Matters of Opinion Fair Tax Special!
Content: The Fair Tax
Guest: Sean Shepard, Director of Communications for the Indiana Fair Tax group. Be sure to check them out at www.infairtax.org, and add them on your facebook page, www.facebook.com/infairtax. Become a fan and let them know that you appreciate all of the hard work the Indiana Fair Tax people do to help change this regressive tax system we have today!
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[...] Matters of Opinion Fair Tax Special! travis posted at 2009-10-26 Category: Uncategorized [...]
Support the Fair Tax! | Kevin Tracy
26 Oct 09 at 9:35 pm
Nice interview on the FairTax. Alas, I could only get about 20 minutes of the audio then the link stopped. But you asked why liberals would not support the FairTax. (By the way, it’s not just liberals who oppose the FairTax — Hugh Hewitt and Bruce Bartlett are prominent conservatives who oppose it as well.) I can’t speak for all liberals, but here’s a partial answer:
1. The rate would almost certainly be much, much higher than 23%. Virtually every independent economist, government agency and policy group that’s studied the FairTax over the last decade has concluded that the “revenue neutral” tax rate would be at least 40%, but more likely over 50%. (on a tax-exclusive basis.) Studies and reports were done by the Brookings Instution, Rice University, the Joint Committee on Taxation, President Bush’s Tax Reform Commission, among others. Your guest just ignored these studies and acted as if the 23% (tax-inclusive) rate was a given. It’s not.
2. The FairTax would be easy to avoid, particularly for the very wealthy. Examples: Paris Hilton buys a “used” $40 million mansion in Beverley Hills tax-free, while her maid who must rent an apartment pays the FairTax on each rent payment. A hedge fund manager buys a yacht and a condo in the Cayman Islands tax-free, while a Forida retiree pays the FairTax on the purchase of his RV and bass boat. A wealthy family skiis tax-free in Switzerland, while a middle class family is stuck paying the FairTax on their ski vacation to Colorado. Examples like this are endless. Yes, the middle class could also avoid the FairTax by buying used homes, vacationing in Mexico, driving used cars, but that just supports the notion that the FairTax is largely unenforceable.
3. If you could enforce the FairTax, it would be terribly regressive, even with the prebate. Statistically, the wealthy spend a much lower percentage of their incomes on goods and services than do the middle class. Think Warren Buffet as the most extreme example. He might have an income of $1 billion, but he only spends a couple hundred thousand dollars a year on what would be taxable under the FairTax. (Remember all of his business expenses would be tax-free.) Even though he only pays capital gains tax at 15%, his taxes under the FairTax would be less than 0.001% of his income. His secretary, on the other hand, probably spends 90%-100% of her income on goods and services that would be taxable under the FairTax (food, clothing, rent, health insurance, gasoline, etc., etc.). So even if the poor were “untaxed” by the FairTax, its burden would fall primarily on the middle class.
Now, one can quibble with my examples and make plenty of counter-arguments, but you get the gist. of my argument. The FairTax is nowhere near the panacea its more vocal proponents make it out to be. By the way, these issues have been endlessly debated on the FairTax Blog. I’m not saying the majority on that blog necessarily agree with me on these points, but I thought I’d give you a liberal’s perspective.
TruthSeeker
27 Oct 09 at 3:29 pm
Truth Seeker, I’m by no means at expert on the Fair Tax, however you might be interested in a show that me, Kevin, and my liberal friend Don did (its perhaps a month back) on why liberals should be supportive. Also, I’ll pass the question on to the Fair Tax people and ask for a response, since they would be much more qualified than I when answering such questions. Thanks for the feedback though!
Travis
27 Oct 09 at 3:58 pm
Travis — I wasn’t able to locate the archived show you reference in you email (but I’m such a techno-spaz that doesn’t surprise me.)
I would be very interested in seeing any response you get from the FairTax folks. No offense, but my experience has been that they are very quick to bash critics, but very slow to provide actual evidence to support their claims.
TruthSeeker
29 Oct 09 at 6:55 am
TruthSeeker, I went back and looked for it, it is the episode on 7/23/09. My apologies, I didn’t realize that the show went back that far (and for the record if you are a techno spaz, I’m techno illiterate.) I’ll send the message to the Fair Tax people again, and either post it up here myself or ask them to directly post. I imagine they are pretty busy, I know they are more than willing to answer questions but don’t want to put false or misleading information out there.
Travis
29 Oct 09 at 1:54 pm