tales of the fairtax

by Boris Glebov

Published: January 25, 2008

“Roll up, we’ve got everything you need, roll up for the mystery tour! Roll up, satisfaction guaranteed, roll up for the mystery tour! The magical mystery tour is hoping to take you away… “ - The Beatles, “Magical Mystery Tour”

Why am I singing Beatles lyrics (off key)? Well, I’m just singing along with the wonderful chorus that is campaign rhetoric. It seems it is all about presentation and sex appeal. Much like a hot silicone bottle blonde - looks so good from far away, yet a shallow bore up close.

Few of these tales are as tall as the FairTax. It does, indeed, sound quite magical - a simple sales tax and a monthly allotment determined by the number of people in the household. Bam. Done. No more IRS, cryptic tax forms, infuriating penalties, elusive deductions, constant fear of audits. FairTax will save over $300 billion on reduced administration costs (according to a study by Beacon Hill Institute) and prevent as much in tax evasion (estimated by IRS for 2001). Alright!

FairTax simplifies collection (which in turn increases compliance), plus there will be an awesome system of seller’s certificates and audits to squash evasion. Sweet!

“How many of you want the federal government out of your paycheck?” Asks Neal Boortz.

I do!

Under FairTax, you will be twice as hot to thrice as many ladies and/or dudes! As an added bonus, it taxes consumption! I have watched Fight Club at least a dozen times; I can get behind something that punishes consumerism.

Wait, hold on… certificates and audits? Who is going to administer this system now that IRS is RIP? We have auditors now, and apparently we are still loosing $300 billion a year on cheaters.

But everything will be cheaper because current costs of goods and services include hidden tax and compliance costs, right? No. Instead of being hidden, these costs will now be in plain sight, and they will be greater than before. Whereas before, cost of goods bore only part of the tax burden, it will now bear it in full. Also, what do you think are the chances that corporations will drop their prices by the entirety of these hidden costs? If there is one thing big corporations love, it is treating regular people fairly. Just ask Kenneth Lay, of Enron fame.

Even if everyone plays nice, nothing will actually change. FairTax does not create more wealth. It doesn’t create more jobs or wages. Amount of money stays the same, but it changes its path. As for the supposed theoretical economic benefits? I will believe them when they I see them in my wallet.

Also, there are no deductions under FairTax legislation - effective cost of such things as healthcare, education, and work-related expenses will rise dramatically. This will surely spark outrage among consumers and lead to subsequent legislation creating deductions. Whether they will be administered at the cash register or in a bloody battle with a tax form at the end of the year is impossible to predict, but there will certainly have to be a government agency to oversee them. Hello, FairTax Service. This feels a lot like Square One.

And, of course, since you are still paying taxes, federal government is not out of your paycheck. Thanks for the rousing sound bite, though, Mr. Boortz.

Even the 23% rate figure is uncertain. William Gale, head of the Economic Studies Program at the Brookings Institutions, thinks an actual rate would be closer to 31%. Experts can argue these figures till they’re blue in the face, but an error of this magnitude would cost our budget almost a trillion dollars in a single year (CNN Money quotes $7 trillion over ten years).

Now, I’m all for a simple and human-friendly taxation system. The current tax code is 60,000 pages of bizarro logic. I even support the idea of consumption taxation. We need aggressive tax reform. FairTax, however, is just a pretty slogan, an idea blown up to unrealistic proportions and with too much makeup.

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