Thursday, August 14, 2008
WIP: The Fair Tax
Reasons we support the Fair Tax:

Debates

We dream of a presidential debate where the two candidates state their consumption-based tax rate, and why. Where every voter will know exactly what they will pay at the store during the next administration, and why.

For example:

Candidate #1: "I will reduce the Federal payrolls by 10% and Federal farm subsidies by 80%, which will bring the Federal Sales Tax to 21% from 23%."

Candidate #2: "I will offer free massage and aroma therapy to everyone and give $5000 vouchers to every baby, which will bring the Federal Sales Tax to 25% from the current 23%."


The current tax complexity does not allow for us to apply a dollar amount to a candidate. In essence, "how much more will I pay if she becomes president?" Not that a value isn't possible to determine, but the complexity allows the target candidate to argue away the charge and create doubt. Besides, most taxpayers do not know what they pay today. It is not a front-burner issue.

The Fair Tax means we all pay, every day. When that happens, future campaigns will live and die by the new slogan: "It's the consumption tax rate, stupid."


Savings

Taxes influence behavior. The current tax code encourages tax payers to hire tax experts to make sense of their annual tax return. The Fair Tax, instead, encourages savings. No capital gains tax. No estate tax. No penalties for saving - period. Some of us still won't save. Some of us will research the cost of a case of Ramen.


Envy

Envy drives the politics of the left. The current tax code represents this in its progressive taxation and poorly hidden wealth redistribution framework. In 2005, the top 1% of earners paid 39% of all income taxes. The top 5% - 60%.

In the Fair Tax world, instead of the intellectually weak (liberals) succumbing to fits of envy when they see their peer purchase that shiny new import, they'll respond with an elitist snicker knowing the new car owner paid more in taxes than they did.


Criticism

Critics seem to think if you can find something wrong with legislation, it shouldn't be considered. Every piece of legislation has something wrong - it is how this nation works. We think critics need to stop telling us about the trees, and join us in viewing the forest. Will the Fair Tax assumptions x, y, or z pan out? Maybe. Is the tax plan fair? Without a doubt.

1) Critics say the 23% is really 30%. Ok. Bring it on. It is still more fair than today's tax code, and we are confident the next election will drive the necessary management changes in Washington. Remember critics, you only pay the 23%, or 30%, if you choose to pay it. You pay $0 in taxes if all you do is cry wolf!

2) 16th amendment. Can it be revoked, or will the doomsday scenario exist where the Fair Tax will co-exist with an income tax, or the possibility of an income tax? Good point. We want the Fair Tax enacted and the amendment revoked on the same day. If Americans agree, including the 24 million that will pay AMT in 2007, 2008 may be the year to make this happen.

3) The rich will find a way around the tax. James Taranto mentions this in his Dec 18 Best of the Web article <link>, but doesn't elaborate. Playing the envy card here? Will Buffy jump on daddy's Learjet to Europe to buy an iPod to avoid the consumption tax? Will there be 5-day-used Porsche's filling lots where new cars were once displayed?

4) In Taranto's same criticism, he says "the Fair Tax ... is only a fantasy. A belief in magic is not a qualification for the presidency." A valid warning. Anybody can say "Fair Tax", but far less could lead a nationwide campaign to sell it to the voters.

Where do we draw the line here? If a candidate wins 45 states on a Fair Tax platform, is it less fantasy? Does a 40-state victory suggest change is possible?

We recall a president that had to wait for the Supreme Court to confirm his win. He campaigned on a $1.2b tax cut pledge. He passed two tax cuts, the first being $1.6b.




This is a Ushanka.us Work in Progress (WIP). We'll add or modify as the mood hits us. Comments are appreciated - let us know what you think!







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