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.

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.

If the FairTax is voluntary, then all taxes are voluntary. Don't like income taxes? Don't generate income. Don't like wage taxes? Don't earn wages. Don't like gas taxes? Don't buy gas. See - totally voluntary. Only the FairTax crowd could claim that a sales tax on all new goods and every service is a "voluntary" tax. Really, it's absurd. The FairTax even taxes health care. Are we not to consume health care if we don't want to pay the FairTax?

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).

Right. And that's why when it's not being compared to the income or payroll taxes it is still expressed in inclusive terms and rarely do FairTax supporters even specify that the 23% they are using is the inclusive rate. If someone makes the logical assumption that the 23% is the exclusive rate? "Oh well. We can't help that! }wink{ }wink{"

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.

Uh, the government would have the power to audit individuals under the FairTax. The FairTax gives the government the power to audit people liable to remit the sales tax and there is at least one case where the individual is required to remit the sales tax (imports), therefore, the government would have the power to audit individuals.

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?

This is really more about Boortz's erroneous idea that prices would be listed with the FairTax included. They wouldn't because they couldn't unless the state sales taxes were applied to the FairTax (he actually does claim that states sales taxes would be applied to the FairTax).

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.

So which is it? Is it progressive or not? You 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.

The FCA is much more like the EITC than the personal deduction / standard exemptions of the income tax. The FCA is a credit that allows for negative tax rates -- the personal deduction / standard exemptions of the income tax (or the Flat Tax) don't. With the FCA, income would be going from the upper class to the lower class. This is undeniable. And this is income redistribution.

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.

You don't see any difference between withholding payroll/income tax vs collecting sales taxes?

Problem #5:The FairTax creates new taxes

Again, all of these items are already subject to taxes via income and payroll taxes today.

Heart surgeries are subject to federal taxes? Wow. Who knew? Of course the surgeon is liable for personal income taxes, but that's not the same thing, is it?

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.

They will need more donations because they will be paying the FairTax on the majority of their purchases. If you think charities would prefer the FairTax over the current system you are nuts.

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.)

The author was stating that people wouldn't notice a slight change in the tax rate. It would just be a penny here and a penny there. The rate would, by law, be changing every year anyway -- it would be very easy to sneak a few basis points increase into the yearly change. And since you geniuses just had to use the inclusive rate, a change in the rate is actually smaller as a percentage than the nominal taxes being increased (e.g., a 10% increase in the rate would be a greater than 13% increase in the amount of taxes collected).

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.

Same failed argument as above.

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.

Sure, lets risk our economy on the fantasies of the FairTaxers.

Problem #10:The FairTax makes certain exceptions while supposedly having none

The "exceptions" are specifically classified as investments.

So if we can get something classified as an "investment" then we can get it exempt (like education). Cool. FYI, the National Association of Realtors claim that the purchase of a home is not consumption, it's an investment. You could make that claim about anything that appreciated in value or whose depreciation rate was less than it's implied rental value.

Problem #11: The FairTax has great potential for fraud

No more so than any other tax system.

Well, golly. If you say so.

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.

So we have another exemption. Whoop!

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?

Who says legislation can't be contingent on the passage of a constitutional amendment?

Problem #14: The FairTax does not eliminate all federal taxes

I too would like to see excise taxes included as well.

In the mean time, you seem to be OK with having the FairTax applied to excise taxes. That's what's called "double taxation."

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.

Actually, it's not revenue neutral at 29.87% (exclusive). And it was designed to require more revenue than is currently collected. The FCA is a new $400 billion+ entitlement program that must be funded. And you said it wasn't a spending bill...

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.

You didn't show his Problem #15 to be wrong so this point is useless 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.

Uh, no. As I stated previously, the personal exemption, standard deduction, and itemized deductions don't allow for negative tax rates. The FCA does. It's a completely different beast.

The Fraud of the FairTax

The only fraud here is this article posing as any serious critique of the NRST bill.

Of course. Because any criticism of the FairTax can't possibly be serious. The FairTax is flawless.

The writer sets you up with a tiny bit of fair and dispassionate reporting.

Enjoy it now, because objectivity and truthfulness wane more and more the further you get into this hit-piece.

They have never been so right and never been so wrong.

Translation: After I concede what everyone with a brain already knows: that the current income tax system stinks to high heaven, I will tell you why we just can't allow the only plan that has any chance of changing it to happen.

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."

All of the above is spin; an utterly irrelevent "shoot the messenger" diatribe. There are millions of Americans pushing for the FairTax, from across the political spectrum. Boortz and Linder's credentials and political alliances tell you absolutely nothing about the value and the wisdom of the FairTax plan.

The Evils of the Federal Tax System

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

See? Here we go...

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.

The writer, in the interest of not being known as utterly insane, has already given away the entire debate.

He's admitted that the current system, the status quo, is utterly corrupt, inefficient, complicated and enslaving.

Keep that in mind as we go along. Look and see whether the writer has any positive solution of his own.

Try and discern whether his vitriolic criticism of the FairTax, the only legitimate proposal on the table to eliminate the current system, does a single thing except preserve the status quo.

However, whether this would actually be the case remains to be seen.

That sentence is the first big lie in the article. The FairTax bill absolutely DOES eliminate the IRS, with its more than 100,000 employees, its room full of regulations that no one fully understands, and its anti-American power to snoop into every American's personal business. That a different mechanism will be needed to collect the FairTax is not arguable, and is freely admitted by every FairTax supporter, but it certainly won't be the IRS. Thank God.

Duh. Anyone who proposed such a thing, without a replacement form of taxation ready in its place, would be considered an idiot or psychotic. Sort of like this writer.

The FairTax Plan

Brace yourself.

Again, the set-up.

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.

Of course. The FairTax is a proposal to reform Federal Taxation. The states, most of which are currently piggy-backed on the IRS code, would be forced to also come into the 21st Century.

The FairTax Plan would be administered through the states.

And a truly wonderful state of affairs that would be. Can't hurt in restoring federalism to have the feds counting on the states for their tax revenue, now can it...

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.

'Receiving a check' is 'dealing with the federal government'? How oppressive!! /sarcasm

But not only will all businesses receive a check from the federal government, so will all households.

That'll be just terrible, won't it?! /sarcasm

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."

Hence, part of the reason for the 'Fair' designation.

Boortz cites as an example a married couple with two children receiving a monthly check for $492—regardless of their income.

The prebate is a political sop to an American public that has been force-fed the notion that progressivity means fairness for a century. Without this feature, it is politically highly doubtful that it could be passed considering the current level of understanding of the electorate.

So, sensible people have a choice to make: Real reform WITH the prebate, or more of the same with the income tax.

Not too tough to make that decision...

Although the FairTax Plan would eliminate Social Security and Medicare taxes, it would not eliminate the programs.

Another 'duh'. The writer begins his liberal use of mixing apples and oranges with this point. There is not a reason in the world for burdening fundamental tax reform with the baggage of the entitlement debate. If the American people want to fix those problems, they're going to have to do it separately, as they should.

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.

One more nod to common sense from the writer, in the interest of preserving some small scrap of credibility.

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.

The method by which we collect taxes and how much we spend are two separate issues. Apples and oranges. That the writer doesn't know the difference, and lays that as the foundation for his arguments against the FairTax, shows clearly that he doens't have a clue what he is talking about.

The Goals of the FairTax

Well, the idea goes back quite a bit further, even in a modern sense.

And, Alexander Hamilton, in the Federalist Papers he helped co-author over two hundred years ago, made it clear that direct taxes like income taxes were incompatible with American freedom, and that consumption taxation was the only self-regulating, self-leveling form of taxation known to mankind.

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.

Again, the apples and oranges roll around on the writer's table willy-nilly. The guy doesn't know the difference between taxing and spending. (By the way, I find it highly ironic that most of the FairTax critics who use this idiotic ploy to preserve the status quo are members of the political class that is driving the astronomic growth in federal spending as we speak.)

Over and over again, Boortz emphasizes that the FairTax is "revenue neutral."

Of course he does. Any other proposal would be a nonstarter in the Congress. Since the Republicans took power in '94, there are LAWS that forbid any tax proposal that is not 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."

Lord Almighty, this guy is dumb.

*Sigh*

Why is the writer not joining Boortz in his 'lament'?

Such an idiotic paragraph doesn't even deserve comment, except to say that, since the writer believes such tripe, it is no surprise that he supports the current system, the paragon of inefficiency. What he doesn't understand is that it is the American people who are bearing the huge burden of that chaos and inefficiency. And considering his other remarks, he obviously also loves the Pentagon's atrocious procurement system...all in the interest of keeping our armed forces weak, of course...lest they 'launch aggresive war'. *barf*

The Claims of the FairTax

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.

And the writer offers not a single argument against the claims. Why? Because Boortz is right. Unshackled from the income tax, Americans will prosper in ways that will far exceed even the rosiest predictions.

The writer just doesn't understand politics, obviously. Or if he does, he'd rather have the status quo than use the means necessary to sell fundamental tax reform to the voters in this country.

We know that the current costs of the income tax system are imbedded in everything we buy right now (and everything we export, btw), and that businesses survive by passing their costs along to the consumer. What that actual amount amounts to is clouded in the fog created by the IRS code and by the largely unknown costs of compliance. That's why these arguments over this point are largely irrelevent. Whatever the amount is, it is huge, and the FairTax will bring it all out in the open, visible on a cash register receipt.

Of course the states, at least those run by people with brains, will move to copy the federal system. Why wouldn't they? The writer also demonstrates here that he doesn't understand the simple fact that the wider the tax base is, the lower the rate will be.

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

Again, this lame writer offers no rebuttal to the claim...one that is obviously true. With no burden on productivity and capital, the motivation to bring production and capital to America, the most stable social and political and (under the FairTax) economic place on the globe will be overwhelming. This is a prediction that falls under the heading 'self-evident'. No wonder there is no rebuttal...

The Lies 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."

Of course, the cost of food would be covered under the prebate...leaving you tax-free if you choose to live a simple lifestyle. The writer doesn't prove a lie on this point...only his ability to obfuscate.

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.

*guffaw*

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.

Arguments about the rate are nothing but red herrings. Because the FairTax is designed to be revenue neutral, as it must be politically and legally to be introduced into the Congress, the rate is determined by the current rate of federal spending.

If the rate is 'too high', it is only because the government is spending too much money, NOW. It's just that under the current system, it is HIDDEN. The FairTax brings it out in the open. No surprise that the amount makes people gasp.

But again, the level of the rate is not an honest argument against the FairTax, against HOW we should tax; it is an argument against excessive government spending.

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:

There shall be in the Department of the Treasury a Sales Tax Bureau to administer the national sales tax in those States where it is required pursuant to section 404, and to discharge other Federal duties and powers relating to the national sales tax (including those required by sections 402, 403, and 405). The Office of Revenue Allocation shall be within the Sales Tax Bureau.

The writer calls a clear presentation by supporters of the FairTax a 'lie', when in fact it is he who is blatantly lying. The FairTax bill DOES eliminate the IRS, and does replace it with a much simpler, much less invasive agency based in the Treasury Department...EXACTLY as spelled out in the legislation, and exactly as presented by FairTax supporters.

The writer is delusional. His 'three lies' are themselves blatant lies.

The Problems of the FairTax

Besides the fact that it doesn't lower the amount of taxes seized from the taxpayers by the federal government...

Which of course it isn't intended to do, and can't be. Tax bills and spending bills are two separate things legislatively.

...and is based on unsubstantiated claims and ridiculous lies...

Which the writer signally failed to prove above...

... 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.

This is too ridiculous for words. Once again, the writer shows how little he understands about this issue. He confuses the arguments over 'exclusive' and 'inclusive' figuring of the rate with visibility.

Sir, all you have to do is look at your cash register receipt, and you will know exactly how much federal tax you just paid. Is that too difficult for you? Must be, since you'd rather keep the current income tax code, which is largely hidden from your view in a thousand ways.

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."

If the writer, or anyone else, doesn't like the prebate feature, lobby against it. But don't claim that your opposition to this part of the bill gives you any decent standing to oppose the overall idea. And don't be surprised if your opposition to keeping the tax system progressive causes nothing but the continuation of the status quo.

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."

The writer would obviously like to keep 'income tax II' and 'income tax III', ie SS and Medicare...and the myth that they are some kind of trust fund or insurance program. All the FairTax does re these entitlements is bring them out in the open and force people to deal with them honestly.

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?

This is largely a bogus claim. The number of people collecting taxes for the feds would plummet under the FairTax, and the compliance difficulties are a fraction of what they are under the current system.

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.

Poor baby. Again, the writer doesn't understand that the wider the tax base is, the lower the rate will be.

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.

The FairTax removes the control point that the federal government now has over our churches and nonprofits...the means to coerce the churches into toeing the politically correct line. Any lover of freedom has to believe that that is a very good thing....a return to common sense and religious freedom.

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"?

This could be the one point that demonstrates the writer's lack of understanding of politics and human nature the most.

The current system is a 'divide and conquer' mechanism for the politicians...the incessant playing off of one group of taxpayers against another.

The FairTax would leave ALL of the American people united in one self-interest: A LOWER RATE.

And they would be operating politically with a full knowledge of the severity of the spending problem, since it would be openly expressed every day in the LEVEL OF THE RATE.

Enaction of the FairTax would leave exactly one debate left to be fought into perpetuity: THE LEVEL OF THE RATE. And we all know where the political pressure will always be in a debate of that sort.

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.

Pure BS. Taxation that is out in the open where everyone can see it can never make it easier for governments to raise taxes. The writer is pushing hooey.

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.

The transition costs are worth it, no matter what they are. But he's really picking nits here in any case. Transition costs will be nominal.

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.

Then lobby against any exceptions, so that that Pandora's box is never opened. But don't throw the baby out with the bathwater.

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.

All minor matters that are easily dealt with. To any extent they can't be dealt with, they still pale in comparison to the morass that exists now.

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.

The current system has made criminals out of every American citizen. There is not a soul alive who understands the income tax code. Even former IRS commisioners have admitted as much. Another total red herring.

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."

Then support Congressman Steve King's bill to launch the process that will repeal the Sixteenth Amendment. The two bills go hand in hand. Politically, you can't repeal the Sixteenth without a replacement ready to go. And you won't even try unless you're some kind of an anarchist.

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.

Notice that the only taxes he mentions are taxes on consumption. If he doesn't like it, launch an effort to repeal those taxes too. Shoot, lobby to include their abolishment in the FairTax bill. Again, he makes no argument against the consumption tax overall, just over one small provision of the same. Nitpicking in defense of the status quo.

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."

The writer reiterates the fact that he doesn't know the difference between a tax bill and a spending bill.

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.

Blah, blah, blah...

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.

Again the writer shows his ignorance. Not only doesn't he understand the difference between taxing and spending, he now proves he doesn't know the difference between a tax refund and welfare.

The Fraud of the FairTax

The writer is the fraud.

The FairTax is not the solution.

According to a man who has shown his ignorance and whose vicious criticisms are shown, upon close inspection, to have no substance whatsoever.

...And because it allows the federal government to confiscate the wealth of American citizens less intrusively and more efficiently...

He equates all taxation as 'confiscation'...a real moonbat view.

Then he admits that the FairTax will be 'less intrusive' and 'more efficient'. Once again, he concedes the debate.

...it will become part of the problem—the problem of the ever-increasing, ever-intruding, ever-destroying welfare/warfare state.

A problem for which he offers not a single solution.

The FairTax is a fraud.

No. It is the one single shot this generation has at returning to prosperity and liberty for ourselves and our posterity.

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."

Bah. Nonsensical.

So, the moonbat advocates for no taxation at all...well, at least unless you want to perpetuate 'theft'. Lovely.

Boortz believes that the abolition of the income tax will make the bad day of April 15 "just another beautiful spring day."

Yeah. It should be a national holiday: Tax Freedom Day.

With its unsubstantiated claims, ridiculous lies, and numerous problems, the FairTax will ensure that everyday is a bad day, not just April 15.

With its unsubstantiated claims, ridiculous lies and numerous problems, this article and the status quo loving hacks who believe it will ensure the continuation of the income tax and its slave mentality on into perpetuity, if we let them.

To the detriment of America and all Americans...

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