This semester, I had the pleasure of writing a thesis paper regarding the FairTax in the United States. I wound up arguing against it, and I think it's not so much because the FairTax itself is a bad idea, but because many of the arguments for it are nonsense.
Take, for example, this paper by FairTax supporter Neil Boortz. His major points:
"Here Adler once again ignores the role of embedded taxes. The price of consumer goods in this country would remain essentially the same. The embedded taxes are merely replaced by the FairTax." This is a direct quote and to me, it underscores the idiocy of Boortz's argument. If the FairTax is "revenue-neutral," as advertised by Boortz and others, it would have to collect enough revenue to replace the embedded taxes as well as the income taxes. Boortz cannot honestly believe that everyone will have more money, prices will be unchanged, and the government will continue to maintain its current expenditure. However, he repeats this same argument about embedded taxes over and over, throughout this article and The FairTax Book.
"First of all we have this silly insistence on quoting the FairTax rate as 30 percent rather than 23 percent." FairTax supporters quote the FairTax as 23% (tax-inclusive), and justify this by saying that the income tax is tax-inclusive, and therefore, we should quote the replacement tax in the same manner. However, in America, we already have sales taxes at the state level, and they are quoted as tax-exclusive. Getting hung up on the difference, to me, is focusing on nonsense rather than the substance of the argument. Personally, I'd say paying 30% really isn't a bad deal for most people, and FairTax supporters shouldn't waste their time trying to confuse the general public about tax-inclusivity or exclusivity.
There are definitely merits to the FairTax, but Boortz really doesn't outline them. He rambles and rambles about embedded taxes and 23%, failing to ever discuss the important reasons why Americans should support a FairTax. This type of argument not only drives me crazy, but also makes me question whether or not he's avoiding the issue because there are serious flaws that I am somehow missing.
This article presents a fair counter-argument to Boortz and his supporters.
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This article in the Wall Street Journal presents a good pro-FairTax argument. Here's an excerpt:
Significantly, the FairTax eliminates all loopholes, gimmicks, exemptions and deductions from the federal tax system. Under the FairTax, Congress would no longer be able to reward friends, punish enemies or manipulate behavior through the tax code. The FairTax would also eliminate the lucrative tax lobbying practices that represent more than 50% of all lobby dollars spent annually in Washington.
My take: Eliminating loopholes will definitely make the tax code more fair, and reducing the amount spent on lobbying (not to mention the amount spent by the IRS, which would be significantly less with the FairTax) will benefit all American taxpayers. I still think tax simplification is the ultimate goal, but maybe the FairTax is the only possible way to truly simplify the tax code.
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