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.”