The FairTax Plan
Mises Daily by Laurence M. Vance | Posted on 5/15/2008 12:00:00 AM
This the great debate going on today. Do we adopt a taxing plan that conforms with the rest of the world even though it defies all logic and conformity to the Constitution? Is it the name of the tax that excites you? FairTax? Did the Patriot Act excite you also? How about the Military Commission Act? The Federal Reserve Act? Internal Revenue Act? Which of these excited you the most?
[Review of FairTax: The Truth: Answering the Critics (Harper, 2008)]
As a critic of the national retail sales tax plan known as the FairTax, I take Neal Boortz's new book on the FairTax very personally. The book is titled FairTax: The Truth: Answering the Critics. It is intended to be a sequel to The FairTax Book, published in 2005, that offers "eye-opening new insights not covered in the original book."
Boortz is right. There are some eye-opening new insights unique to this sequel. Like the disclosure that you might "owe more in taxes in the first year of a FairTax system than you do today." Or the admission that "the FairTax could be even more progressive than our current system." Or the confession that the "implementation of the FairTax doesn't mean complete annihilation of the IRS." Or the proposal that "a procedure should be set up in the Treasury Department to collect taxes on Internet and catalog sales, remitting the state and local governments' share to them."
As with Boortz's original work, this book is coauthored by Congressman John Linder (R-GA). New this time, however, is the addition of "with Rob Woodall" on the front cover and title page. But although the back cover contains brief bios for Boortz and Linder, there is no information on Woodall, Congressman Linder's chief of staff. As I said when I reviewed Boortz's original book on the FairTax in "There Is No Such Thing As a Fair Tax," since Boortz has previous writing experience, and his name appears in larger letters on the book's cover, I will refer to him as the author.
The FairTax is a revenue-neutral consumption tax in the form of a national retail sales tax on all new goods and services that is designed to replace most federal taxes: personal income taxes, corporate income taxes, estate taxes, gift taxes, unemployment taxes, alternative minimum taxes, capital gains taxes, Social Security taxes, and Medicare taxes.
Although it seems like the price we would have to pay for the elimination of these taxes is higher prices on all new goods and services because of the imposition of a high sales tax, FairTax proponents claim that the removal of embedded taxes — the tax burdens of businesses that contribute to the overall cost of products — will result in the prices of goods and services falling by enough to offset the amount of the FairTax imposed. In addition to this dubious conclusion, there are some misconceptions about the FairTax that should be pointed out.
I will be quoting Boortz extensively throughout this review since he believes that "opponents who want to criticize the FairTax often feel compelled to misrepresent its principles — or to lie about it outright — to give themselves something to shout about." No shouting on my part will be required. The deceptions, half-truths, and lies of the FairTax will speak for themselves.
The FairTax does not eliminate all taxes. It does not eliminate tariffs on imported goods, federal excise taxes on products like gasoline and tobacco, special taxes on things like telephone service and airline tickets, or any state and local sales, gasoline, or hotel taxes.
The FairTax does not lower the overall tax burden. Since it is revenue neutral, the total amount of taxes the federal government extracts from the citizens of the United States would be the same as it is now.
The FairTax does not eliminate the Sixteenth Amendment. To repeal the Sixteenth Amendment would require a constitutional amendment to that effect, as the Twenty-First Amendment repealed the Eighteenth. Not only is there no guarantee that Congress would propose such an amendment, it would still have to be sent to the states and approved by three-fourths of them.
Even if the prices of goods and services fall after the change to the FairTax system, with the sale of new homes and cars being taxed, as well as services from heart surgeries down to haircuts, the FairTax would result in a tremendous change in American society. Is it worth expending so much effort on changing the way the federal government collects taxes instead of changing the amount that the federal government collects in taxes? This is a question that doesn't even have to be answered since the stated rate of the FairTax is too low to achieve revenue neutrality and the amount by which prices would fall under a FairTax system has been grossly exaggerated.FULL STORY.