Typically, either knowing or not knowing the numbers do not add up, Georgia Republican congressmen support the Fair Tax bill that has been around since the late 1990s. I have always assumed they supported it to attract votes of the FairTax cult in Georgia, a small but vocal group. Our senators support the FairTax bill.
Our Republicans in D.C. generally advocate tackling our nation’s pressing debt and entitlement problems. I believe they are correct that these problems must be addressed immediately and that they are legitimately concerned. Then consider their plan of implementation. This is where things fall apart.
The problem with the FairTax bill is the numbers don’t work. Contrary to the Fair Tax economists’ conclusions, a 2000 memorandum of the nonpartisan Joint Committee on Taxation stated the five-year tax-inclusive revenue-neutral rate is approximately 63 percent higher than the rate in the bill (i.e., 37.5 percent, compared to 23 percent in the bill). This means a $1 sale (pre-tax) would need to bear 60 cents of tax instead of 30 cents in order for the Fair Tax to be revenue-neutral using the five-year neutrality rate. (The 10-year revenue neutral rates are slightly lower.) The 2005 President’s Advisory Panel on Federal Tax Reform reached a similar conclusion.
FairTax advocates say these government analyses improperly assume some evasion and fail to account for government sales. However, assuming no evasion is unreasonable, taxing federal government sales produces identical costs and state and local government sales probably cannot lawfully be taxed. Claiming that the IRS can be eliminated is ludicrous, unless you accept that there will be a tax collection agency with a different name.
If enacted in a revenue-neutral manner, the FairTax would shift a tremendous amount of the federal tax burden from a relatively small portion of the voting population (the wealthy and upper middle class) to a very large portion (the middle class and retirees). Thus, no politician of significant power has pressed for it.
Our representatives either know or don’t know the numbers don’t work. Which is worse? We have tremendous financial problems that necessitate solutions. The tax system is a mess, but that does not justify a fix that does not compute.
Perhaps our representatives believe starting with a very conservative position is a means of achieving a better compromise with Democrats. However, on a national level, no Democrats and few Republicans would vote for the Fair Tax.
The FairTax could work if federal spending was cut by more than 40 percent. Where are the plans from our Republican representatives in this regard, given their desire to increase military spending? Without such cuts, the debt would grow tremendously if anyone would lend to the U.S. under such circumstances.
Essentially, our Republican representatives say we need to build a strong bridge to support heavy vehicles for years and we can build it out of straw. That’s simply unreasonable. They need to do better for us.
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