Steve D'Ippolito

True. What it does do is take the IRS (or whatever they choose to rename it) out of the lives of anyone who is not actually running a business. And businesses would no longer have to file ANY sort of corporate income tax. One other thing that does disappear is the "payroll tax" (and its evil twin the self-employment tax) that funds Social Security, Medicaid, and Medicare. That is about 15 percent of the first ~$90,000 of income (a regressive tax!) although half of it is supposedly paid by your employer (i.e., comes out of your hide without you even seeing it on a piece of paper titled "paystub"). One big benefit of the "fair tax" if it is ever enacted, is that ANY tax hike will immediately result in a jump in the price of goods you buy the next day. Did I say benefit? Yes, because everyone will be made unhappy by the tax hike right away. Therefore the political cost of a tax hike becomes a lot higher. One of the reasons we are in the mess we are in right now is that almost half of the voters pay no income tax whatsoever. Therefore anyone arguing for tax cuts is going to get, at best, less than half of the votes for doing so (and in practice a lot less than half because of altruism). One thing I do not like about the proposal is that the tax will be "hidden" in the price of the product. I think it should be added on at the cash register every time, and slap the consumer across the face every time. (But then the "inclusive" rate quoted would be an even worse "misrepresentation" than it already is.) One benefit I have NEVER seen anyone discuss is that the special, priveleged status of employer paid, one-size-fits-all medical insurance, disappears. That is a huge distortion of the health care market, and it's suddenly gone. Also imagine suddenly being able to draw on your 401k account any time you want, and not having to wait on some arbitrary age the IRS decides is a "retirement age"--it's no longer taxable until you spend the money. IF (a big if) this becomes law it will be an interesting transition! I suspect there will be some folks who are worse off for a while--but the economy will boom and five years later they will be much better off.

(The first paragraph is the article Gus Van Horn is quoting, the second is his analysis of that quote.) The paragraph Gus Van Horn is quoting proves that the people writing the Wall Street Journal do not understand the fair tax proposal--and their misunderstanding has confused Gus Van Horn. The monthly check would be sent out, all right--but it would be sent out to every household and be based SOLELY on the number of people living in the household. Yep, a billionaire family of four gets the same check as a dirt-poor family of four. The dependency on the size of the household is there becuase that is the key variable in figuring out the poverty level. The purpose of this is to effectively exempt the poverty level of income from the tax. If the poverty level is 12,000 per year (it isn't but I chose that number to make the math easy for the illustration), that works out to 1000/month; you get sent a check for $230--it is the refund on the sales tax you would pay, if you were at maximum poverty level and spent all your income. Thus, the poor are exempt from this tax. It should be noted that "how many people are in your household" is basically equivalent to the information you are required, under the US Constitution, to give to the census bureau. (The census asks for more; that's an over-reach on their part.) Please note that Gus van Horn's conclusion--based on this faulty information--is incorrect. there would be NO so-called need for the federal government to determine your income under the "Fair Tax." Think about that. Why do it this way instead of simply exempting "necessities?" Because if they wrote it to exempt food and shelter, caviar and filet mignon, to say nothing of multimillion dollar mansions, would be exempt--and people would find some way to make a loophole out of it. Also, there would be endless wrangling by lobbyists to get their specific service and/or product exempted. And one of the great big problems with the income tax (over and above the fact that it IS a tax!) is that it has become such a political football with everyone trying to get new exemptions, and the exemptions themselves being used for social engineering. The most influential group opposed to the "fair tax" is the lobbying firms (merchants of pull) whose specialty is to lobby Congress over tax law. They'd have to find honest work if this passed. (that's from the WSJ article) The reason they quote it this way is that this way, it parallels the way income tax is quoted. Your tax is quoted as an inclusive percentage--a "30% tax rate" means you keep 70% and the government takes (steals) 30%. By quoting the "fair tax" this way, you see that out of every dollar you actually fork over at the cash register, 23% goes to the government. I agree that this IS done in a confusing way and frankly I think it was a mistake for them to do so--it just gives the opponents something to hit them on. But they did have their reasons. My personal opinion: The "fair tax" would turn the US into the world's biggest tax haven. Corporations that used to be based here, driven offshore by our double-taxing their foreign profits (we are the only industrial country to do so, to my knowlege), would come back, and not have their profits taxed at all. That would lead to unbelievable growth. The IRS would no longer be snooping around in your life, no more than the states (that do not have income tax) do, at the cash register (though they would continue to collect those excises). This is a HUGE improvement over the current situation. But of course I have to say this: yes, it is still a tax, and it is still therefore immoral. I also think it will be very hard to pass. I won't quite say "impossible" because there is a big grass roots movement. But I notice that the most damning arguments against it are basically based on misunderstandings of it. In some cases I am sure those misunderstandings are quite willful. (I specifically do NOT accuse the present company of this!) A recent WSJ article (I do not know if it is the same one Gus Van Horn quoted; I do know the author was Bartlett) claims that the fair tax is a scheme by the Scientologists, and that is untrue. (Scientologists were pushing a different scheme (cats.org) but I am told--not verified by me--that they are no longer involved with that.) That claim is of course the fallacy of "guilt by association" and simply a smear.