Kevin Drum says the idea of a national sales tax replacing the income tax is pure “crankery” and cites a Bruce Bartlett column in yesterday’s WSJ as proof.
Despite my strong intuitive sense that a consumption based tax is more fair and efficient than one based on income, I’m prepared to admit that I don’t understand the economics and logistics of implementation enough to truly assess the costs and benefits. It may well be, for example, that a too-high sales tax would encourage a huge black market. And it may well be that state income tax filing requirements, the need to rebate money or otherwise exempt the very poor, and other hurdles will offset many of the supposed efficiency advantages.
Bartlet’s argument, however, is simply nonsensical.
His subheadline asks the rhetorical question, “Does adding 30% to the price of every house sold sound like a good idea to you?” He then goes on to argue that the specific FairTax proposal advocated by Mike Huckabee would require a 30 percent surcharge on everything to be revenue neutral.
That sounds horrible, right?
But . . . um . . . it’s revenue neutral. So, we’re already paying the equivalent of a 30 percent surcharge on everything? The only difference would be that, rather than having the amount of we pay tax hidden by collecting in multiple ways and then having an arcane filing system nobody without a CPA actually understands is that it would be transparent. Why’s that a bad thing?
But there’s more! Because FairTax would make government pay taxes on the things it buys, too, government spending would increase by 30 percent!
Well . . . no. That’s just a change in bookkeeping.
How so? The government would pay 30 percent in taxes on all the things it buys, right? Yup. To whom is it paying? Why, itself. That means the money really isn’t changing hands. It’s like a small business owner paying himself a salary.
Okay, how about this, then: “It’s also worth remembering that state sales taxes now average 6%, which means that the total tax rate will be 36% on retail sales.”
Right . . . . But, we’re already paying an average 6 percent state sales tax? And the equivalent of 30 percent to the federal government in this revenue neutral scheme? So, the net difference between this unconscionable plan and the current one is . . . zero?
Okay, but wait. In order to take care of the poor, we’d have to rebate some of their money. This would require “incredible complexity and intrusiveness of tracking every American’s monthly income–and creating a de facto national welfare program.”
Gosh, a complex and intrusive system whereby the federal government tracked every American’s income? There’s no way in hell we’d put up with that in the Land of the Free and Home of the Brave! We’d probably give it some Big Brotherish name like Internal Revenue Service to tip us off to how sinister it was.
But it’s a de facto welfare program! Nobody would want that in a country of rugged individualists! Unless you consider a progressive system of income taxation wherein the top quintile pays 26.8 percent of their income and the bottom quintile pays only 5.4 percent a de facto welfare program, in case that’s what we have now.
Okay, here’s one for you: FairTax “was originally devised by the Church of Scientology in the early 1990s as a way to get rid of the Internal Revenue Service.”
Gee, Scientologists are whackos. Anything they support must be bad! Then again, Hitler was responsible for the Volkswagon and the Autobahn. And, for that matter, Tom Cruise is a Scientologist and he’s made some very entertaining movies. So maybe there’s a reason they call ad hominem an argumentative fallacy?
Of course, there are all manner of flattened tax systems aside from the Scientology-Huckabee one. For example, a “flat-rate tax would add significantly to economic growth” and would be “the difference between GDP doubling in 33 years instead of 36 years.” Just ask Bruce Bartlett.
