Posted on 08/16/2007 6:10:39 PM PDT by RobFromGa
Fair Tax, Foul Politics
By The Editors
Advocates of a national sales tax to replace the income tax have built an impressive grassroots army. They have given their idea an appealing, if somewhat gimmicky, name: the Fair Tax. And they have managed to get five Republican presidential candidates to suggest that they would sign a sales-tax bill if it reached their desk. Some observers credit the enthusiasm of the Fair Taxers for Gov. Mike Huckabee’s surprisingly strong showing in the Iowa straw poll. Huckabee is the candidate most committed to the Fair Tax.
Former senator Fred Thompson is, however, backing away from the idea. Fair Tax advocates have released a video in which Thompson, asked about the proposal, appears to say he would “absolutely” sign it if elected. On August 10, however, Thompson wrote those advocates a letter that said merely that the Fair Tax was a good starting point in thinking about tax reform. Mitt Romney’s campaign says that the Fair Tax has some attractive elements, but that the candidate would need to see details before making any pledges. Rudolph Giuliani has said that he does not think he would sign any such legislation.
The leading candidates are right to be wary. The tax code needs major reform to become fairer, simpler, and more efficient. The Fair Tax is one instantiation of those goals, but its political impracticality makes it fatally flawed. If conservatives force a choice between a Fair Tax and no tax reform at all, the latter is what they are likely to get.
There is widespread confusion about what the Fair Tax would entail. If you bought $100 of clothing and paid a $30 tax on it, you would probably think you had paid a 30 percent tax. The Fair Taxers say that you paid a 23 percent tax: $30 is 23 percent of the $130 you paid in total. When they say they want a 23 percent tax, that’s what they mean.
Since there would be no more income tax in this system, there would also be no more standard exemption to make sure that the basic necessities of life went untaxed. The Fair Taxers would solve this problem by sending out monthly “prebate” checks to all Americans.
The great, undeniably attractive selling point of the Fair Tax is that it would allow the country to dispense with the IRS. But the sad truth is that if the federal government is going to collect as much money as it currently does—which the Fair Taxers say their system would—its methods of tax collection will inevitably be intrusive. The real difference between the current system and this proposal is that the primary brunt of tax collection will be borne by a smaller group of people: business owners.
Over time, then, enforcement measures could become more draconian than they are today: especially since a massive retail sales tax would create a massive incentive to evade it. That’s why every country that has ever tried to impose retail sales taxes this high has quickly moved to a Value Added Tax levied at every stage of production. Consumers rarely see or keep track of these taxes, and they seem to be fairly easy for governments to raise.
These pitfalls are beside the point, however, since a national sales tax is not going to become law. No presidential candidate could be elected on a sales-tax platform, and no Congress would enact one if he were.
A candidate who ran on the national sales tax would be able to run on nothing else. He would have to spend all of his time defending the idea. Off the top of our heads, we can think of three devastating lines of attack an opponent could use in television ads. One ad could argue that getting rid of the mortgage deduction would send home prices into free fall (something that voters are going to find especially worrisome now). Another could ask why senior citizens, having paid taxes all their lives as they made income, should have to spend their retirements paying taxes on everything they use that money to buy. A third could simply ask voters if they look forward to paying a brand new tax.
There are answers to each attack. But no Republican candidate, especially in the daunting environment of 2008, is going to want to have to make them. Republicans cannot win a national election without the tax issue. If they ran on the national sales tax, Republicans would be taking one of their natural strengths and making it into a liability. Which is why we expect them to say nice things about the Fair Taxers’ passion, and move on.
I liked this quote:
So what about these cosponsors of the FairTax bill? Are they interested in reducing total spending by government? Out of the fifty-eight cosponsors, forty-four of them voted for the Medicare Prescription Drug and Modernization Act of 2003 — the largest expansion of the welfare state since the Great Society. Only six voted against it [6] (eight cosponsors were not members of Congress at the time of the vote. [7]) The sponsor of the FairTax bill, John Linder, also voted for the Medicare Act. No wonder the FairTax has to be revenue neutral now with adjustments every year! How else will the government come up with the billions of dollars it will need to pay for all these prescriptions?
Most people know how much income tax they pay, and can find it on their tax returns. Almost no one knows how much total sales tax they paid over a years time. Next mis-representation?
The country spends too much money now, that is the problem. Not the method of confiscation.
that’s because the government spent very little money in those days! That’s the problem! This tax has to support a multi-trillion dollar budget!
You just might learn something.
but they will know how much $$$ of the prebate. free money!
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus
Bother someone else, jerk.
It is worse than revenue neutral. They need to add half a billion to the intake to pay the socialist prebates to every man, woman and child regardless of whether they pay a dime in FairTax.
Since the governemnt will have to PAY THE FAIRTAX on everything they buy from missiles to copy paper, and also on every government salary (except teachers) and every government fringe benefit, they will also have to raise the additional revenue to pay the FairTax. They counted the revenue that they paid themselves when they calculated the Fairtax rate, but they didn’t give themselves enough money to pay it. So the FairTax rate would be about 36% to start and that is before evasion— legal and illegal— begins...
Repeating what you said is bothering you? LOL!
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus
If conservatives ever were compelled to agree with anything NRO editors said or were were compelled to be lobotomized with cattle prods to the cranium, the latter would be preferable.
And methadone frees us from drug dependence.
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus
You won’t get a statement saying “Bud, you just paid $5,000 in taxes this year! Thanks, Uncle Sam”
Instead you’ll see a few bucks here and a few quarters there every time you shop but you won’t see the big picture of exactly how much you paid in taxes.
Some doom and gloomers think that the greatest and most resilient economy the world has ever seen is the Titanic. I'm not sure what could possibly make such a nattering nabob of negativity recognize the truth. Some people just don't get it...
How sure of the impact of the Fairtax would we have to be in order to make such a sudden and risky change, in wartime, when the result of being wrong could likely be an economic catastrophe?
They can't even predict the performance of the economy for last quarter without going through several iterations. And yet we are supposed to believe that they can figure all the ramifications-- psychological, microeconomic, and macroeconomic-- for such a reckless plan. No thanks.
FairTaxers sound like Global Warming chicken littles with the gloom and doom, and perfect predictions of the future that only they can save...
I bet if you ask 100 people on the street what they paid in total sales tax last year you would see 99 blank stares..
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus
So the FairTaxers have dropped the increased purchasing power argument?
I want to see elimination of corporate taxes, elimination of death taxes, additional reductions in the marginal income tax rates until we find that we are the Laffer optimal point.
In addition I want to see Social Security privatized, and I am willing to pay extra money to pay for those who were promised this benefit, and never receive a penny of it myself. I also want to see Medicare reformed from top-to-bottom. I also want to see Tort Reform to reduce the exorbitant costs of insurance on our medical costs. And we need to reduce the scope of the Federal Government to its constitutionally mandated responsibilities and get rid of the rest. The Golden Goose that is America is way too fat and needs to be put on a severe diet.
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