Tuesday, May 5, 2009

The FairTax Fantasy

Radio talks show host Hugh Hewitt takes on another radio talk show host's goofy idea:
Launched by talk radio host Neal Boortz and Georgia Congressman John Linder and embraced by Presidential candidate and former Arkansas Governor Mike Huckabee, the FairTax movement, though relatively small, has grown into a significant and very media-savvy force pushing for radical changes in the way the federal government will collect taxes.

The details of that plan, and why its advocacy is a disaster for the GOP and why its implementation would be a disaster for the United States are discussed in this book. Put simply, the imposition of a massive new sales tax -- at least 30% but probably much higher -- on every product consumed in the United States and accompanied by the simultaneous repeal of the federal income tax code is a risky and deeply dangerous attempt to sell simplicity to a tax weary public. Hank Adler and Hugh Hewitt both favor real tax reform, but don't advocate either economic or political suicide. The FairTax is both.

(Via TaxProf Blog.)

My view of The Fair Tax? Its advocates are intellectually dishonest from the gate when they insist their plan doesn't call for a 23% sales tax but for a percentage the claim is less. ( A $100 price tag would include $23 in Fair Tax. So $23 of $100 is 23%, right? Not so fast. The math should really be $23/$77 = 30%. That's how a sales tax is figured. A 5% sales tax on a $1 is $1.05. The percentage is figured by .05/1.05.) Also, the false promise off abolishing the IRS lacks any kind of anchor in reality.

A quick scan of Boortz' website shows no rebuttal but I'm sure he's got one ready. If I come across it, I'll link to it.

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