kickaha | You know it's election year when...

babbleon posted a link to a critique of FairTax (HR 25). It's kind of stretching for arguments in much of it, IMO, and utterly glosses over the actual meat, which is unfortunate. This is a sufficiently complex topic that it's easy to obfuscate, and I think that's what that write-up does, sadly.

I was going to post it as a comment in your journal, b, but *cough* it exceeded the maximum comment length. Shocker, eh?

As far as I can tell, that page basically boils down to:

- an argument about inclusive vs. exclusive taxes, and whether stating it as one or the other is deceptive. I kind of consider this a non-issue, it's simply not that complicated. VAT overseas is generally stated as inclusive, so this is common practice, and in line with other economic reporting principles. It also provides a nice comparison for the consumer: income tax is inclusive as well. This is just smoke and mirrors, IMO. Unless the conversation shifts to refer to income tax as exclusive, so it's all on the same level, this is just silly to argue about whether FT is expressed as inclusionary or exclusionary. (And wouldn't that be fun - 30% income tax suddenly shoots up to 42% exclusionary... odd how no one ever expresses it that way, eh?)

- pointing out that the poorest are better off, the middle range ends up taking a bigger hit, and that the richest look like they get a break. Their calculations seem a little odd to me... they seem to ignore any possible gains from investment of the increased net paycheck, for one thing. I'd also like to see their assumptions about lifestyle spending habits. (Results without methodology are useless, people!) Right now, the folks who have dug themselves deep into debt pay the same tax as those who save and invest, income being equal. (Under FairTax, those who choose to go into debt through spending beyond their means carry a larger share of the burden. Seems fair to me - contribute to adding volatility to the economy, you can make up for it by contributing to the tax base to help shore it up.) What are the long term benefits to the economy, and nation as a whole, through freeing up additional investment money? What are the benefits from discouraging the bling-centric consumer spending we've been riding? What are the *deep* economic questions, not just the shallow "Oh noes, the rich might be better off!" analysis that that section of the page seems to boil down to? Seriously. If that's your only criteria for a taxing system, that's kind of miniscule. They make a nod towards long-term projections at the end that even the most pessimistic long-term forecasts show a grown economy and increased purchasing power over time for everyone... but it's sort of a footnote when it's *kind of the point*.

- they completely and utterly avoid talking about eliminating a massive sink of resources in the income tax preparation sham we have, not to mention the savings at the federal level by eliminating the IRS.. and that's before we get into the normalization of the insanely opaque tax code. When the tax laws are as convoluted as they are now, it is trivial to slip in a few extra hits to the citizen's wallet (increase govt funding without being accountable), or a few extra exclusions (pork, anyone? why yes, Mr. CEO, we can do that for you, thank you for contributing to my campaign...). Opaque is the opposite of transparency, and that's what the current government needs a shot of, from top to bottom. Having a single, obvious, out there in the open tax point means that *nothing can be hidden*. Everyone is affected by, and sees, any and all changes to the tax rate. You bet your ass this is not a popular idea in DC... no more hidden shenanigans. The fact that this has gotten the traction it has should tell you how bad the current taxing approach is - even the power brokers who live and die by the pork are considering giving it up. It's bad for everyone.

- a disagreement over how the actual tax level is calculated. *THIS* is meat, and where the actual debate should be centered, IMO, but they don't spend a lot of time on it, and then they make gaffes like this:

"The Advisory Panel did in fact begin with the 30 percent figure that proponents of the FairTax submitted. But the panel rejected those figures, claiming that they were based, at least in part, on the unrealistic assumption that there would be full compliance with the FairTax. In other words, proponents assume that no one will cheat on taxes. However, the Treasury Department estimates that the evasion rate for the entire U.S. tax system under current law is approximately 15 percent. The Advisory Panel accordingly assumed a 15 percent evasion rate for the FairTax."

Ok, this tells me they haven't a clue how FairTax works, or are being purposefully deceptive or obtuse.

1) Income tax, right now, is done on an honor system - you are supposed to calculate your own taxes, and send them in. The IRS is sent *some* documentation on your revenue sources, but not all. You're supposed to honestly report the rest, to be taxed on. Hell *yes* people are going to try and cheat. I mean, duh? 15% seems entirely reasonable, if not actually low.

2) FairTax is a tax collected at the point of sale. There are approximately 24M POS points, as opposed to 140M income tax filings. 1/5 of the oversight load... now imagine if 1/5 of the rather large resources currently sent to the IRS were diverted to helping states enforce sales tax auditing. 80% savings, and re-using and augmenting established auditing channels. Seems like a win/win to me - states get an assist in enforcement, reducing the local fraud rate.

I wish I could find better numbers, but WA estimates that their *current* fraud rate on sales tax is around 6%. Hell, assume that's consistent with FairTax, the feds send zero resources to help out, and absolutely nothing improves... that's still a lot better than the 15% used to calculate the 34% rate, at a pessimistic level.

I mean come on - a few seconds of thought, and a few more with google and I can give good evidence why the maintained 15% fraud rate assumption isn't solid. It's incredibly pessimistic, to the point of being naive, assuming no malice.

The debate needs meat. This wasn't it.

FairTax isn't perfect - no tax system will be, IMO. You can not, and will not, please everyone involved, period.

But it's a *hell* of a lot better than the mess we have now, which needs to be tossed. We tried it, it's been a fiasco, time to ditch it. Bandaids haven't worked, transparency (a cornerstone of a working democracy) is non-existent, and it's rife with abuse and fraud. When even critics agree that the FT forecasts show a positive outcome for the economy, increased purchasing power for *everyone*, a nice boost to the poorest and neediest, and it comes about by reducing the opportunities for abuse of power in DC... I kind of fail to see the downside.

After all, if taxes aren't being gathered to help *the collective whole* of our society, what the hell are they being gathered *for*?