It is coming back. So-called FAIR tax, meant to solve all our tax problems. The return still pushes a lot of flaws. Rather than rebut them all, I’m going to hit three that never seem to go away.
For those who’ve missed it, it is a national sales tax on end user items only (which distinguishes it from a VAT).
Problem one. The plan always contains the step “eliminate the IRS”. Look, folks, it’s a tax that’s going to the feds, and if you eliminate the IRS some other agency will have to take over handling the money – counting it, paying rebates, etc. Further, you’ve got exemptions. If you’ve got exemptions you will have people who should pay but don’t – mistake or fraud, the money still needs recovered. The arbitrary claim that the states will be the collectors doesn’t eliminate those points. It won’t eliminate the IRS, it’ll just rename it.
Problem two, those exemptions. This is supposed to simplify the issue. Exemptions are complications. This is especially ugly when you see one constant exemption: investments. Very bland, that word. What it means is that people who presently pay capital gains will pay nothing. By the way, this is also supposed to eliminate corporate income taxes. Bottom line, a detailed examination shows the code would be just as complex, but the rich would pay less than they do now.
(An argument I used to use applies here. The rebates mean the poor pay less. The exemptions mean the rich pay less. Since this is supposed to bring in just as much, who is making up the difference from the rich and the poor?)
Problem three is more obvious to people now, and that’s the unstable nature of sales taxes. In bad years, the government doesn’t have the money it needs to cover and assist the people.
That’s three (or more honestly four) major problems with this that never seem to go away. The only one I’ve seen argued is the last, and the argument there is more a question as to whether that is a bad thing. Perhaps it is not surprising to discover these people are also balanced budget fanatics.
FAIR tax isn’t. As long as that’s true, I will object.