"Fair" Tax Scam

[forsyth]

The following is the text of an email I sent to NPR's Marketplace show today, after they had a hack from the WSJ editorial page spouting nonsense straight out of the "Fairtax" book. Here's the article in question.

And my letter:
This morning, on the Marketplace Morning Report, you had Stephen Moore on, praising the benefits of a national sales tax.  His ideas and numbers come entirely from the book "FairTax" by Neal Boortz and John Linder.  And unfortunately, most of what he quoted is inaccurate or false.  A 23% sales tax would not replace all of the government income, the percentage was picked as near the maximum amount people would tolerate as a sales tax.  A national sales tax, despite his claim, would be extremely regressive and complex.  Most families who are out of the top 1% spend most of their income each year, which would make their net tax rate at LEAST 23%, plus the increases in cost that would come from this kind of tax.  Whereas the richest few don't spend all their money, which would make their net tax rate far below the 23% the rest of us would pay.  That hardly qualifies as "fair" by any stretch of the imagination.  And his idea of a $20,000 rebate for the sales tax spent?  That would be at least as complicated as the current income tax.  The rest of the work of tax collection would then be pushed on to the companies who sell products.  It would require just as much work, and we would still require the IRS to investigate cheats and other things.

His entire presentation was misleading at best, and outright false at worst.  The entire idea of a "fair" national sales tax is snake oil, designed to cover up for a gigantic tax cut for the rich and a tax hike for the rest of us, not any kind of serious policy suggestion.

Comments

Reply, Part 1

[forsythferret.livejournal.com]

I see it's reached Strawman O'Clock. But one step at a time.

"FFerret, is the current income tax system something you really want to work hard to defend?"
I don't recall saying anything defending the current tax system. I've been attacking the "FairTax" plan as a scam, regressive, and not likely to work the way it's claimed to. As I understand it, that's normally the kind of thing done by conservatives, questioning if a certain change is good or worth it. Not that I'm much of a conservative, but I have little choice until we get the country back from some of the insanity it's been dragged into.
here's a lot of things in our current tax system that I'd be glad to see changed. The "Fair Tax" doesn't address any of the problems, though.

"Renown economist Larry Kotlikoff believes that the current tax system IS bringing the country to nothing less than an "economic meltdown" by virtue of the invisibility to the taxpayer of actual taxes paid." If Americans do not understand the true cost of their government, they're unlikely to hold Congress accountable - thus the enabling mechanism to continued profligate spending.

I can't speak for how renowned he is, economists generally aren't rock stars, and his wikipedia article is only a stub. :) But as for the invisibility of taxes, how is a sales tax, which would be printed on receipts, be more visible than tax deductions printed on every paycheck, and tax returns done once a year? And as for the "economic meltdown"? I'm sorry, but that "Social Security is falling apart!" dog won't hunt. Social Security is in a surplus, still. There's a huge store of treasury bonds waiting for when it goes into deficit, which still won't be for a number of years. Medicare's increases in costs are a symptom of the runaway cost of health care in America, dealing with that would slow its rate of growth, which still isn't that insane. Especially when compared to the growth of costs in regular health care plans. Let's look at some budget numbers here.
Military: $699 Billion (Not including "emergency" expenditures which have regularly been used to fund the war in Iraq, and been easily over $100 billion)
Interest on Debt: $243.7 Billion (And climbing!)
Social Security: $586.1 Billion
Medicare: $395.4 Billion
Unemployment and Welfare: $367.0 Billion
Now income.
Social Security and other Payroll Taxes: $884.1 billion

Sure looks like Social Security is fine to me. Medicare isn't funded solely through payroll taxes. Yes, we're spending considerably more than the government collects in taxes, but that's due mostly to the Bush tax cuts for the rich, and the war in Iraq and its numerous "emergency" supplementals. The war in Iraq is costing at least $200 million a day. If you want to find a culprit for our current levels of debt, that and the budgets passed by President Bush and the Republican Congress over the past six years would be the first place to look. Without the war in Iraq, and without Bush's repeated tax giveaways, the government's finances would be in much better shape. Pointing at Social Security, Medicare, and Medicaid as the looming cause of a "crisis" is more than a bit dishonest.
And that doesn't even address the fact that part of how the Social Security payroll tax change under Regan was designed to create a surplus by taxing regular working people more than necessary, and then using that surplus to pay for tax cuts for the rich, but that's a little late to get into, it happened years ago.
So I don't think it's the "invisibility" of income tax that's enabled Congress's profligate spending, I think it's the Republicans in Congress's constant recitations of tax cuts as a balm for everything, and the supply-side kookery claiming that tax cuts increase revenue. Republicans have been pretending they can have everything, tax cuts and increased spending, for years. None of the Republicans in power, in Congress or the Administration, have shown any signs of giving a tinker's damn about holding down spending. That has more to do with our current budget woes.

So no matter how renowned he may be, I'm not going to take anything Professor Larry Kotlikoff says at face value, since he's promoted the myth of the "Social Security Crisis".

Continued in the next reply.