There is No Such Thing as a Fair Tax

Syndicated talk show host Neal Boortz and Congressman John Linder (R-GA) have joined forces to write a book on the FairTax Plan—a proposal to replace the current system of federal income taxes, corporate taxes, Social Security and Medicare taxes, capital gains taxes, gift taxes, and estate taxes with a national sales tax on new goods and services that does not reduce the government's overall tax revenue.

Former attorney Boortz is the well-known Atlanta-based "libertarian" talk show host who, like Rush Limbaugh and Sean Hannity, spends an inordinate amount of time on the evils of liberalism, the Left, and the Democratic Party while turning a blind eye to big government Republicans and supporting Bush's "War on Terror." Boortz has drawn fire from Christians for his support of abortion and gay rights. He has also offended Southerners (he himself was born in Pennsylvania but was raised throughout the country as a "Marine brat") because of his negative comments about the Confederate flag.

Former dentist Linder represents Georgia's Seventh District, which includes the highly gerrymandered parts of five counties. He has been a member of the House of Representatives since 1992. Although Linder has received the designations "Hero of the Taxpayer," from Americans for Tax Reform, "Taxpayer Hero," from the Council for Citizens Against Government Waste, and "Tax Fighter," from the National Tax Limitation Committee, he is ranked by Congressional Quarterly as "among Bush's strongest supporters." Linder's claim to fame is that he is "the primary sponsor of the FairTax." He actually introduced the first FairTax bill in Congress back in July of 1999. It is interesting to note that his rating on The New American magazine's "Conservative Index" for his term in the 108th Congress was 45. For this same period, the universally acknowledged "taxpayer's friend," Ron Paul (R-TX), scored a perfect 100.

Since Boortz has previous writing experience, and his name appears in larger letters on the book's cover, I will refer to Boortz as the author of The FairTax Book. This is not, of course, meant to imply that Linder had no hand in writing the book. Linder himself says in "A Word from Congressman John Linder" that "the inflammatory and rude references come from Neal" while he "provided the intellectual backdrop that allows him to be outrageous."

Boortz is certainly right when he describes the evils of our current tax system:

Our current tax system is one that punishes the behaviors Americans value and rewards the behaviors we abhor. Those in our society who work hard and achieve are punished with taxes that approach confiscatory levels.

Politicians have managed to mold our tax code into an instrument designed not so much for raising revenue to fund the legitimate operations of government, as to control the behavior of individual Americans and corporations, and to give politicians levers to pull and buttons to push to buy votes when reelection time comes around.

The FairTax Book contains whole chapters on the hidden evils of the withholding tax ("Politicians love withholding because it gives them a chance to grab their 'share' of your earnings before you even see your paycheck."), corporate taxes ("Business and corporations merely collect the taxes from individuals and pass them on to the government."), the cost of compliance with the tax code ("In 2002 individuals, businesses, and nonprofits spent 5.8 billion hours complying with the tax code — an effort that cost an estimated $194 billion."), the embedded costs of taxes in all consumer goods and services ("When you buy that loaf of bread, you're paying a portion of all of the bills, including tax bills, of every person or business entity that had anything to do with that bread."), and corporations moving offshore ("They're moving for one simple reason: to escape a punishing tax structure here at home.").

The abuses of the IRS merit not only a full chapter, but are mentioned throughout the book. Indeed, one of the continually stated purposes of the FairTax proposal is to eliminate the IRS altogether. However, whether this would actually be the case remains to be seen.

But rather than just calling for the elimination of Social Security and Medicare taxes, withholding taxes, corporate taxes, gift taxes, estate taxes, capital gains taxes, and personal income taxes, Boortz proposes to replace all of these taxes with the FairTax.

The FairTax Plan is currently pending in Congress under the name of "The Fair Tax Act of 2005." It is a consumption tax in the form of a national sales tax of 23 percent on new goods and services. Although it would "not be imposed on used or previously owned items," it would apply to all new goods and services: medical procedures, haircuts, new cars, new homes, gasoline, food, medicine, Internet purchases, and electricity.

The taxes currently imposed by the states would be unaffected by the FairTax Plan. Thus, states that impose a state income tax or a state sales tax would continue to collect those taxes.

The FairTax Plan would be administered through the states. However, this doesn't mean that individual businesses would not be dealing with the federal government. For acting as a tax collector for the federal government, both the states and the businesses that initially collect the national sales tax will be paid one quarter of 1 percent of what they collect.

But not only will all businesses receive a check from the federal government, so will all households. The FairTax plan includes a monthly check from the government called a "prebate" that reimburses each household for the taxes paid on "the basic necessities of life." These checks, which are based on "the government's published poverty levels for various-sized households," do not just go to the poor, they are "paid to everyone, rich and poor alike." Boortz cites as an example a married couple with two children receiving a monthly check for $492—regardless of their income.

Although the FairTax Plan would eliminate Social Security and Medicare taxes, it would not eliminate the programs. Boortz correctly explains that "under our current tax code, these programs can be maintained only by increasing the tax on those who work, reducing benefits for those who have retired, or by increasing the age of retirement." The FairTax Plan solves this problem because it would fund Social Security and Medicare out of general revenues.

So, instead of calling for the elimination of the various federal programs that feed off tax dollars, Boortz wants to merely change the way they are funded.

Boortz tells us that the FairTax idea originated with the group Americans for Fair Taxation (AFFT). He says that "the goal of AFFT was to develop a system that would raise the same amount of revenue for the government as our current income tax system, but which would be less intrusive, abusive, coercive, and corrosive." This means that the FairTax idea should have been discarded at the very beginning, for instead of saying that it was not fair that the government confiscate 10, 20, 30, or 40 percent of a man's income, the FairTax proponents did not even begin to tackle the root of the problem: the welfare/warfare state that drives the federal leviathan's insatiable lust for the taxpayer's money.

Over and over again, Boortz emphasizes that the FairTax is "revenue neutral." The rate will be set "to ensure that the federal government—and all the programs within it, including Social Security and Medicare—will receive from the national retail sales tax exactly what they had been receiving under the current tax system." The FairTax is "simply a new and equitable method for raising the same amount of money our old and complicated code does today." It "isn't about cutting spending or changing government benefits. It's simply a plan to change the way Americans fund their federal government."

The FairTax is designed to simplify the tax code, increase compliance, and make the government more efficient at collecting taxes. It is not about reducing the overall tax burden one cent. The book should therefore be discarded upon reading this line on page two: "This book isn't about saving us a penny in taxes." Boortz has the proverbial cart before the horse. He wants to fight for "a simpler, clearer way to fund our federal government" before he fights for "tax cuts and lower government."

Boortz laments that tax evaders, tax avoiders, participants in the underground and shadow economies, and users of offshore financial centers aren't paying their fair share of taxes. He rejoices that the FairTax will eliminate the "cap on earnings subject to the levy for Social Security," thus forcing "the wealthy" to contribute their fair share. The FairTax will "recapture" the billions currently lost "from Internet and catalog sales."

We know that governments are notoriously inefficient at everything they do. But is this always a bad thing? Why would anyone want to make the government more efficient at collecting taxes? We want the government to be just as inefficient as possible when it comes to tax collections. Just like we want the government to be just as inefficient as possible when it comes to launching an aggressive war, violating the Bill of Rights, or punishing dissent.

Boortz makes a lot of dubious, unsubstantiated claims for the FairTax that greatly exaggerate its benefits. He all but states that the FairTax will usher in the millennium.

The FairTax will not just increase economic growth, it will "send the American economy into warp drive." It will "bring a period of transformation and economic growth to America such as has never been seen before." "Millions of new jobs will be created." The FairTax will "double the size of the economy in the first fifteen years." After its implementation, "capital investment will increase quickly by a staggering 76 percent," "interest rates will decline by almost 30 percent," and "the economy will grow by 10.5 percent."

Although he disparages "soak the rich" sentiments and "economic class warfare," Boortz appeals to the poor and middle class. He contends that the FairTax will "create a financial bonanza for the poor and the middle class." It will "all but eliminate the tax burden on the middle class." The FairTax "would give the average income worker a 50 percent increase in take-home pay." The lowest income earners should support the FairTax because "for them it's all benefit and no burden." Correct, thanks to the prebate. For even though the purpose of the "prebate" is to cover "the basic necessities of life," Boortz acknowledges that there will be "money left over" for the poor "to invest in their own futures." The trouble with this is that the "money left over" belongs to someone else—"the rich" who will pay most of the taxes just like they do now.

Based on an unnamed study by Harvard economics professor Dale Jorgenson, Boortz maintains that the current price of consumer products includes embedded taxes of about 22 percent. Under the FairTax, these prices will "go down by roughly the same amount as the proposed FairTax rate of 23 percent." Consumers will be paying "at least 20 percent less for virtually everything they buy." A new home, even with the FairTax added to the price "may cost less than that home would have cost under our current tax structure." Everything will nearly be a wash, declares Boortz the economist. But not only does this ignore the basic laws of supply and demand, it is based on the fallacy that the costs of inputs in the production of a good determine the price of the output they produce.

The FairTax Plan is so good that even the states will want to adopt some form of it. The state governors that Boortz talked with said that under a national FairTax system, "They'd be very likely to eliminate state income taxes." Boortz's unnamed governors would also "welcome a move to taxing all goods and services with no exclusions or exemptions." Why, of course they would. They would welcome that right now, but could never get away with it. Naturally, Boortz maintains that with the addition of a tax on services, and with no exclusions or exemptions on any good or service, states would be able to reduce their sales tax rate "without losing a dime in revenue."

And then there are the "global implications of the FairTax." After the adoption of the FairTax, "foreign corporations will be compelled to build new plants in America" to remain competitive. Boortz envisions "the forward-thinking nations of the world" adopting "their own version of the FairTax," which will "spread freedom across the globe."

Is there any problem in the world that won't be fixed with the adoption of the FairTax?

In addition to the unsubstantiated claims that Boortz makes for the FairTax, there are three ridiculous lies of the FairTax Plan.

Lie #1: taxes would be voluntary under the FairTax. In his discussion of the origins of the FairTax, Boortz says that the AFFT sought "a method of taxation that would be totally voluntary, that would allow all citizens to pay what they choose, when they choose, by how they choose to spend their money." Boortz has the audacity to say that "there is nothing coercive about the FairTax." It is "a truly voluntary tax system." The government should allow you to "keep your money in an investment account of some kind, earning interest for you, until you decide to pay taxes to the federal government." The FairTax would allow people to "judge for themselves when and how they're comfortable making taxable purchases."

Well, if the FairTax system is voluntary, and allows everyone to pay what they choose and when they choose, what happens if someone decides that they don't want to pay any taxes to the federal government? The same thing that happens now: fines and imprisonment. The FairTax is not a voluntary tax at all. The whole idea is a contradiction in terms. Boortz's statement about people keeping their money until "they're comfortable making taxable purchases" is ludicrous. There is no way to avoid buying new items. One can buy a used car, a used house, and used clothes, but one cannot purchase used food. One could argue that our present tax system is also voluntary: Don't earn any income and you won't have to pay any income taxes.

Lie #2:the FairTax rate would be 23 percent. Throughout the book, Boortz gives the FairTax rate as 23 percent. It is not until near the end of the book—in the chapter, "Questions and Objections"—that he admits it is really 30 percent. But even then he still insists it is 23 percent.

Those of us who were skeptical from the beginning noticed this when we got to page 84. There Boortz used the example of a single mother with two children spending $45 a week on groceries. He claims that the removal of the taxes currently embedded in the price would lower the cost of the groceries to $35.10 (a dubious proposition). But then he says: "Add the FairTax, and the groceries would cost $45.58. I learned in the sixth grade that if an item cost $35.10, and I add to it $10.48 in sales tax, then I paid a tax rate of almost 30 percent—not 23 percent. Boortz says in the "Questions and Objections" chapter that "critics of the FairTax have a way of dwelling on this 30 percent figure." I wonder why? Although Boortz explains that he is using an exclusive rate rather than an inclusive rate to figure the percentage, his "mathematical equivalent of a game of semantics" still results in a FairTax rate of 30 percent. This is why Boortz prefers the national sales tax to be included in the price of each item—so the consumer doesn't realize that he is really paying an extra 30 percent in sales tax, not Boortz's new math amount of 23 percent.

Lie #3: the FairTax would abolish the IRS. Boortz claims that his book is about transforming the nation by sending "one of its most hated institutions," the IRS, to "that place in the government guano heap of history." The goal of the FairTax is to "eliminate the IRS." Boortz even jokes about IRS agents working at a fast food restaurant after the FairTax is implemented.

Calling the IRS by another name doesn't mean that its functions will be eliminated. Just as the income tax will be replaced by the FairTax, so the IRS will be replaced by some other federal bureaucracy to oversee the collection of the FairTax. It should not be forgotten that the FairTax is a national sales tax. According to The Fair Tax Act of 2005:

The Fair Tax Act also sets up a "Problem Resolution Office" and authorizes "problem resolution officers." There will even still be tax courts. Boortz himself also states: "We envision a department of the Treasury to deal with Internet and catalog sales, with stiff penalties for those selling into our communities who do not abide by the law." The FairTax will abolish the IRS in the same way that it will abolish the income tax—by replacing it with something else.

Besides the fact that it doesn't lower the amount of taxes seized from the taxpayers by the federal government and is based on unsubstantiated claims and ridiculous lies, the FairTax is fraught with other problems. In his Introduction, Boortz says that this book will explain the FairTax in detail. He will walk us "through the plan step by step, detailing both the good and the bad." Since Boortz never gets to the bad, I here present seventeen problems with the FairTax.

Problem #1:The FairTax hides the amount of sales tax being paid. Boortz explains how "the FairTax was designed as what's called an 'inclusive' tax—that is, the tax is included in the list price of the product." He reasons that "since our current income taxes are figured on an inclusive basis—that is, they are taken out of our paychecks, not added to them—it was decided to handle the sales tax in exactly the same manner." How could someone write a whole chapter on the evils of the withholding tax and then turn around and recommend a hidden tax like the FairTax? Boortz even has the audacity to claim that with the FairTax the "consumer is completely aware of what he is paying." Really? Suppose the FairTax is implemented next year. Go stand in front of a store and ask the typical American how much federal sales tax he paid on the item he just bought for $139? Give him a calculator and ask him again. Unless he is familiar with figuring percentages, the average American will not be able to tell you how much sales tax he just paid.

Problem #2:The FairTax is progressive. Boortz correctly identifies a progressive income tax with Karl Marx. Yet, because of the prebate, the FairTax sets up a progressive tax system like we have now. Millions of Americans will pay no taxes at all. Others will have some of their taxes offset by the prebate. "The rich" will still be paying the majority of the taxes—something Boortz says he considers "class warfare."

Problem #3: The FairTax is an income redistribution scheme. Boortz calls the Earned Income Tax Credit "a prime conduit for income redistribution from high-income earners to the poor and middle class." Why, then, would he promote a FairTax Plan with a prebate that in essence allows the majority of citizens to not only pay no taxes, but in many cases gives them money over and above that which they paid in sales tax? What's fair about making "the rich" subsidize the poor and the middle class? Boortz calls Social Security an "income redistribution and welfare program." But under the FairTax Plan, Social Security is even worse. At least now it is funded by payroll tax contributions that are independent of deductions for federal income tax. Thanks to the prebate, many people will receive a free retirement program via Social Security who never contributed a dime towards their retirement, or as Boortz says: "All benefit and no burden."

Problem #4:The FairTax creates new tax collectors. From doctors and lawyers to garbage collectors and tree trimmers—multitudes of individuals and businesses that never collected taxes before will be turned into tax collectors for the federal government. Will a teenage babysitter be required to collect the FairTax from her neighbors?

Problem #5:The FairTax creates new taxes. All Internet purchases will be subject to the national sales tax. So will heart surgeries, kidney transplants, and appendectomies—plus the drugs prescribed by the doctors doing the procedures. Want to attend a baseball, football, or basketball game? Better save up a little extra to take care of the FairTax that will be imposed on your tickets.

Problem #6: The FairTax creates new taxpayers. If there are no exceptions and no exemptions then churches and other non-profits will be forced to pay a national sales tax on every purchase. The FairTax will basically do away with not-for-profit entities. The FairTax would also count as taxable the purchases made by federal, state, and local governments. This means the government will be using taxpayer money to pay taxes to itself.

Problem #7: The FairTax makes it easier for the federal government to raise taxes. All Congress has to do is slightly increase the initial 23 percent rate. A penny here, a penny there; a quarter of a cent now, a half of a cent later. Just a little at a time, of course. It might be to compensate for inflation, to give seniors a cost of living raise, or to pay for some manufactured crisis like bird flu. Since the federal budget goes up every year, and the FairTax is supposed to be "revenue neutral," the FairTax rate will have to go up right along with the federal budget. You can count on an increase every year, for if government budgets are not under control now, why should we expect Congress to magically become fiscally responsible just because the FairTax is adopted? Furthermore, since Social Security and Medicare would be funded out of general revenues the FairTax rate would also have to go up to fund the ever-increasing cost of these programs. Then there are the escalating costs of the new prescription drug plan. And if the amount of the prebate "is updated every year to keep up with inflation," the FairTax rate will have to be raised in like manner. How can Boortz recognize that "there is absolutely no limit to the government's desire for your money" and then express hope that the FairTax rate "will go down in the future" if "Congress can keep government spending down"?

Problem #8: The FairTax makes it easier for state governments to raise taxes. In the name of simplicity and efficiency, the states would be inclined to follow the lead of the federal government. States that currently have no sales tax could add one. States that have exemptions on certain items could get rid of the exemptions so as to match the federal government. States that have no sales tax on services could begin taxing services like the federal FairTax Plan would do.

Problem #9: The FairTax has unknown and potentially huge transition costs. Boortz asks a good question: "How will the switch to the FairTax be made?" But then he gives a very naïve answer: "Cold turkey!" He explains that "on January 1, we'll begin to get our gross pay with no deductions." Boortz gives one "transition rule": The value of any inventory on hand December 31 can be used as a credit against collecting taxes in the next year." This should get accountants to work figuring out how to value each company's inventory the highest. Will it be specific identification, average cost, FIFO, or LIFO? But what if a company's fiscal year does not end on December 31? This will cause massive accounting problems. And especially for the federal government since the government's fiscal year begins on October 1.

Problem #10:The FairTax makes certain exceptions while supposedly having none. After saying that there are "no exclusions or exemptions" under the FairTax, Boortz specifically mentions exemptions for Internet access services and tuition. Therefore, his complaint that "exempting certain items—such as food and prescription drugs—would again open the door to an entire battalion of lobbyists to argue that the portion of the industry that they represent is clearly an essential product" is unjustified for he has already opened the door to that very thing.

Problem #11: The FairTax has great potential for fraud. Boortz envisions the prebate amount being issued to a card "like your bank debit card." Since every head of household would have one of these cards, there would be a great chance of criminals preying on people for their cards. There is also the possibility of counterfeiting, resulting in massive theft from the taxpayers. And since the FairTax only applies to new items, there will also be a tremendous incentive for new items to be reclassified as used or previously owned. Businesses could offer a slight increase in the price of a reclassified item in exchange for not having to charge customers the 23 percent national sales tax that would be due if the item was considered new. Enforcement of the "proper" classification of items would require an army of federal bureaucrats that would rival the IRS.

Problem #12:The FairTax has the potential to turn thousands of law-abiding Americans into criminals. Since the FairTax contains no exemption for even the smallest business, anyone who does not collect the FairTax on any good he produces or services he provides is breaking the law. Mow a yard—collect the tax. Babysit—collect the tax. Repair a car—collect the tax. If you don't collect the FairTax then you are a criminal. Once again, the FairTax would have a terrible enforcement problem.

Problem #13: The FairTax does not repeal the Sixteenth Amendment. When FairTax advocates discuss their plan, they talk as though the FairTax would result in the repeal of the Sixteenth Amendment that gave us the income tax. To his credit, Boortz doesn't make that mistake, but when many people read about "saying goodbye to the income tax," that is what they think. The FairTax bill now pending in Congress (H.R. 25 in the House and the identical S. 25 in the Senate), repeals Subtitle A of the Internal Revenue Code of 1986 that relates to income taxes and self-employment taxes and Subtitle C that relates to payroll taxes and the withholding of income taxes. The only mention of the Sixteenth Amendment in H.R. 25 is when it reports: "Congress further finds that the 16th amendment to the United States Constitution should be repealed." But to repeal Sixteenth Amendment would require a constitutional amendment. Are we to believe that Congress would vote to repeal the Sixteenth Amendment after the passage of the FairTax? And even if Congress did so it would still have to be sent to the states for approval by three-fourths of them. So, barring the repeal of the Sixteenth Amendment, what is there to prevent an income tax from being imposed again after a national sales tax has been enacted? And what is to prevent any of the other taxes replaced by the FairTax being re-imposed due to some unanticipated budget shortfall or "crisis"? Is Boortz that naïve to think that Congress will be satisfied with just the FairTax? And even if the Sixteenth Amendment was repealed after the imposition of the FairTax, any previous tax not on income could be brought back. Can Congress be trusted to do anything else? I can easily envision Congress proposing to lower the rate of the national sales tax in exchange for the addition of a supplemental Social Security tax because we need more money to fund Social Security. Then, a few years later, the national sales tax rate would be right back up to where it was before the "exchange."

Problem #14: The FairTax does not eliminate all federal taxes. Although it is implied throughout the book that the FairTax will be a replacement for the various federal taxes, there are some federal taxes that will still be with us under the FairTax. Even Boortz slips up one time and says that the FairTax would "replace virtually all personal and corporate taxes." Two examples of federal taxes that will still be with us under the FairTax are the excise tax on gasoline and the various taxes that one pays when purchasing an airline ticket. There is no mention of the federal gas tax anywhere in the Fair Tax Act of 2005. No list of taxes that are supposed to be eliminated under the FairTax includes the federal gas tax, which adds 18.4 cents to the price of a gallon of gas. So under the FairTax, we would have added to each gallon of gas federal excise tax, state excise tax, and federal sales tax. This is just the minimum. The states could also begin applying their sales tax to gasoline. A recent airline ticket I purchased had added to its price a federal excise tax of $15.28, a federal segment tax of $12.80, and a September 11th security fee of $10.00. And what about federal taxes on tobacco and alcohol? The FairTax will merely replace one visible tax with another while leaving intact the invisible ones.

Problem #15: The FairTax is not at all about lowering the amount of taxes the government collects. Boortz terms the FairTax a "tax reform measure, not a government reform measure." It "changes the way revenues are raised for the legitimate operations of the federal government." But if the FairTax raises the same amount of revenue to fund the same federal programs, then what does Boortz think the federal government does that is illegitimate? Is there anything he considers to be illegitimate? If so, then why would he expend so much energy on changing the way the federal government collects taxes instead of changing the amount that the federal government collects in taxes? The fundamental problem is clearly taxation, not the tax code. What is wrong with the federal government's tax code is not that it is too complex, but that it makes possible the almost $3 trillion a year that the federal government spends. As the French laissez-faire economist Jean-Baptiste Say (1767–1832) once said: "The best tax is always the lightest." Or, as our modern-day Say in Congress, Ron Paul (R-TX), says: "The real issue is total spending by government, not tax reform."

Problem #16: The FairTax doesn't even begin to address the root of the problem. Boortz does refer to Frank Chodorov(1887–1966), reminding us that he "once observed that, by enacting the income tax, the American government was proclaiming that all wealth belonged to the government, and whatever wealth the government did not seize from the person who created it should be looked on as a concession—a gift from the government." But Boortz doesn't quote Chodorov, and he gives no source that he is referencing. He subtly seems to imply that Chodorov was opposed to the income tax because it was an income tax and that, therefore, he might be inclined to support the FairTax if he were alive. But this couldn't possibly be true because Chodorov considered taxation itself to be robbery. How is justifying the federal government spending almost $3 trillion a year of the taxpayers money, as long as it is collected "fairly," any different from the viewpoint that Chodorov condemns? While making the case for not allowing exemptions from the FairTax for food, Boortz, in using the example of a wedding reception, inadvertently shows his true colors: "Would it be fair to allow a multimillionaire to spend $20,000 on food for a large wedding reception at his estate, and not pay any sales tax on that purchase?" Why, of course it would. It would be fairer than forcing the American people to pay a 23 percent national sales tax on every good and service they purchase.

Problem #17: The FairTax makes welfare universal. Millions of people who never took a dime from other taxpayers in the form of food stamps, SSI, AFDC, Medicaid, WIC, or housing assistance will now be on the federal dole via the prebate. The FairTax is welfare for the masses. It makes us all wards of the state. Perhaps it would be best, in the interest of equity and efficiency, if all the money Americans earned was just paid to the state and then distributed to every American in a "fair" manner. The government could just keep what it needed, redistribute what's left, and do it all without the FairTax.

The FairTax is not the solution. And because it allows the federal government to confiscate the wealth of American citizens less intrusively and more efficiently, it will become part of the problem—the problem of the ever-increasing, ever-intruding, ever-destroying welfare/warfare state. The FairTax is a fraud. Yet Boortz ties rejection of the FairTax to believing that America is a great country because of its government, "as so many politicians do." Politicians who oppose the FairTax do so because they "thrive on dependency."

The antidote to the fraud of the FairTax is a good dose of the wisdom of Murray Rothbard: "There can be no such thing as 'fairness in taxation.' Taxation is nothing but organized theft, and the concept of a 'fair tax' is therefore every bit as absurd as that of 'fair theft.'"

Boortz believes that the abolition of the income tax will make the bad day of April 15 "just another beautiful spring day." With its unsubstantiated claims, ridiculous lies, and numerous problems, the FairTax will ensure that everyday is a bad day, not just April 15.

Laurence M. Vance is a freelance writer and an adjunct instructor in accounting and economics at Pensacola Junior College in Pensacola, FL. See his Mises.org archive. Send him mail. Comment on the blog.

Taxes suppress activity. Tax income and you suppress the reporting of and creating of income. Tax consumption and you will get less consumption. I don't see how this is going to stimulate the economy. This idea is at least 50 years old in the US but there are virtually as many problems trying to implement this as there are implementing the existing system. Rich people will learn to game the new system just like they do now. And there is no way you get Democrats to go along with NOT taxing the rich so its a moo point (you know, what a cow thinks...)

Maybe you should wait to comment on this book until it comes out in an audio version because you obviously had a difficult time understanding it as it is written. Many of your comments about the book and plan are wrong. I will just give a couple of examples which will include your own contradictory comments.

Your "Lie # 1" section is completely absurd. Your claim that the fair tax would not be voluntary is way off the mark. You ask "what happens if someone decides that they don't want to pay any taxes to the federal government?" Then you reply with: "The same thing that happens now: fines and imprisonment." Fines and imprisonment could occur if someone buy or sells goods without charging or paying the tax. As is pointed out in the book, that requires two parties (the buyer and seller) to consciously avoid the system.

This is so simple! Even an under-worked, over-educated idiot should be able to understand it. If I don't make any purchases on new goods or services I won't have to pay any tax. That would not be illegal. I would earn my wage, keep ALL of my earnings, then save (if I choose to) in an interest bearing account without paying taxes. That would be completely legal.

If on the other hand I wanted to buy a bunch of goods that I don't need, I would be VOLUNTARILY paying more in taxes.

Your "Problem #1" section is also flawed. "Go stand in front of a store and ask the typical American how much federal sales tax he paid on the item he just bought for $139? Give him a calculator and ask him again. Unless he is familiar with figuring percentages, the average American will not be able to tell you how much sales tax he just paid."

Do you think that same individual has any idea how much is deducted from his paycheck? I pay attention and have good math skills but I still don't know in advance how much is going to be confiscated by the government; sometimes it's 22%, other times it's 23%, when I work several hours overtime it's 31%. At least the fair tax is a consistent percentage.

As far as the typical American being unable to do simple math.......well, that's a different debate for a different day.

Now it is time to point out some contradiction. "The FairTax is not a voluntary tax at all. The whole idea is a contradiction in terms." You made that assertion in "Lie # 1" but in "Problem #2", you state, "Millions of Americans will pay no taxes at all." By whom is the contradiction being made?

I will now admit that I didn't read your entire posting. I will, however, if you will actually read all of the book and the proposed legislation.

You're missing huge portions of the big picture.

The fact that foreign made goods enter our market pretty much free of charge under the current system.

The fact that our goods enter the world market loaded down with the stupid costs of our current stupid system.

The fact that we're burdening capital, the fuel for productivity and prosperity.

Those are a couple of the biggies.

And the fact that that would completely change under the FairTax.

Our goods and services would swiftly become the most competive in the world.

America would become THE magnet for capital.

The FairTax is the only way to go, friend.

There is no other plan out there that even approaches it for its elegance, simplicity, efficiency and the return to freedom and privacy of our business affairs that it provides.

lots of gobledygook.

It's called legalese. It's the lexicon of lawmakers. It does account for leased property when it is sold.

but leased good problem

It's not a problem. Leased property that is sold is taxed at fair market value of the property and tax is prorated according to how much tax was paid on the principle of the leased property.

thy neighbor as tax collectors are real issues.

Not sure what you mean by that. Eighty percent of retail sales are made by the large national stores, Eg., Wal-Mart, Target, Microsoft, McDonalds... They will collect 80% of the tax and remit it to the states.

Under the income tax the IRS has to keep track of 160 million tax payers. Under the FairTax there's about 25 million businesses to keep track of/ And most of those businesses already remit sales tax to their respective states.

I am not sure the law says that. Leasing is currently used by corps to get and double tax deduction. One for the expense of the lease by the renit corp and twice by the corp that takes the depreciaation.

I think we would see all sorts of used gray markets. for instance, I make computer and rent it for one week. One week of 'value' is taxed at 23%. Since the computer has then depreciated it is used and I pay no tax. I think this would be hard to keep track of.

Also, I am sure that the level of *visible* goods and services at the retail level would go down and we would have to charge a higher rate. This has already happened with the income tax as more folks have opted out the workforce.

Do you think that same individual has any idea how much is deducted from his paycheck?

A line item on the receipt shows how much the tax was -- 23% of the total. It's no different than a person walks out of the computer store with a new computer -- he or she knows how much tax they paid. Except under the FairTax the shopper knows not just the exclusive tax rate, but also the inclusive tax rate. A different situation applies before purchase and the product price doesn't include the tax. The shopper will add the 30% exclusive tax figure to get a total price for the product.

I am not sure the law says that.

I realize you don't understand, as you wrote, "lots of gobledygook". Nonetheless, SEC. 804 deals in part with not allowing a leased item being sold to circumvent paying the tax on the value of a new product. A $10,000 new car that has a $3,000 tax compared to a leased car sold six months into the lease. A portion of the lease payment is principle. Say for example $1,000. When the leased car is sold the fair market value would be about $9,000 and the tax applied to that. Also, the lease company remits a tax for it's lease services.

Also, I am sure that the level of *visible* goods and services at the retail level would go down and we would have to charge a higher rate.

Raising the tax rate will be very difficult. People back East in Western New York, Eire county, are hammering the county legislature for trying to raise the sales tax by 1/4 of one percent. I heard a similar scenario happened in Wisconsin dealing with the state sales tax. I think the visible goods and services would remain about the same with only minimal swing up or down.

just make stuff more expensive new, rent it out for a short time and then book a large amount of depreciation suitable for sale in the used market.

Won't work.

`(c) Determination of Principal and Interest Components of Financing Lease- The Secretary shall promulgate rules for disaggregating the principal and interest components of a financing lease. The principal amount shall be determined to the extent possible by examination of the contemporaneous sales price or prices of property the same or similar as the leased property. `SEC. 804. FINANCING LEASES.

To learn more about the FairTax see: www.fairtax.org. or read the Bill at HR25

I have read that line. Sure there is some embedding, but the 'exlucive' rate MUST be used, because you have raised the cost of stuff 30% in real terms. Sales taxes are currently quoted and thought of in 'exclusive' terms.

France consumes aroung 66% of what we do if I remember correctly. This is no small part to their vat, which looks very similiar to a retail customer.

Folks would just find ways to use used stuff. Haircuts at home and people would buy eat out less. Revenues would fall short due to price elasticity, then gov would have to bring back the income tax.

I would be for this, except, I dont think you can get past 12, 13% where people's behaviour would change drastically.

You could have a broader based tax than say in 1880, but gov would also have to shrunk to size closer to what it was in 1880.

Think about this. Company sets up a datacenter in canada to save the 30% price of blade oards. Then ships the boards to be sold as used computers in the us.

Same could be done for furniture jewelry. We just use the world's hand me downs.

Look what happened with the lux boat biz. All that stuff would be made overseas.

Incidentally, I have the same elasticity issues with the way europe taxes INCOME. They used static analysis and fall short because of all the underground jobs that go on whilst folks collect welfare. (car repair, haircuts plumbers) That is why they work fewer hours than in the us. this has been noted by the edward prescott paper.

as soon as I saw this line:

Under the FairTax, these prices will "go down by roughly the same amount as the proposed FairTax rate of 23 percent."

I knew it was a MONSTROUS load of hokum (the fair tax proposal, that is.

I have a fairly decent memory, and up here in Canuckistan, when the GST (government sanctioned theft) was introduced, the manufacturer's tax of 13% was eliminated.

Imagine the shock and dismay of economists here when the month after the 7% GST was imposed, there was a 7% "inflationary episode".

I do agree that a consumption tax is the "fairest" tax, but ALL other taxes MUST be reduced, and the federal government should go back to funding itself through IMPORT taxes ONLY, after eliminating all the "transitory" and "temporary" taxes that have been imposed on the productive over the last 100 years. Food, clothing, and shelter (the necessities) should all be exempt from all taxation. Sure, there are the Imeldas out there, but duds are duds, and food is food.

The outrageous homes will be taxed by their communities.

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