“Fair” Tax: A Terrible Idea That Just Won’t Die

Pieter Brueghel the Younger, 'Paying the Tax (The Tax Collector)'
Pieter Brueghel the Younger, ‘Paying the Tax (The Tax Collector)’

Here we go again: The “Fair Tax Act”  is out for its perennial limp around the dead legislation track.

The “Fair Tax” (or “FairTax” for those with defective space bars on their keyboards) proposes to replace the current federal tax regime with:

First, a 30% national sales tax, falsely advertised as 23% by calculating it “inclusively” — e.g. a 30 cent tax would be 23% of $1.30, which is the total cost, including tax, of a $1 purchase — on all services and “new” goods.

Second, a cradle-to-grave monthly welfare check for every man, woman, and child in the US, falsely advertised as an “advance rebate” or “prebate,” even though it’s not conditioned on payment of any tax at all.

Third, pretending to “eliminate” the IRS by re-naming it and/or parceling out its functions to other government bureaucracies.

In baseball, three strikes is an out. With legislation, three lies means extra innings until the bill passes or everyone dies.

It was a bad idea when Congress first considered it in 1999.

It was a bad idea when Neal Boortz and John Linder published The Fairtax Book (which should have been subtitled “Putting Lipstick on a Pig, Badly”) in 2005.

It’s continued to be a bad idea, and recognized by most as such, every time it’s raised its hoary head.

But for some reason, many supposed advocates of “smaller government” seem to think it would be an improvement on that metric. It wouldn’t.

“Fair Tax” advocates paint the proposal as “revenue neutral” (that is, the government would be taking just as much of our money as it did before). They also say that, with the monthly welfare checks, it would remain just as “progressive” — that is, redistributive — as the income tax.

What they don’t like to mention is that everyone who’d already paid income tax all their lives would have their savings taxed AGAIN, by 30%, when they spent that savings.

Or that the prices of “used” goods would rapidly rise — when the price of all “new” goods instantly goes up by 30%, there’s a lot of room to demand more for “used” while still remaining competitive.

Or that the “prebate” checks would instantly join Social Security as a political “third rail” that must not be touched, and a political football that could be kicked around to get anything politicians want by claiming a threat to the checks.

Does that sound like “smaller government” to you?

If so, check your hearing aid battery.

Thomas L. Knapp (Twitter: @thomaslknapp) is director and senior news analyst at the William Lloyd Garrison Center for Libertarian Advocacy Journalism (thegarrisoncenter.org). He lives and works in north central Florida.