The Daily Sandwich

"We have to learn the lesson that intellectual honesty is fundamental for everything we cherish." -Sir Karl Popper

Location: Boston, Massachusetts, United States


Thursday, September 06, 2007

And it makes thousands of julienne fries.

Another story in TNR that serve as a nice companion piece for yesterday's lesson in supply-side economics. This time it's about another piece of fiscal insanity that's become right-wing gospel: brutally regressive taxation as the only fair taxation. And-- in perfect accordance with the axiom that any conservative proposal is designed to achieve the exact opposite of its stated goal-- that gives us:

[T]he so-called FairTax, which has been endorsed by John McCain and Fred Thompson, as well as second-tier presidential candidates Mike Huckabee, Tom Tancredo, Duncan Hunter, and Democrat Mike Gravel. Georgians John Lindner and Saxby Chambliss have introduced FairTax legislation in the House and Senate that would establish a 23 percent national sales tax.

I know plenty of conservatives (and high-earning, pious Christians) who fully subscribe to this view. Including a tax attorney, for the luvva Pete. But it really doesn't make a difference to any of them that this plan is neither conservative nor Christian:

For starters, the FairTax is deceptively calculated. When you think of a 23 percent sales tax, you think of paying an extra 23 cents on the dollar. That's how every sales tax in the world works. The FairTax, on the other hand, doesn't represent 23 percent of the pre-tax value of the item you bought, but the post-tax value of the item. So, under FairTax, you wouldn't pay $1.23 for a $1 widget--but $1.30, since the 30-cent tax is 23 percent of $1.30. How straightforward!

The legerdemain doesn't end there. Unlike every other sales tax in the world, the FairTax actually applies to everything--every pencil, every tank--the government buys. Unfortunately, the FairTax proposal doesn't take into account this increase in government spending. Thus, it will either provoke a massive cut in federal spending or a massive increase in taxes.

And what about the poor who bear the brunt of this highly regressive tax? The FairTax would track every household's monthly income and then cut checks to minimize the pain, a logistical challenge that will ultimately resemble some welfare state nightmare. What's more, this would cost gobs of money, forcing further cuts in spending.

For these and other reasons, every reputable tax expert who has ever looked at the FairTax has concluded that the true tax rate would have to be much, much higher than 23 percent (or even 30 percent) to work--and, even at that unrealistically low rate, the plan would inspire massive tax evasion. In short, the FairTax is a crackpot scheme from beginning to end.

FairTax: the sensible and just way to expand government, bankrupt the nation, and condemn millions of Americans to poverty.