Pundit Jay Bookman, writing for The Atlanta Journal-Constitution, has penned an article entitled Huckabee’s fantasy FairTax feeds on workers’ frustration. I should note that his column is named, simply, “My Opinion”. That name, at least, is honesty in journalism; as the article is heavy on opinion, and sadly short on facts.
You know what? This calls for a good hard fisking!
There is indeed a cult member among the frontrunners for the GOP presidential nomination. But it isn’t Mitt Romney, the Mormon from Massachusetts, despite what some in the evangelical community might tell you.
Ooh, hey! Nice twofer there. Let’s start in with the name calling while simultaneously name calling by proxy1 a different Republican candidate. Is every group you don’t like a “cult”?
It’s Mike Huckabee, the Baptist preacher, former Arkansas governor and fervent believer in the cult of the FairTax.
“Cult” Counter: 2
For those unfamiliar with the FairTax creed, it goes something like this: Let us go forth and abolish the federal income tax, the estate tax, corporate taxes, capital gains taxes and payroll taxes, as well as the IRS. Let us then replace all those taxes with a 30 percent national sales tax collected on all services and goods, from a new house to chemotherapy treatments to a gallon of milk.
If we do that, economic heaven is within our reach.
“Creed”? “Go forth”? “Heaven”? You, Sir, are mixing your metaphors. Is it a cult or a religion? (Or are those the same thing to you?)
Beyond that, we also have our first factual inaccuracies: “…a 30 percent national sales tax collected on all services and goods…” First, as this is a replacement for the Income Tax, which is measured as an inclusive, not exclusive, tax, the only fair “apples to apples” comparison is to also measure the FairTax as an inclusive tax. As such it is 23%, not 30%.
That is: If I earn $100,000, and pay 25% income tax, the government takes $25,000 and I keep $75,000. $25,000 is 25% of $100,000 (inclusive tax), but 33% of $75,000 (exclusive tax). The FairTax works like this: if I spend $100,000 for something, the government takes $23,000 in taxes, and the retail seller keeps $77,000. Measured in the same way as today’s existing income tax, $23,000 is 23% of $100,000. Apples to apples, the FairTax is a 23% inclusive tax. Calling it a 30% tax is a distortion of the plan, and just a way to spread some FUD.
Second, it is not a tax on “all services and goods”, but all new, retail goods and services. Used or resale goods (from clothing to houses) are not taxed. Environmentalists should love this plan, as there is a strong incentive to buy (and thus re-use) used goods.
Or, as Huckabee says, “when the FairTax becomes law, it will be like waving a magic wand releasing us from pain and unfairness.”
That does sound wonderful. Don’t we all want to be released from pain and unfairness? Don’t we all yearn for a magic wand that would bring such a glorious day to pass?
Sadly, though, there’s this little matter of reality. Reality says taxes are going to hurt, and no magic wand will ever change that. For time immemorial, taxes have been perceived as unjust, and nothing will change that either.
So… what, your “reality based” outlook insists that taxes must remain as painful as possible, or they’re no good? You’re right — there’s no such thing as “no taxes” if you’re going to have any government at all, but there is a lot of room for a lower tax burden. A huge part of the current tax burden is the cost of simply figuring out how much you owe. Billions of dollars are lost to the sheer bureaucracy of the IRS and it’s 100,000-plus page long tax code.
According to Huckabee and other proponents, the FairTax will raise just as much revenue as the current system. They also believe that, somehow, almost everyone will pay less in taxes.
At the least, they will not have to pay those aforementioned billions of dollars in compliance costs. Retail businesses will be the only ones filling out federal income tax returns.
They believe that under the FairTax, the economy will grow at double-digit rates, interest rates will fall, exports will boom and the Falcons will win the Super Bowl.
OK, they don’t really mention the Falcons. Even the FairTax magic wand has its limitations.
Yes, Yes, Yes, and… Hey Look! A monkey!
In effect, the FairTax is the tax equivalent of those automobile engines designed to run on water. It sounds great, but it doesn’t have a chance of working.
“Don’t sell the bike shop, Orville! It’ll never work!”
The proposed 30 percent sales tax, for example, wouldn’t come close to being revenue neutral. A tax commission convened by the Bush administration found that eliminating just the federal income tax ? leaving all other federal taxes intact ? would require a sales tax of at least 34 percent, a finding backed by other economists.
Here’s I’ll just quote Neal Boortz, who (literally) wrote the book on the FairTax:
What Bookman either doesn’t realize, or doesn’t want you to know, is that the president’s tax reform commission was not permitted to consider the FairTax as it was written. They first were compelled by their own rules to rewrite H.R. 25, and then they considered the idea as reformulated by them!
Back to Bookman’s article:
To a cult, of course
“Cult” Counter: 3
the scorn of nonbelievers is transformed into proof that their cause is righteous; likewise, outside criticism is typically dismissed as the work of conspiracy. In this case, the FairTax cultists
“Cult” Counter: 4
dismiss the findings of the Bush tax panel on grounds that it was stacked with liberals.
See above. If you’re going to examine a plan, don’t change the plan first. Study it as written.
The FairTax cult also boasts its own holy manuscript, in this case “The FairTax Book: Saying Goodbye to the Income Tax and the IRS,” by radio talk show host Neal Boortz and his congressional sidekick, U.S. Rep. John Linder (R-Ga.). Cultists
“Cult” Counter: 5
insist that the book, like the Bible, is inerrant and answers all doubts, and that all who read it will earn enlightenment.
I don’t think the book is infallible, but I do advise actually reading it before writing at great length about how the author doesn’t know what the hell he’s talking about.
The fantasy nature of the FairTax is perhaps most glaring in its approach to enforcement. Advocates believe that under their system, tax fraud would essentially cease to be a problem and that the new system would almost enforce itself, allowing the IRS to fade away.
Again, did you read the book? Tax fraud would not disappear, but it is a lot easier to police several thousand retail businesses than three hundred million individuals. Also, the IRS becomes obsolete not because enforcement is unnecessary, but because the states would be doing the enforcement.
But we all know human nature. Ask yourself how many people would be lured into the black-market economy to avoid paying a sales tax of 30, 40, 50 or even 60 percent on expensive items? The FairTax cult says very few ? maybe they’re counting on that magic wand again.
The fiipside of that is that drug dealers and foreign visitors would enter the tax system. When a drug dealer buys a fancy new car, he pays taxes on it. When a Japanese tourist buys a camcorder in New York, he pays taxes on it. Currently, neither of these people pay into the income tax system.
As for black market sellers, well… you’re right. There will always be people trying to buck the system. But again it is a lot easier to police retailers than individuals. Police will somewhere along the line notice that so-and-so is buying a bunch of wholesale goods and never officially selling them. This kind of market already exists on products with prohibitively high sales taxes.
By comparison, do you, Mr. Bookman, believe that nobody cheats on their income taxes?
The grassroots fervor for the FairTax is fed by a growing and all-too-legitimate frustration among working-class and middle-class Americans, a sense that they’re working harder than ever yet losing ground every year.
You forgot to mention upper-class Americans, who are most certainly frustrated with taxes. Lessee… “working” (i.e. “lower”) class, middle class, and upper class. That would be “All Americans” are frustrated with the current system… and rightly so.
Huckabee isn’t shy about appealing to that frustration, not just with the FairTax but with other rhetoric as well.
Oh my God! A politician who promises to do what people want! The Horror! My Eyes!
However, under the FairTax, those folks would end up paying significantly more in taxes, while the tax burden for the wealthy would fall dramatically. It would victimize the very people who look to it for salvation.
People at or below the poverty line would pay nothing under the FairTax. You conveniently forgot to mention the prebate, did you? Simply put: every single American citizen (and legal alien) would receive a rebate once a month for the amount of taxes on spending at the poverty level. Thus poor people pay nothing. Don’t worry, those eeeevil rich people will still pay the FairTax every time they buy caviar or a new yacht. They’ll get the prebate too, but it will be pocket change compared to a yacht! Heck, they spend that much in a week lighting their cigars with hundred-dollar bills.
Let us not forget that the removal of multiple layers of embedded taxes (that is, layers of income tax that hit at all levels of manufacture and distribution of goods) will lower prices, as, again, the FairTax only applies at the retail level, on new goods and services. Price drops will effectively balance out the increase caused by the tax itself. Thus prices will remain much the same as they are, but everyone’s buying power will increase because we’ll all be taking home our entire paycheck.
The real reason leftists don’t like this plan is because it would represent the single biggest return of power from the Federal Government to The People since the Declaration of Independence. Lack of government power means it’s harder to institute socialist schemes. When the country’s citizens no longer have to submit detailed financial information to the government, that makes it a lot harder for politicians to engineer their multitude of social experiments in the form of social programs. When the IRS and its thousands of exceptions and loopholes are eliminated, it’s far more difficult for politicians to buy votes by passing new loopholes that even further complicated the current bloated system.
The FairTax, like other cults, plays its followers for suckers.
You’re projecting, man. It is you playing your readers for suckers.
Power to the People!
[Update: Missed it at the end there… Cult Counter: 6]
1: “name calling by proxy”: v. the act of indirectly voicing a negative statement about another person (name calling), generally while feigning that you are not doing so, by referring pointedly to name calling by others. Ex: “Some people say he’s a criminal.” The “playing innocent” aspect of this is often enhanced by an explicit statement that you are not name calling, but simply pointing out that of others. This can be detected when there is no reason to mention the negative portrayal in the first place, except for the sake of it being mentioned. Ex: “I don’t actually know, but many people say that my opponent is a drunk.”