The following is a comprehensive recounting of the bad to be found in The FairTax Book:
The book isn’t about reducing taxes or spending but about funding the entirety of current spending levels (2).
The historical example of the 1872 repeal of the income tax is noted, but the lesson that it was done without trading the income tax for a new tax is overlooked (11).
The tax trade in the Ruml plan of 1942 — with the taxpayer taking it on the chin — is recounted, but the lesson of not trusting politicians with such tax trades is ignored (27).
More than an entire chapter is spent celebrating the idea of every household receiving a monthly check from the federal government (79—90).
A reference to "replacing virtually all personal income and corporate taxes" is slipped in, apparently betraying the book’s claim that the national sales tax will replace all of these taxes (82).
There’s a passing reference to politicians who thrive on others’ dependency, but the idea of every household receiving a monthly check from the feds disturbs these authors not at all (88).
The authors seem quite stressed over individuals using things such as Offshore Financial Services and Eurodollar transactions to avoid death taxes and other taxes (99—100).
The authors want the US to become a tax haven for businesses, but bellyache about other countries being such tax havens (100—101).
Part of the FairTaxers’ propaganda that the intended sales tax rate will generate as much revenue as all of the current income-based federal taxes do today is based on three unrealistic assumptions: 1) no increase in black market activities; 2) governments at all levels paying the tax; and 3) no additional exceptions to what is taxed being implemented (106).
It is claimed that businesses will no longer need to keep payroll records (108). Then, inconsistently, the authors state that businesses will in fact report the number of quarters of employment to the Social Security Administration (168), while the FairTax.org website states: "Employers continue to report wages for each employee … for the determination of benefits." [emphasis added]
The authors believe that when people avoid any taxes it causes an increase in other people’s taxes (4, 93—94) — despite the fact that at other times they tell us politicians will always spend any additional money they receive (136).
The authors celebrate the prospect of broadening the tax base for the unconstitutional Social Security program and bemoan the fact that currently Social Security taxes are not levied on dividends (136—137).
Apparently it is offensive that the IRS would demand that golfer Lee Trevino pay gift taxes on heart surgery he paid for his caddy, but not offensive if he were forced to pay their hefty sales tax on that same surgery (142).
Revealing a near-psychotic level of navety, the authors tell us that the kind of abuses suffered under the IRS "simply wouldn’t happen" once the FairTax is implemented (145—146).
In the Q & A, we’re told that questions and objections unanswered in the book itself is why we have talk shows and email and that the Neal Boortz Show is the unofficial clearinghouse for the FairTax. Yet Boortz has avoided answering the objections I have raised (as well as those of others who have contacted me) (148, 179).
The authors attack doubters who point out that the plan calls for a sales tax rate that is 30% of an item’s price, claiming that such critics "never miss a trick." Yet Boortz and Linder wrongly claim that their misleading, but more appealing, 23%, is the proper figure (152).
To further muddy the waters concerning the intended national sales tax rate the book refers to a $100 item as one priced at $77 with the $23 worth of tax. Once upon a time, one of the touted virtues of the proposal was to bring the tax rate out in the open for the taxpayers…now the intention is to hide the tax within the price as politicians currently do with gasoline prices (152, 154)?
Denying the lessons of marginal analysis, we’re told the deductibility of charitable contributions has no effect on the decision to contribute — in their enthusiasm for this new tax scheme these guys will claim anything to tout the FairTax, it seems (164—165).
In defiance of all common sense, law, and history the authors claim that politicians will only be able to change the tax rate itself, not which items the tax is applied to, once the FairTax becomes law (166).
First, we’re told that the FairTax will apply to all new retail purchases, goods and services alike, then inexplicably we’re told that that your monthly bill for access to the Internet will not be so taxed (77, 170).
The authors expect us to cheer at the prospect of the states’ new-found power in collecting an extra $20 billion on sales of goods through the Internet (171).
We’re told that the FairTax will not apply to education expenses (at least college and other tuition), while nothing is said about home schooling supplies and other such spending. This is based on the idea that education is an "investment." Of course, this gives away the fact that everyone will be clamoring to have the goods and services they sell officially classified as "investments," thus unraveling the alleged simplicity of the entire scheme and keeping all those K Street lobbyists in business (171).
The authors call for reaching for the possible. But surely there are better possible goals to reach for than building a movement to institute the FairTax. How about for instance, a movement to limit government to its Constitutional functions (174)?
A virtue claimed for the FairTax is that it was not written by politicians, though of course the final bill will be. The authors claim in contrast that the income tax was written by politicians, though they ignore their own recounting of how the income tax came from the mind of Karl Marx (175, 180).
They have the audacity to state that "income taxes are seized. Consumption taxes are paid." It’s time to apply the often-stated Boortz challenge: try not paying your [sales] tax and see how voluntary they are (176).
The authors manage to refer to their status-quo-protecting $2.5 trillion take for the feds as "revolutionary legislation" (178).
The cheap shot is taken against those who dissent from this scheme. So let me say that I did not read this book and write this critique because I like shooting down other people’s ideas, or have no ideas of my own. Here are a few alternatives to the FairTax:
The Liberty Amendment is supported by the most libertarian/strict constructionist member of Congress, Ron Paul of Texas. The two authors could have written a book called Constitutional Government and developed a following for this amendment — but they didn’t.
The Read the Bills Act is a piece of legislation deserving of support; but this hoopla over the FairTax helps to keep people from knowing about it.
Walter Williams has proposed a Constitutional Amendment worthy of support, but again, it’s not well known in part due to the energies devoted to the FairTax scheme.
Milton Friedman, through the National Tax Limitation Committee, has proposed constitutional changes as well.
Harry Browne detailed a way to eliminate all taxes, except the current import duties and excise taxes.
The Cato Institute has published its Handbook for Congress now for more than 10 years. The Handbook has hundreds of pages of analysis and literally dozens and dozens of specific policy recommendations and is distributed to all 535 members of the House and Senate each Congressional term.
I can only conclude that neither of our two authors wants Americans to know anything about these — and many other — worthy ideas since they don’t mention them in the book, discuss them on the radio, or tout them on the Internet (179).
With seemingly no shame at all, the authors actually brag of their efforts to fund the current expenses of the grossly bloated federal government (179).
Rising to new levels of silliness the authors tell us the FairTax will have none of the flaws of the current income tax (180).
Yes, America is better than the income tax, as the authors say; but it is also clearly better than the FairTax (180).
And finally, in calling the FairTax movement the "Second American Revolution"(!) the authors apparently believe the American Revolution was not about individual rights and limited government but about a way to fund the British Empire more efficiently, in lieu of a tax on tea (180).
Jim Cox is an Associate Professor of Economics at the Lawrenceville Campus of Georgia Perimeter College and author of Minimum Wage, Maximum Damage.