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TechnoratiFervent Faith in Fair Tax Defies Reason
I wouldn't want to accuse Georgia's Fair Tax movement of being a cult, but it does have a disturbing number of cult-like attributes. Among other things, its adherents display an almost religious fervor for their cause, to the point that they become blind to the obvious irrationality of claims that are made on its behalf.
The prime advocate of the Fair Tax in Congress, U.S. Rep. John Linder (R-Ga.), claims the tax will do away with "all personal income taxes, corporate income taxes, payroll taxes, self-employment taxes, capital gains taxes and gift and estate taxes." Instead, those taxes will be replaced with a retail sales tax of 30 percent on all services and new goods.
Among other benefits, Linder claims that adopting the Fair Tax will drive down retail prices by 20 percent to 30 percent. That price drop would almost completely offset the Fair Tax's 30 percent sales tax, meaning that in effect, we could run the federal government for free.
But wait! If you act now, Linder will also throw in a 10.5 percent increase in the nation's gross domestic product the very first year the Fair Tax is in place. And as a special bonus, interest rates would also fall by 20 to 30 percent.
Linder and other Fair Tax advocates, including talk radio host Neal Boortz, make two other promises as well. First, they say, the Fair Tax will be revenue-neutral, generating just as much money as the current system.
Second, they promise that the Fair Tax will not shift the tax burden onto low-income households, as sales taxes usually do. To their credit, they make an honest effort to achieve that goal, using a monthly check to compensate low-income households for the higher sales tax they would pay.
But let's review. Under the Fair Tax, low-income Americans won't pay taxes; corporations won't pay any taxes either. Yet the Fair Tax is guaranteed to generate the same amount of revenue as today's system. Basic arithmetic requires that somebody's taxes increase. Who will that somebody be?
For example, would it be a typical middle-class two-income Georgia family with two kids, a mortgage and college tuition payments? As it happens, I have access to the tax returns of just such a family.
At www.fairtax.org, the main Web site of the Fair Tax movement, I plugged the Bookman family financial data into the FairTax calculator. The model reported that the Fair Tax would save me $7,500.
Suddenly, the Fair Tax didn't seem such a bad idea.
Still, the mystery remained: If the middle class pays less, and corporations and poor people don't pay anything at all, who pays more? The rich? That didn't seem likely given Republican enthusiasm for the Fair Tax, but again I turned to the FairTax calculator for help.
As it happens, I also had access to the 2006 tax return of a rather wealthy couple who reported an adjusted gross income of $765,801 and paid $203,021 in federal taxes. What would this couple, a certain George and Laura Bush, pay under the Fair Tax?
Plugging their data into the calculator, I learned that the Fair Tax woud cut their federal tax burden by $74,596.
I then began to punch invented numbers into the model, determined to find somebody, even a theoretical somebody, who would pay more. A family with $1.5 million in income, with a $4.5 million mortgage? Nope. Under the Fair Tax, they would save $436,624.
Finally, I hit paydirt. It turns out that a married couple with two children who rented their home and made $40,000 would, under the Fair Tax, pay $860 a year more in taxes than they do today.
Somehow, I doubt that will be enough to make the concept revenue-neutral.
In 2005, a panel appointed by President Bush to study proposed changes in the federal tax system reached the same conclusion, though its process was more sophisticated. It found that eliminating just the federal income tax — leaving payroll taxes, estate taxes and gift taxes in place — would require a retail sales tax of at least 34 percent. As it noted, "no state or country has ever levied a retail sales tax at a tax rate that even approaches the 34 percent required to replace the federal income tax system."
The panel also reported that replacing the income tax with a 34 percent sales tax would reduce taxes on just two groups — households making more than $200,000, and those making less than $30,000. For everyone else, the tax burden would increase.
Unfortunately, such data don't seem to penetrate the cult. A core of Georgia Republican Party activists has completely embraced the Fair Tax, and GOP elected officials have done so as well. Every Georgia Republican in Congress is a co-sponsor of Fair Tax legislation, as are both U.S. senators. The fever is spreading to the state Legislature, where House Speaker Glenn Richardson is touting his radical tax-reform measure as a state version of the Fair Tax.
Anybody have the number of a cult deprogrammer?
Jay Bookman is a regular columnist for the Atlanta Journal-Constitution.
© 2007 The Atlanta Journal-Constitution
7 Comments so far
Show AllFairtax reminds me of those little pills they sold the gullible, to let you run your car on water, instead of gas.
Neal Boortz wrote "The federal government itself will become a major taxpayer." Neal put that farce on page 148 ---- I'm convinced if he put that in the first few pages, the country would have laughed the absurdity off the national stage.
Boortz put that absurdity deep into the book -- after he lulled the guillible into a stupor with countless phoney promises.
How can the government pay itself ANY taxes -- much less become a "major taxpayer." If the government can pay itself taxes -- why bother the people? Just tax the government and leave the rest of us alone.
Taxing the government to pay the government is like me paying myself 10,000 a day to cut my own grass. I can write the check, I can even deposit the check, but at the end of the month, I don't have 300,0000 dollars. I just have short grass.
Because of that farce -- by itself - the fairtax can't possibly be 23%, because it would be 500-600 billion short. So the tax rate would have to be 40%, on that "mistake" alone.
Why would Boortz et al pretend to tax the government? They aren't stupid, are they? They have to pretend to tax the government, because ON PAPER they have to show their sheep the tax can be 23%, because they want people to believe the tax "will be a wash" since the fairtax also "cuts prices" 22%.
Well, Fairtax doesn't cut prices. If they admitted that all prices would go up at least 40%, even the gullible wouldnt go along. A 40% sales tax on new homes? A 40% sales tax on cancer patients?
A 40% sales tax on gasoline? Rent? Utilites??
A 40% sales tax on insurance premiums?
Not one fairtax groupie in 1000 know that insurance premiums would be taxed -- car insurance, health insurance, ALL insurance, would get a 40% tax.
How do you tax a cancer victim 50,000 in sales tax on their 120,000 effort to stay alive? Suppose the cancer victim doesn't happen to have 50,000?
Fairtax is absurd nonsense. Its more of a study in the psychology of wishful thinking -- and how easily people are fooled.
The anti-FairTax crowd gets very little press so not many people have heard about the FairTax Dirty Little Secrets. Please visit fairtaxfraud.com and then make up your mind.
Also, I thought that if you could "live off your investments" you were not a member of the "middle class". Most "middle class" people, myself included, work for a living and earn most of our income from a payroll check. Again, I think that we differ only in semantics.
Paul, I stand by my comment. I think that our disagreement comes from how we define "middle class". I think that "Lusmu" has it right, but am open to more information.
Any way you slice it, the so-called "fair tax" is just another right-wing fraud pushed by those who will benefit from it most onto those who will benefit least.
>>"Let's face it: as with all tax breaks for the rich, the >>middle class takes the hit."
>
>Didn't you read the article? It's the working poor who take >the hit.
Uum, I thought the income bracket between $30K and $200 000 could be described as middle class.
Could this system be some sort of a bargaining tool? It sounds so outlandish, that this system could be adopted as is. But then again, stranger things have happened during Bush administration.
"Let's face it: as with all tax breaks for the rich, the middle class takes the hit."
Didn't you read the article? It's the working poor who take the hit.
Why this in sitence that anyone with a job and some kind of a roof is "middle class"? You are not middle class unless you can live off your investments. Everyone else is a worker or a member of the aristocracy - and don't kid yourself that the US does not have an aristocracy.
I live in Georgia and would like to echo what Mr. Bookman writes here. There are many, many people who are buying into the "fair tax" farce yet have no idea how the plan would work in reality.
Let's face it: as with all tax breaks for the rich, the middle class takes the hit. The middle class is paying for Bush's tax giveaways now, and we'll be left holding the bag again if the "fair tax" crap actually comes into existence.
I've heard Boortz' explaination of this tax concept, and his presentation is quite misleading. People hear the words "fair" and think "just". They automatically assume that it is fair for everyone. The hear the hollow rhetoric of "everyone pays the same rate" and somehow think that it is "fair" for a multi-millionaire to pay the same tax rate as a single mother of two who makes $30K per year. Sounds good on paper, but is it really fair to ask that woman to pay as much of her income as does the multi-millionaire? Who do you think has benefited most from the system? Who do you think has a larger burden to pay into society?
The only "fair" tax is a progressive tax, much like we have in place now. If people want to simplify the tax code then let's do it. Let's cut out all the deductions and loopholes for the rich and for corporations. Let's eliminate corporate welfare and start taxing investment income at a higher rate than payroll income. Let's get rid of the cap on Social Security income and all of us pay 100% for a change. (Currently income over about $80,000.00 is exempt from Social Security tax.)
How about a PAY YOUR FAIR SHARE tax? Wouldn't that be better than just another giveaway to the rich?