Submitted by Tom, Dec 17, 2007 14:54

This same article by this same clueless author appeared on Bloomberg.com last week, and here it is again with the same holes and inaccuracies. It's amazing to me the amount of negative press this issue gets, and how much of it is so horribly off-base. My suspicion is that most of the authors, such as this one, don't bother to read the specific legislation on the issue. Instead, they seemingly base their comments on some ficticious general national sales tax, not on the highly reasearched and thought-out plan that is the subject here.

Let's start with the rate. The Fairtax plan clearly states an inclusive rate of 23%. The author states this is "beyond disingenuous". Huh? A 23% inclusive rate means that of every dollar you spend, 23% (or 23 cents) goes to the Feds. Stated exclusively, yes, the rate is 30%. No one argues that. However, the amount is still the same 23 cents on the dollar, regardless of whether the rate is quoted exclusively or inclusively. There is no attempt at hiding anything or deceiving anyone. Whichever rate you choose to use, 23 cents of every dollar you spend would be federal tax. Also, she fails to metion, as most critics seem to, the embedded taxes currently being paid by all of us now. Once those are removed and the Fairtax applied, prices will increase by only a slight margin, not 30%. Add to that the fact that you would then take home 100% of your pay, and your buying power increases to offset the tax.

She then alludes to the creation of a huge black market problem, whereby the average family will be buying DVD players from shady vendors in back alleys. Really? Having read the actual legislation, I find this rather comical. Where does the author suppose these mysterious vendors would get these DVD players to sell tax free? Would they steal them? Perhaps. That occurs today. No reason to suspect it won't happen on some small scale if the Fairtax were enacted. But if she is suggesting that somehow these vendors would be able to buy them wholesale, untaxed, and then sell them tax free, she is sadly misinformed. First of all you need to be a properly licensed business to be eliglble for tax-free business-to-business purchases. And that does not mean that everything you as a business buy for resale would be free of the tax. In fact, in most cases, businesses would buy the items including the tax and then deduct the amount of the tax paid from their monthly or quarterly remittance to the Feds. Also, both the buyer and the seller of and goods sold tax free for resale are subject to very close scrutiny and stiff penalties for violations. It's highly doubtful, then, that major manufacturers or wholesalers will be selling tax-free goods to anybody who shows up with a suspect business license. And if you are thinking you'll just go get a business license and buy everything wholesale, free of the tax, think again. Let's forget for a second that, once again, you actually will pay the tax on MOST items, but what happens when the Feds come calling looking for their 23%? The Fairtax just took you, as an individual, completely out of the purview of the government vis a vis taxes. Now you are going to throw yourself right back under their watchful eye by creating some fake business? Not very smart.

Then she mentions the issue of a dual tax system. Yes, the 16th Amendment would still exist even with the passage of the Fairtax legislation. However, the 16th just allows the gov't to collect income tax, it does not require it to happen. And the Fairtax legislation would completely replace the standing income tax code. In other words, there would no longer be any law on the books regarding income tax. In order to collect income tax again, the Congress would have to pass legislation to reinstall the 50,000+ page income tax code. If we were to stand by and let that happen, then shame on us. Granted, the repeal of the 16th should be the ultimate goal, but if that doesn't happen, there's no reason to think it would be very easy for the Congress to have both taxes in place.

Legitimate criticisms of the Fairtax plan should be welcomed, but at a minimum, they should be based on the actual plan, not figments of (pseudo) journalist's imaginations. To be sure, the plan is not perfect, however, it would be a vast improvement over the monstrosity under which we suffer today.

Note: Comments are screened, and in some cases edited, before posting. We reserve the right to reject anything we find objectionable.