Thursday, March 18, 2010

The False Promise of The Fair Tax

Last year was about the last time I heard anything about the goofy idea of The Fair Tax but with soaring deficits and abounding questions about how to fund Obamacare should it pass, the Fair Tax may be getting another life. National Review's Ramesh Ponnuru has a pretty good takedown of this deceptive idea:
Here’s the pitch: The FairTax — a plan to replace the federal income tax and payroll tax with a national sales tax — will get rid of the IRS forever. It will let workers keep their entire paychecks and retirees keep their entire pensions. It will raise just as much money as the current tax code. It will promote economic growth. It won’t hurt the middle class, and it won’t cause prices to rise. It will even end our illegal-immigration problem.

These claims are drawn from the leading proponents of the plan: a group called Americans for Fair Taxation, former Republican presidential candidate Mike Huckabee, and the trio behind the book FairTax: The Truth. By painting an attractive picture of a prosperous America without an IRS, they have gotten many conservatives to become enthusiasts for their cause. Rising conservative star Marco Rubio, a Senate candidate in Florida, has endorsed the FairTax in the past (although more recently he has hedged on it). Republican congressman John Linder of Georgia, a FairTax co-author who just announced that he will not run for reelection, has made promoting it his principal mission in Congress. The Iowa Republican party has endorsed it. It seems to be gaining support among tea partiers.

The FairTax sounds too good to be true. It is. The campaign for the FairTax is deeply misleading, and much more likely to set back the cause of tax reform than to advance it.

Our current system of taxation is far from perfect but there's nothing about the Fair Tax that would bring us closer to a fairer, more efficient system. Its dishonest supporters only muddy the legitimate dialogue of tax reform we should be having.


  1. It's hard for me to believe anybody (let alone Repubicans) could push through any major tax reform after HCR (win or lose). I'd think they'd want to maximize revenues by amping up equities (to maximize 401(k) retiree taxes) as well as encourage bracket creep by letting inflation run to the maximum amount bearable. We haven't suffered any real inflation for so that long we've forgotten how threatening it can be.

  2. HCR has tax reform: an tax on interest and dividends as well as an increase in Medicare. Oh, but only on the rich, so that's okay. See? Tax reformed!