Attacks on the FairTax
FairTax Act is one of the most researched public policy issues in
History, is cosponsored by 72 members of Congress and endorsed by 5
presidential candidates.
In the last few days before presidential primary elections many articles
are written about the FairTax that contain misconceptions that often
befall individuals that have a less than full understanding of the
FairTax. This is easily overcome by reading the proposed legislation and
looking at the research that has been done on the FairTax. These
attempts to discredit the FairTax are generally motivated by people
trying to discredit presidential primary candidate Mike Huckabee, an
advocate of the FairTax.
With over $22 million spent on research, the FairTax is likely the most
researched public policy issue in history. This research was done by
some of America’s best economists at premier universities and think tanks
by individuals from the political left and right. This research is
readily available at the FairTax website: www.fairtax. org.
The articles will state that the FairTax rate is 30%, which is true, but
to compare it to the income tax it is replacing then we would have to say
a person at a 20% income tax rate would really be at a 26% rate, because
he is buying things with after tax dollars. Under the FairTax we would
be buying things with pretax dollars, as we’d be receiving all of our
earnings (no income and payroll taxes). To compare the FairTax to the
income tax the FairTax rate should be presented as a 23% rate.
The important issue is whether we will be at a higher or lower tax rate.
A 2006 study by Boston University economists Dr. Laurence J. Kotlikoff
and Dr. David Rapson concluded that the FairTax benefits all income
groups. Of 42 household types (classified by income, marital status and
age), all have lower average remaining lifetime tax rates under the
FairTax than they would experience under the current tax system, and
those with lower spending levels benefiting most.
Economists generally like this kind of consumption. Like most
economists, most CPA’s know only too well that our current tax system is
broken and impossible to comply with. The more citizens learn about the
FairTax the more they like it.
Some of the articles attacking the FairTax may try to gain credibility by
quoting authors Bruce Bartlett or William Gale who’s statements about the
FairTax have been thoroughly discredited. Their efforts to misrepresent
the FairTax are not taken seriously by most economists due to their lack
of scholarly content and truth. Economists will have different opinions,
but almost all agree that income taxes depress the economy and
consumption (sales) taxes grow the economy. It is not rocket science.
When you penalize productive behavior you get less of it.
Claims are made by some that the FairTax will create an underground
economy. Isn’t this what we have today with all the under the table and
illegal transactions, and hidden economy of illegal aliens. Under the
FairTax the drug dealer on the corner will be paying his taxes when he
spends his money. Illegal aliens will also pay taxes as they consume,
however, only legal households will receive the monthly “prebate” check
each month to offset expenditures up to the poverty level.
The FairTax is so simple that some fear the public will understand it.
It is so visible to the public that some fear the public will learn their
true tax burden. It taxes us so directly that it eliminates the ability
to buy and sell tax favors, so some that benefit from this practice hate
it.
Numerous studies confirm that on average ~22% of the retail price of all
US produced goods and services are “business taxes” imbedded in the
prices. As Dr. Alan Greenspan lectured Congress, “only people pay
taxes.” Taxes, like any other cost of doing business, are added to the
cost of products and are passed on to consumers. This deceptive practice
of hiding our taxes in prices is resulting in the exportation of our
companies and jobs rather than our products, as it places American
business and labor at a ~20% competitive disadvantage.
By eliminating personal and business income taxes the FairTax removes
taxes (and $500 billion in tax compliance costs) from the prices of
American produced goods and services and allows American labor and
business to compete with foreign competitors on a level playing field.
The FairTax would do more than any other legislation contemplated or
possible to revive our economy, reverse our balance of trade, stop the
fall in the value of the US dollar, save our industrial base (that is
necessary for our national defense) and return to us the freedoms we have
lost due to the income tax.
By eliminating the ruse of “business” taxes people will see, on every
sales receipt, their true tax burden for the first time in generations.
This visibility of taxes is the self-limiting factor on taxation and size
and reach of government that was intended by our Founding Fathers.
The FairTax eliminates the buying and selling of tax favors by public
officials and lobbyists that today corrupts our political system. By
this means it transfers power from Washington back to citizens where our
Founders intended it to reside.
