Chad Blodgett

My brother-in-law, Luke (I would link to him but for some reason he hasn’t started a blog yet), sent me a “candidate match” test that he saw on CNN.com. This test asks you a few questions to see which presidential candidate you are in alignment with.

The one question that I had a hard time answering was about the current Income tax in America. The question asks what you would do - keep the current income tax structure, simplify it, or do something else, like a flat tax or the fair tax.

I had read a little bit about the Fair Tax and understood it as a consumption tax – meaning that you only pay taxes on the things you buy and not on your income. That was about all I knew so after a bit of research, here is what I found…

FairTax.org talks of how the fundamentals of taxation (even from the founding fathers) are…

• Only people pay taxes
• Consumption taxes are the oldest form of taxation for many good reasons.
• Consumption tax rates are self-limiting.
• Consumption taxes, throughout history, have enhanced civil liberties and more.
• Direct taxes (income taxes/poll taxes/head taxes), throughout history, have been the tools of tyranny.
• Uniformity of taxation wards off special interest manipulation.

From those above fundamentals, FairTax.org goes on to say that Fair Tax is an improvement from our current tax system in the following ways….

• The FairTax is revenue neutral at $0.23 out of every retail dollar spent.
• The fair tax is imposed on a base that is twice as large as the base of taxable income today Taxing on that base would
  generate about $2.6 trillion - $358 billion increase
• The FairTax lowers the lifetime tax burden for most Americans.
• This point was quite interesting – complete with very scientific studies. Check out this document for the details.
• The FairTax benefits retirees who depend mostly on Social Security.
• The FairTax preserves the overall progressivity of the federal tax burden.
• The FairTax dramatically improves the U.S. economy.
• Following the implementation of the FairTax plan, the higher take-home wage provides an immediate incentive for people to work more.
• The FairTax improves the international competitiveness of American producers.
• The FairTax taxes foreign-produced goods as U.S.-produced goods are taxed and exempts exports fully from taxation, thereby restoring a level playing field for U.S. and foreign-produced goods.
• The FairTax promotes home ownership better than the current system.
• While there were a lot of points for this argument, the main one was that homeowners would be making their entire house payment (interest and premium) on PRETAX dollars.
• The FairTax simplifies tax compliance, thereby reducing tax evasion.

From what I read this seems great – but why hasn’t it received more attention? What are the fatal flaws? Have other counrtries used this model of taxation? Has it worked well for them?

This article was very basic and helpful - but didn’t address any criticism of the idea - Wikipedia’s article was much better in that regard.

What do you think of the Fair Tax?

Comments(3)