Is the FairTax “fair”?

Before the the FairTax goons swam over this and tell me that I’m wrong that the tax rate is 23% and not 30% – I DON’T CARE.  The FairTax hides the tax just the same way that the current payroll tax does.  Yes, it is printed on the store receipt but then so are your payroll taxes printed on your pay stub.  As I see the purpose of a National Sales tax it is to awaken the sleeping masses to the real cost of government.  Well leave the price of goods alone and have the merchant add the tax on exclusive like is done now.  To do it inclusive like the FairTaxers want will soon become  unseen and unfelt.  Just like the frog in the pan of water.

My sister emailed me the other day asking my opinion on the FairTax

Hey!
What are your thoughts on this FairTax thing.  I know I’d love to see a complete overhaul and simplification of the current mess but I don’t know if this is the answer – if there is an answer that would satisfy everyone.

While I like the idea that a National Sales tax will make people aware of the real cost of government as opposed to it being hidden in employment taxes, etc…  The “FairTax” is anything but “Fair. Consider just a few items”¦

They claim that it will do away with the IRS and get rid of tax loopholes.  Sure the IRS will go away because you won’t be sending in a 1040.  However every business in the US will now become Uncle Sam’s “unpaid” tax collector and we have to collect, report and send that money somewhere and if we don’t the newly renamed IRS will come after the business that doesn’t send in the Sales Tax,

Now as to the Sales Tax.  The proponents keep saying that it is 23%  But when you find out that the tax on a $100 purchase will be $29.XX that says that the sales tax is really almost 30%.  (Again I DO NOT WANT TO HEAR about inclusive rather than exclusive and the embedded taxes not being there.)  The price on the good “should” be the cost of the item.  The Sales tax “should” be added to the item when it is purchased and not before.

FairTaxers should actually want the tax to be exclusive.  They kep saying the the cost of goods will go down so that the end result wil be that neutral.  Well, if true, keeping the tax exclusive could mean that the cost of  gallon of milk will drop from the curent advertised price of $3.00 to say $2.34.  Then when the tax is added back on at check out it would again be $3.00 and the consumer would what the cost of government was for that transaction.

Of course the proponents point out that the “poor” and “middle-class” will get a monthly pre-bate check to cover the sales tax that would be spent on things like butter, milk, eggs and #2 school pencils (etc).  but since there is no IRS to determine who is poor or middle-class that means that every household in the US will be getting these monthly “checks” from the government.  Instead of just welfare recipients waiting by their mailboxes for their monthly government check we will have most of America on the “dole”.  Talk about making a new dependency class!  There are 301 millions people in the US (give or take) according to the latest Census estimate.  Now these checks will go to every “Household”, so you have to report somehow if you are single, married, how many kids, etc”¦ so that the Government knows how big of a check to send you each month to cover the tax on the staples of life as determined by some Civil Servant.

You’re not filling out a 1040 but you are filling out forms.  And you have to mail those forms in and somebody has to process them.

So, who is going to receive all that mail and send out 200 million checks every month (the postal service and the paper companies will be happy)?  A renamed IRS that’s who.  Talk about rearranging the deck chairs.  Maybe the new entity could be named SRI (for Screwing Residents Individually).  Plus out of those 200 million checks that will get mailed out the US Postal Service is bound to lose at least a few each month.  So now you have to call the Federal Government to put in a request to replace your missing pre-bate check.  How long will that take?  Certainly longer then the tim before your next trip to the Grocery Store or the Gas Station.  Just what I want to do call up an entity like Motor Vehicle and expect prompt customer Service.

They also claim that it will do away with the death tax and taxes on investments.  I like the doing away with the death tax.  If I make the money and I paid taxes on it while earning it why should the government tax it again when I die.  They have already been taxing it when it was earning interest.  How many times did each of my dollars get taxed by the time I die?

But I am in favor of taxing investments.  Not onerously else there is not an incentive to save.   But if I work I get taxed and if my money is working for me earning more money I think it should be taxed too.  Let’s pick on Paris Hilton.  She inherits her money from Grandpa (although it sounds like Grandpa is tring to buy his way into Heaven by giving most of his away to Charity rather then let Paris get her hands on it) or Dad.  No tax.  The money she inherited is now sitting in various investments.  No tax on investments means she lives for free (yeah, she pays a sales tax when she buys a fendi purse or a bottle of booze) and enjoys the benefits of Society.  Nope that does not work for me.  Not as a matter of class envy but just as a matter of common sense.

Now let’s look at a typical trip to the Grocery Store.  I’m sure when you are there now you see the person in front of you in line that can stretch their dollar with coupons and smart shopping to not buy the “junk” and the person behind you will be loading the cart up with chips and pop, etc”¦  Given that the “Government” will be making up the rules  on what is the monthly pre-bate” think the dollar number will be geared to the frugal shopper or the spendthrift?

How soon until we see news reports of a family unable to afford the cost of groceries due to the high tax and the pre-bate not covering their spending.  Then the calls to increase the pre-bate which is know an entitlement.

The law as written limits the “Prebates” to legal residents.  How soon after it is enacted would we hear the cry that it is not fair to the “illegals” living in the shadows and demand that they be included since they are “contributing” too.

Again like I said above the pre-bates are really a method for creating a whole new dependancy class.  Rather then the current lower income welfare reciepts waiting at the mailbox for their monthly check we will have all of middle-class America standing out curbside waiting for the check too.

Then of course the pre-bates will become political.  The Whores in Washington will use them to buy off whole segments of society.  Let’s raise the pre-bate because it’s not fair that the tax on a new plasma TV, computer, etc… is to high and only the wealthy can afford them.

One of the FairTaxers arguments is that the Sales tax will bring untaxed money into the taxed realm since people like Drug Dealers don’t pay an income tax in the first place.  The Sales tax is actually a benefit for the Drug Dealer.

Under the current system the Drug Dealer has to hide his income so that the IRS does not come after him.  Why did Al Capone go to jail?  Murder?  Robbery?  Nope.  Tax Evasion.

Without the Income Tax reporting the Drug Dealer does not have to hide his money.  He can spend it how he wants.  If he makes $5 mil what is he going to care about paying a sales tax when he does not have to worry about the conspicuous consumption raising flags based on his reported income.

Paying a Sales Tax is a lower cost of doing business then facing the IRS.

Plus doesn’t this argument about Taxing Drug Dealers violate the concept of Reagan Supply Side economics?  The Drug Dealer is hiding his money by not reporting it.  So?  He is still going to spend the money. He needs the Hummer with the 22″ rims, etc…  So he is spending the money anyway (it’s not like he is living a lifestyle that lends itself to saving for old age retirement) which puts that money into the economy buying goods and services which generate jobs and production in the honest segments of society.

Then there is the issue of the retired or nearly retired.  They worked their whole life, earned their money and paid income taxes on what they and their investments earned.  Now the FairTaxers are going to hit these same people again (now living on fixed incomes) by taxing their money when they want to spend the money they arned over a lifetime?  Are they kidding?  How is that fair?

I could go on and on about how stupid and populist (but I repeat myself) the FairTax is.  The “concept” is good but the discussed implementation is flawed and full of unintended consequences which in the end will not reduce the size of governemnt nor it’s appetite for it’s citizens money.

The IRS needs to be overhauled to get rid of loopholes and complexity.  But that said the current system is far more “fair” then will be a regressive sales tax.  Plus, unless we repealed the 16th Amendment and replaced it with a new Amendment that tighten up the language in Constitution to prohibit an income based tax the Politicians in their lust for every more money they would figure a way to tap that too at some point.

The real issue is not how “we” collect money from ourselves to pay for our government, rather the issue is how and what we spend the money that we do collect, regardless of mechanism.  Do we “really” need to pay for many of the items that we give ourselves?