More on the Fair Tax

Not so long ago, I posted a message on the Fair Tax - proposed by both Ron Paul and Mike Huckabee in this campaign - and I got an interesting comment from a Ron Paul supporter. The comment suggested that I was wrong in my position that the Fair Tax would be just the opposite of a fair tax - that it would be unfair to the middle and lower class tax payers.

I'd like to offer a couple of more comments - and sources - that support my position.

From John Mauldin's "Outside the Box" newsletter - circa 1/10/2008. John is a Conservative hedge-fund manager who puts out a free newsletter weekly on the economy.

• [Mike Huckabee's] "espousal of the Fair Tax demonstrates his lack of understanding of reality and economics."
• "No one would like to get rid of the IRS more than I. I spend way too much on accounting for taxes and such. But this is not the way to do it."
• "That 23% number simply won't produce the revenues they suggest. That assumes the Government will pay the tax, so the [Federal] budget has to go up."

As quoted by John, "Bruce Bartlett writes this week in the Wall Street Journal"...

"A 2000 estimate by Congress's Joint Committee on Taxation found the tax-inclusive [Fair] tax rate would have to be 36% and the tax-exclusive rate would be 57%. In 2005, the U.S. Treasury Department calculated that a tax-exclusive rate of 34% would be needed just to replace the income tax, leaving the payroll tax in place. But if evasion were high then the rate might have to rise to 49%. If the Fair Tax were only able to cover the limited sales tax base of a typical state, then a rate of 64% would be required (89% with high evasion)."

Back to John Mauldin's words: "44 States have income taxes. They would have to repeal their income taxes and raise their sales taxes in order for individuals not to have to file annual income tax returns."

"Do you really want to add 30% [or much, much more] to the cost of a new home? And pay an extra 30%[+] in interest on the borrowing price? 30% to 40% more for your legal services? Do you want your rents to go up 30%? Do you really think that massive evasion would follow? We would move back to a black market economy so fast that it would take all of Ben Bernanke's printing presses working overtime to create enough cash for the black market economy."