“Fair Tax” or False Promise?

After the recent publication of my column on the GOP tax reform plan that would eliminate the federal tax deductions on home mortgage and interest payments (Republicans Shooting Themselves in the Foot, June 29th), I was discussing tax reform with some friends when a couple of them proposed instating the Fair Tax program, which would allegedly eliminate the IRS and simplify our tax code.

I admitted I didn’t know much about the plan, and after the discussion decided to educate myself. So I went to the website of the group promoting this plan (https://fairtax.org/) to learn more. But what I found out is that the Fair Tax is neither “fair”, nor even particularly sane. I’m not buying into this at all.

First of all, the federal mortgage and property tax deductions will be gone, once again, and I am dead set against that for the reasons I stated in my previous column. It would devastate the real estate market, drive down home values, and essentially steal people’s home equity, which is no different from robbing their savings account in a bank. In fact, it compounds the problem, as we’ll see in a moment.

Secondly, you’re essentially talking about a VAT, a “value added tax”, and that’s a recipe for disaster. I’ve seen it in operation, in Vancouver BC when I visited there about 15 years ago. They had a 14% VAT. It jacked up the price of goods and services immensely.

In the case of the proposed Fair Tax, the rate is 23%. Now, add that to any state taxes a person pays, and the tax burden’s even worse than now. How’d you like to add 23% in tax to the price of a new car? Or a new house, as I mentioned a moment ago? Here in LA, our local sales tax is about 11%. Add a VAT of 23%, and anything we buy (with certain limited exceptions) would have 34% added to the cost in sales taxes… PLUS we’d still face state income and property taxes, and any other taxes and “fees” imposed from the state level on down. It’s absolutely absurd.

Compound that with the fact that there’d be nothing to prevent that VAT from being jacked up in the future, and you can bet your last dollar — which would very soon be leaving your wallet under that system — that the VAT would continue to be jacked up as time went on.

On top of all of that, you just KNOW that in order for such a program to actually pass, there’d be so many “exemptions” and special treatments for “the poor” carved into it that not only would it NOT do anything to ease the burden on the current taxpayers, it would actually make it worse.

As to the amusing claim that the Fair Tax would “eliminate the IRS”, how would it do that? There would still be a need for a bureaucracy to administer and enforce the new tax laws, as well as to receive, process and distribute the funds. So, maybe, the actual name “Internal Revenue Service” would be replaced by something like “Fair Tax Administration Agency”, but it would still be the same animal with a different moniker, that’s all.

Which brings us to the root of the issue. The problem in this country isn’t the tax system. It’s spending. Ever since FDR we’ve been trying to create a bastardized mix of socialism and free-market liberty in this country, and that’s like trying to McGyver a car out of two bicycle wheels and an empty tuna can. It ain’t gonna work.

I have absolutely ZERO interest in any “tax reform” plan until I see some serious actual spending cuts. And I don’t mean cuts in the rate of spending increases, which is what that term actually means today.

I mean an actual decrease in the dollars shoveled out the door.

 

 

©Brian Baker 2017

(Also published today in my local newspaper, The Signal)

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