Nothing "fair" about the "fair tax"

Look up the word “fair” in Webster’s dictionary and you’ll find this definition: “Free from favoritism or self-interest or bias or deception.” Ironically, the so-called “fair tax” proposal that has been getting some attention lately is fraught with favoritism, self-interest, bias and deception.

The phrase “fair tax” is a new way to refer to the old proposal to create a national retail sales tax. Such a tax would replace essentially all federal income and payroll taxes with a national sales tax levied on all purchases. So instead of having Social Security and Medicare taxes taken out paychecks and filing those April tax returns, Americans would pay a national sales tax on every purchase they make. There are four myths about this tax proposal that must be dispelled in order to have a meaningful debate about its merits.

The first such myth is that the rate would need to be set at 23% in order to raise enough money to run the federal government. Not so fast. Under the proposal if you buy a $100 item the tax would be $30. Most of us would describe that as a 30% tax. But proponents would have us believe that the tax rate should be calculated by dividing the tax amount by the total purchase price including the tax. So divide $30 by $130 by and you get 23%. That is truly fuzzy math at its finest.

The second myth that needs to be addressed is that the IRS could be abolished because the federal government would no longer collect income and payroll taxes. That might technically be true but a new massive bureaucracy would have to be created in its place. This new agency would be in charge of sending every single American an approximately $450 check at the beginning of every month that presumably reimburses them for taxes they pay on their income up to the federal poverty level. This new agency would also be charged with making sure that anyone who sells anything is collecting the tax. So the guys who live out in the country near my home who shell the pecans that grow on my trees would have to start charging me sales tax and send that money to the federal government. And for each of these types of services that aren’t taxed or retailers that aren’t discovered, the tax rate on other purchases has to be that much higher.

This brings me to the third myth – that a 30% rate would be adequate to run the federal government. There is no way that a national retail sales tax could pay for current federal programs without setting the rate at least 45%. The allegation that a 30% rate is sufficient relies on some strange assumptions such as requiring government to tax its own spending and even taxing free services like free checking accounts and free care at veterans’ hospitals. It also assumes that every single transaction is taxed, including lots of things that aren’t taxed currently. So, imagine adding $90,000 to the purchase of a $200,000 home or adding $450 to your $1,000 monthly rent. Better yet, imagine adding $4,500 for every $10,000 paid in college tuition.

Fourth, and most importantly, it is a myth that the tax is “fair.” A deeper look at the proposal clearly shows that it would raise taxes substantially on most Americans while giving the wealthy a substantial tax cut. That’s because most Americans must spend most or all of their incomes to make ends meet, while better-off people can afford to spend a much lower share of their incomes. According to the Institute on Taxation and Economic Policy, the typical middle-income North Carolinian who earns about $34,000 per year would pay an additional $3,800 in federal taxes. The state’s wealthiest 1% of taxpayers whose average income is over $700,000 would get a tax break of around $150,000 per year.

It’s not fun to be in the role of defending the current federal tax system because it is confusing and not always fair. But ideas for replacing it need to be grounded in sound tax policy principles. An idea that relies on myths and gimmicks to get attention is not one worth considering.

The problem is, it wont be just a dollar. I have read the posts and other writings of your “Fair” tax peers. The goal is finding ways to pay NO tax, and indeed, with the pushing of the “prebate” you want a little “welfare”’ as well.

Two deliberate distottions in a row. Good start.

That does not terrorize me, as a responsible American it pisses me off and I wont be the only one.

I have already found out that it pisses off a loty of people like you -- who don't know what the hell they are talking about, or have a pecuniary interest in maintinging the present system.

Ask me to adjust my life style to yours to “avoid” tax or get stuck with your tab also, no thanks. You get protected by the same military and ride the same highways, pony up bub.

You know, you don't impress me a damned bit with your lies, Why the hell don't you do some research and find out what the hell you are talking about -- and ;quit accusing me of a bunch of lying shit -- that pissses ME off. Oh, avoidance and evasion, little difference, it is shirking responsibility no matter the term.

That is a viscious damned lie. Go look up the difference, and get even with the average Junior High School kid's knowledge of the English language. That way you won't make such a fool of yourself.

You’re not just “wrong” on a massive scale, but most people have come to the conclusion that you’re a pretty serious bigot, too.

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You, the village idiot and childish blockhead saying that is hysterically funny.

Ms. Mejia’s comment regarding the FairTax, in her opening paragraph, quickly implied that her article was not going to be “fair” to her readers, or to the FairTax. The 2nd sentence immediately tells those who have read the FairTax story she has little knowledge about how the FairTax bill acquired its name. She also made the accusations that the FairTax was fraught with favoritisms, self-interests, bias and deception. Ms. Mejia then wrote her four myths trying to justify parts of her statement. Much of her myth’s have to be presumptive because they are flawed and your readers deserve to know the facts.

First let’s deal with her calling the FairTax, the “so-called” FairTax, as many other critics have in the past. The FairTax was “called-so,” or named, by ordinary everyday taxpayers who were involved in the $22 million commissioned studies made while designing and test marketing of The Fair Tax Act. In other words, Ms. Mejia has immediately alienated these participants and over 800,000 taxpaying supporters of the FairTax from around our great nation, by using her adjective of poor taste.

Ms. Mejia goes on to say, “…Americans would pay a national sales tax on every purchase they make.” This is another misleading statement on Ms. Mejia’s part. Only new goods and services are taxed; used goods such as used cars, previously lived in homes, used clothes, home appliances, gardening tools, etc. will not be taxed under the FairTax. Many low income people will benefit immensely from this feature.

Ms. Mejia’s 2nd myth is exactly that, a figment of her imagination. She states,” The second myth that needs to be addressed is that the IRS could be abolished because the federal government would no longer collect income and payroll taxes. That might technically be true but a new massive bureaucracy would have to be created in its place. This new agency would be in charge of sending every single American an approximately $450 check at the beginning of every month that presumably reimburses them for taxes they pay on their income up to the federal poverty level.” Had Ms. Mejia gone to www.fairtax.org, spent a few minutes reading the FAQ she possibly could have avoided this erroneous statement.

The massive bureaucracy is already in place in 45 of our 50 states. Forty-five states already are using a state sales tax and each state has their own collection system. Each state will have a choice of collecting the FairTax using their current sales tax system and the cooperation of their service companies and retailers. The states and their individual services and retailers will each be paid .25% of the total FairTax each collects; the retailer sends the collected FairTax (less their .25% reimbursement) to their state agency, who in turn forwards the total of the state’s collections to the US Treasury, after deducting .25% for their service.

Our current Social Security program is doing a great job of sending out Social Security checks and they will only need to enlarge their system to issue the “prebate” checks. Only one check will be issued for each registered legal household.

Where Ms. Mejia came up with the $450 checks she says would be sent to every American is beyond us FairTax supporters. Had the FairTax been in effect during 2007, the amount paid to every adult citizen in a household would have been $196 (rounded), not $450; a single parent with one child was $262 (or $66 per child in a household). A check for $458 would be for a family of two adults and one child. Readers can go to question #3 of the 50 most frequently asked questions to read about the “prebate,” or www.fairtax.org, and educate themselves on the virtues of the FairTax.

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