Monday, August 27, 2007

FairTax Smear (Comments)

Bruce Bartlett, Bush Sr's Deputy Assistant Secretary of the Treasury, tries to smear the Fair Tax in Saturday's WSJ editorial. It justifies a response:

Smear Rule #1: If you want others to dislike something, tie it to the Church of Scientology. Para. 2:

For those who never heard about it, the FairTax is a national retail sales tax that would replace the entire current federal tax system. It was originally devised by the Church of Scientology in the early 1990s as a way to get rid of the Internal Revenue Service, with which the church was then at war (at the time the IRS refused to recognize it as a legitimate religion). The Scientologists' idea was that since almost all states have sales taxes, replacing federal taxes with the same sort of tax would allow them to collect the federal government's revenue and thereby get rid of their hated enemy, the IRS.

As if only the Scientologists would be happy to see a 100% layoff at the IRS...

Smear Rule #2: Use phrases like "so and so asserts" or "so and so claims". This makes your audience think the other side is lying. But, don't offer a counter clarification or, in the case of the FairTax, a counter calculation. Para. 3:

They assert that a rate of 23% would be sufficient to replace federal individual and corporate income taxes as well as payroll and estate taxes. Mr. Linder's Web site claims that U.S. gross domestic product will rise 10.5% the first year after enactment, exports will grow by 26%, and real investment spending will increase an astonishing 76%.

Mr Bartlett continues with his guess that the FairTax will instead be closer to 30%. This argument is refuted in the Fair Tax Book (available one click away at the Book Club to your left), but Mr. Bartlett ignores the author's argument.

He also misses one big point here - 23%, 30%, 40%, whatever. IT. IS. FAIR. Fair for the 50% of Americans that pay tax today, but also fair for those who don't pay taxes today. Get it?

Smear Rule #3: Talk about the burden on the government. Liberals eat this up! Paras. 8 & 11:

...state and local governments would have to pay the FairTax on most of their purchases. This means that it is partly financed by higher state and local taxes. 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.

Since sales taxes are regressive--taking more in percentage terms from the incomes of the poor and middle class than the rich--some provision is needed to prevent a vast increase in taxation on the nonwealthy. The FairTax does this by sending monthly checks to every household based on income.

Mr. Bartlett, do you mean the government will have to be more selective on how it spends our money? Do you also ignore the possibility that the government may receive higher revenues now that our 12 million illegal immigrants and the tens of thousands of tourists will start paying taxes? Have you not heard of technologies called "database" and "direct deposit" that could support monthly payments to the, so called, American poor?

Smear Rule #4: Incorporate words like "deception", even if you do not know how to use the word correctly. Para. 17:

Perhaps the biggest deception in the FairTax, however, is its promise to relieve individuals from having to file income tax returns, keep extensive financial records and potentially suffer audits. Judging by the emphasis FairTax supporters place on the idea of making April 15 just another day, this seems to be a major selling point for their proposal.

Actually, the FairTax DOES eliminate federal tax returns, the need for extensive records and audits. So far, the only deception appears to be Mr. Bartlett's purpose for writing this article. We suspect Mr. Bartlett will be coming out for a Republican other than Gov. Huckabee, as this is clearly a hit piece on Gov. Huckabee's recent surprise showing in Iowa.

To further use the "deception" word, let's look at what Mr. Bartlett leaves out. There is no mention that employees will now keep every penny of their gross salary, minus any state tax. Like all FairTax opponents, he deceives by painting the picture that you'll pay 23/30% more of your current take-home pay at the cash register. Nor does he address the idea that the reduced tax burden on businesses will result in lower prices for goods and services. And where is the new concept - people will now choose when they pay taxes, and how much they will pay? These missing items were not for a lack of space.

Mr. Bartlett used his previous position in government to grab half of the WSJ editorial page. He wasted an opportunity to apply critical thought to a complex, but popular idea. His article has two target audiences: those who haven't read the Fair Tax Book, and those who remember that wonderful economic boom in 1991-1992 when Mr. Bartlett was serving our country. For everyone else, Mr. Bartlett has shown himself to be an economic non-authority.

We think taxes will rank equal to the war on terror in the 2008 election, thanks to the Alternative Minimum Tax. We hope someone will step up for the FairTax, offer an enhancement of the FairTax, or provide a fair alternative. Here's to hoping...

I'm Karl. Thanks for reading.

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