HOCUS-POCUS FAIRTAX? NOT HARDLY!

Boy, the FairTax is sure getting a chewing-up and spitting-out by the media, the talk show hosts and the Pundits (whatever they are). They are not giving it a fair shake. They need to learn what it is about before they start ripping it apart.

Following is a letter written by one of our FairTax Volunteers in reply to one of these so-called know-it-alls. It is long, but a good read. I high-lighted my favorite paragraph in red - at least read that:


Hocus-pocus FairTax?? Not Hardly

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 a commentary in Friday, January 11th’s newspaper, Brian J. O’Connor appeared to come to conclusions about the FairTax 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.

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: http://www.fairtax.org/. I’ll refer to some of that research in responding to Mr. O’Connor’s comments.

He states 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.

Mr. O’Connor states that economists like this kind of consumption tax but “almost anyone who can do math hates the FairTax”. Like most economists, most CPA’s know only too well that our current tax system is broken and impossible to comply with. I would guess that most mathematicians would like the FairTax after reading the bill.

He quotes a former Treasury official, Bruce Bartlett who said, ”It took me almost a month to understand this crackpot proposal.” Bruce Bartlett’s statements about the FairTax have been thoroughly discredited. His 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.

Roger Buchholtz