The “FairTax” Fraud

Bruce Bartlett tax a look at the latest scam to harness the power of antitax sentiment without actually cutting taxes, the so-called FairTax. Something in general that the not-very-rich, which is most of us, should keep in mind: any revenue-neutral tax reform is going to be a massive tax hike on people like you and me. If it’s revenue neutral, it must bring in as much revenue as the current system, which disproportionately taxes the wealthy. Basic math: if you keep that equals sign and you lower the amount the rich are paying, somebody has to make up the shortfall. Usually the revenue-neutralists say that they’ll do that by getting rid of loopholes and exemptions — such as the home mortgage tax exemption. You can see that that’ll be a political non-starter.

These kinds of things make me see blood red. The conservatives and libertarians who get behind them are the worst sorts of frauds. The problem with our current tax system is not that it’s “unfair” (boo hoo!) or imposes a lot of external costs (which it does), the problem is that the taxes are too high across the board and government at every level is as bloated and inefficient as you would expect of any socialist institution. “Reform” ought to be a dirty word; we want cuts. Slash, eviscerate, take a chainsaw to present levels of spending and taxation. Productive Americans should not be yielding up a third of their incomes (which is about what taxation at all levels amounts to, in my experience) to finance bombs, bums, and collapsing bridges.

By the way, a point that Bartlett doesn’t raise–perhaps the FairFraudsters address this themselves–is that you can’t slap a tax on a product and expect it to sell as well as it does when it’s untaxed. Sprockets at a FairTax price of $1.30 or $1.57 are not going to sell in the quantities of sprockets at $1.00. So to meet the sacred goal of “revenue neutrality” — God forbid the state should have to tighten its belt! — the tax might have to be higher still.

Addendum: Here’s a classic Lew Rockwell article on the “Tax Reform Racket.”


9 thoughts on “The “FairTax” Fraud

  1. FairTaxFraud September 9, 2007 / 12:49 am

    The FairTax has many dirty little secrets that get very little media attention. For a complete list of them see:

  2. IRS Help April 20, 2008 / 1:08 am

    If a FairTax was fair, it would be worth investigating. The problem is that no matter who is in power, they will always want more power. How to get more power? Raise more money. Hence the problem with every tax system on the planet.

  3. Colin Warnick July 28, 2008 / 9:40 pm

    You are way oversimplifying quite a few things. If the FairTax ever did pass you can expect to see a drop in consumer goods prices by as much as %30 due to the money producers would save. Tack on the FairTaxes’ %23 and you are paying approximately the same amount or less for goods you buy. The government would prebate lower income families for all necessities they had to pay taxes on. And did you ever stop to think about the increase in your pay check that would occur with the end of income tax?

    Illegals could not avoid taxation also.

    • Kyle May 19, 2009 / 12:00 am

      Colin, you’ve been drinking the kool-aid a bit too deeply I’m afraid. You first say there will be a reduction in price, but then say your paycheck will increase. You’ve obiviosly don’t read Money Magazine, the Wall Street Journal, or Fortune…..all of whom have pointed out the obvious: where is the price reduction for goods going to come from? Simple, from you. That money that your employer is currently paying the government in taxes….isn’t going to you. It’s being elimated completely. And as far as your comment on “illegals” — you’re even more wrong. Most of the “illegals” are living at or below the poverty line in the country. The volume of new goods they’re consuming is minimal. Under Boortz’s plan the market for used goods would increase. So riddle me this, Batman: Why would you expect “illegals” to start purchasing new items, when the market for used ones are going to exponetially increase? This idea is a FRAUD.

      • Dan May 6, 2015 / 10:22 am

        The FairTax would end income and business taxes, which would bring back to the U.S. capital sent over seas. With a larger tax base, we would need to pay less proportionally in taxes under the Fair Tax than we do now even if it does bring in equal revenue. Ignorance of these facts and logic is the only way to make your argument work.

  4. Dugan King December 18, 2010 / 12:02 am

    The Fair Tax Plan
    Years ago (on July 11th, 1993 to be exact) the Arkansas Democrat-Gazette published an original proposal to reform our broken tax system. It appeared under a provocative headline;

    “It’s time to scrap the IRS and create an equitable tax system”

    The non-partisan article (written by yours truly) explained how income and property taxes were illogical, unfair and prone to chaos and corruption. My revolutionary thesis proposed replacing invasive taxes with a simple excise or national sales tax.
    In retrospect, anytime we grant government the power to tax income or property, individual freedom becomes a temporary illusion. Such intrusive taxes should not exist in a country that professes “liberty and justice for all.” With these tools in place, the State can slowly tax its way to absolute power. Once deprived of civil rights, our children and grandchildren might one day find themselves shackled under a new mode of serfdom and subject to the tyrannical whims of an elite oligarchy.
    Can any government be trusted with direct taxing power? History says absolutely not! That is why our Founding Fathers, in their profound wisdom, drafted a Constitution that originally prohibited non-uniform, capitation (or head) taxes.

    Karl Marx and the Income Tax
    The graduated income tax was first promoted by Karl Marx in his Communist Manifesto of 1848. For those unfamiliar with political history, Marx was opposed to freedom and democracy. According to his Communist creed, the Sate would become supreme and citizens would become dependent upon the State for all their needs. Under Marx’s peculiar vision, traditional concepts such as private property and economic freedom were considered obstacles to the creation of a supreme State. For Communism to succeed such basic rights would have to come to an end.
    In pursuance of his objective, Marx introduced the idea of the graduated income tax as a major plank in his manifesto. Like a choker chain, an income tax would enable the State to thoroughly manage and control it’s subjects while robbing them of the fruit of their labor.
    He also proposed a central banking monopoly as another major plank for establishing Communist power.
    Karl Marx was clearly a man without a soul. His Communist caste system has been tried and failed. His propositions are diametrically opposed to the American way of life. That is why a lot of brave Americans have spilled blood and died to stop the specter of communism, yet it continues to linger somehow, like a ghost in the attic.
    It was during the administration of Woodrow Wilson, who was surrounded by Marxist advisors such as Edward Mandel House, that two of the major planks of the Communist Manifesto were railroaded into law. The Federal Reserve Act created a central banking monopoly and the 16th Amendment authorized an income tax. This diabolical combination has drastically altered the meaning and spirit of our U.S. Constitution. The moment these planks became law is when “We the People” began to lose control over our destiny.
    Today, after millions of bankruptcies, home foreclosures, bank takeovers and corporate crashes, all due to a spendthrift government, Marx’s socialist vision seems to be creeping into reality. But it is not too late to reverse the direction. We still have a chance to preserve our American legacy by demanding reform of our national tax code.

    “Vigilance is the price of liberty!”
    We owe it to our children and grandchildren to take immediate action. In order to preserve liberty and save the economy we must first establish a single tax that will satisfy all the elements of thrift, efficiency, simplicity, uniformity and fairness. The only way to do that is to replace Marx’s income tax with a national sales or excise tax.
    A sales tax is the only tax that is fair and uniform because everyone pays the same percentage. With a national sales tax you can determine how much tax you pay by the way you spend your money. If you decide to save or invest your money, you would pay no tax at all. And in spite of the false claims of Marxism, a sales tax is not regressive but progressive because wealthier citizens who spend the most will be taxed the most. To make it even more progressive, luxuries and vices could be taxed at a higher rate than basic necessities such as food and medicine…which could be tax free. And sales taxes are easiest to compute and collect. So all the positive elements mentioned before are therefore satisfied. You simply can’t do that with an income tax or a property tax. It’s mathematically impossible.

    Economic Results
    The elimination of the income tax would create the biggest stimulus in U.S. history. It would supercharge the purchasing power of millions of workers. Imagine taking home your gross paycheck free of deductions. Such a big raise would quickly translate into a greater demand for products and greater savings. Multiply that times every worker in America and the economy would go… BOOM!
    By eliminating payroll taxes, millions of American businesses would be free from non-productive paperwork and unnecessary accounting costs. The elimination of payroll taxes would lower the price of American products at home and overseas and enable us to better compete in foreign markets. The resulting drop in prices will most likely absorb and neutralize the initial impact of a national sales tax.
    Abolishing Marx’s income tax would also enable our government to excuse thousands of IRS bureaucrats, engaged in non-productive arithmetic. Their Gestapo days of terrorizing hard working Americans would come to an end. And due to the increased business activity sparked by abolishing income taxes, the government would actually reap more revenue from the sales tax. The combination of less bureaucracy and more revenue should enable them to balance the federal budget and pay down the national debt.
    Replacing the income tax with a sales tax right now would send positive shockwaves across the marketplaces of America. It would make life much easier for everyone including our government. It’s a win/win proposition.
    After my article appeared, numerous phone calls came in from readers supporting my thesis. One kind gentleman sent a letter to the editor to nominate me for U.S. President. I must admit, it was good for my spirit and ego. There were also suggestions to organize a political action committee, but I had no free time to become politically active again. My intent was to introduce the idea in the hope that someone with political muscle might read it and take it to heart.

    Birth of the Fair Tax Movement
    Today it appears the idea has caught on in a big way. In 1995 a group of Houston businessmen, led by Leo E. Linbeck, Jr., spent millions of dollars to conduct academic research on the subject. Their positive findings compelled them to launch the Fair Tax movement.
    I was unaware of this until I started following Mike Huckabee’s campaign for President. Apparently the Fair Tax movement made great progress in Iowa during the Presidential primary. Huckabee learned about the Fair Tax movement while campaigning in Iowa and he immediately adopted the plan. In his recent book, “Do The Right Thing,” he attributes his success in Iowa to his position on the Fair Tax Plan and gives it some of the credit for his amazing second place finish behind John McCain.
    And now a bill to enact the Fair Tax into law is pending before Congress. It is gradually attracting co-sponsors from both sides of the aisle. And Missouri, the “Show Me State,” has become the first test case. They recently replaced their state income tax with the Fair Tax.
    I’m very excited by all this. Could it be possible that my letter to the editor, published here in Little Rock, was the tiny spark that ignited the Fair Tax movement? I certainly like to think so. One should never underestimate the power of the pen. It can sometimes alter the course of history.

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