.
Lie #2:the FairTax rate would be 23 percent
Ah, the old tax-inclusive vs. tax-exclusive calculation as a "lie" canard. The rate is expressed, as has been pointed out repeatedly, to allow for head-to-head comparisons with income and payroll taxes. Detractions use tax-exclusive to make the NRST seem higher, in comparison to other taxes, than it is. Of course, if the Bush tax cuts are made permanent, the author is correct that 23% is wrong -- it would be more like 19.1% inclusive (23.76% exclusive).
Lie #3: the FairTax would abolish the IRS
As we know it, it would. Would there be another or transformed agency? Yes. Would it have the power to audit individuals? No, unless they were operating a business. The primary job of the federal agency would be to coordinate tax collections from the administering states.
Problem #1:The FairTax hides the amount of sales tax being paid.
It is required to be itemized on the receipt. How can that be hidden?
Problem #2:The FairTax is progressive
A half-truth here... the effective tax rate is progressive, but the marginal tax rate is flat. Progressivity is a political necessity, and in fact works as a much simpler scheme than exempting crtain items from taxation. This, of course, ties back to the author's concern over "Lie #1" -- can't have it both ways.
Problem #3: The FairTax is an income redistribution scheme
This is just a blatant misrepresentation of the FCA, which is essentially the same as the personal deduction / standard exemptions of the income tax. Does the author point that out? No -- he fallaciously likens it to the EITC, which is an income-redistribution scheme only available to certain people, whereas the FCA is broadly available to all.
Problem #4:The FairTax creates new tax collectors
All of these people were "tax collectors" before, they were just doing so via the guise of income taxes. If anything, the NRST would reduce the number of "tax collectors" by about 90% by removing most individuals (who are not self-employed) from the "tax collectors" pool. The "teenage baby sitter" example is likewise laughable -- if this babysitter is getting enough payment from you to qualify as a business needing to collect and remit sales taxes, then he or she is already required to file income taxes.
Problem #5:The FairTax creates new taxes
Again, all of these items are already subject to taxes via income and payroll taxes today.
Problem #6: The FairTax creates new taxpayers
Complete fallacy. With more disposable pre-tax income, non-profits will likely benefit from more donations. And those purchases are already subjected to taxes today, as pointed out in previous items.
Problem #7: The FairTax makes it easier for the federal government to raise taxes
The author thinks its easier for Congress to raise the taxes on everybody than it is for them to tinker with the tax code to "soak the rich"? What universe is he living in. (Although by this point, we have established that he is living in a fantasy land.)
Problem #8: The FairTax makes it easier for state governments to raise taxes
Same argument as above, and false for the same reasons. Also, states that piggy-back off of the federal income tax for their collections will have to rethink income taxes altogether.
Problem #9: The FairTax has unknown and potentially huge transition costs
Hey, I agree with the author on something! (Broken clock principle, I guess.) Anyone who has seen my posting history knows that transition concerns me, but that I think the risk is acceptable for the benefits.
Problem #10:The FairTax makes certain exceptions while supposedly having none
The "exceptions" are specifically classified as investments.
Problem #11: The FairTax has great potential for fraud
No more so than any other tax system.
Problem #12:The FairTax has the potential to turn thousands of law-abiding Americans into criminals
The author hasn't read the bill. Such small-scale activity does not need to file if the tax due would be less than the minimum credit to the collecting business.
Problem #13: The FairTax does not repeal the Sixteenth Amendment
Legislation and Constitutional amendments are separate animals. Nonetheless, if the author is so worried, then why isn't he clamoring for an Amendment to make federal sales taxes illegal as long as we have an income tax?
Problem #14: The FairTax does not eliminate all federal taxes
I too would like to see excise taxes included as well.
Problem #15: The FairTax is not at all about lowering the amount of taxes the government collects
It was designed as revenue-neutral to meet requirements (at the time) that any replacement tax be, *gasp*, revenue-neutral. The NRST also doesn't reform Social Security, enforce our borders more effectively, or put Howard Dean on trial for treason. It's a tax bill, not a spending bill or any other type of authorization. Judge it on what it is, not what you want it to be.
Problem #16: The FairTax doesn't even begin to address the root of the problem
This goes back to the first claim on people's own production, a point the author has completely missed before, and does so again. It's also basically just a re-wording of his "Problem #15" and therefore wrong for the same reasons.
Problem #17: The FairTax makes welfare universal
By this definition, anyone who has ever taken a personal exemption, standard deduction, or itemized deduction from their income tax is also on welfare. The author repeatedly mischaracterizes the FCA to meet his pre-conceived incorrect assertions.
The Fraud of the FairTax
The only fraud here is this article posing as any serious critique of the NRST bill.
Great piece. Thanks.
To: Laurence M. Vance;
Research and write your own book in response.