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Fair Tax Take

Someone recently e-mailed me asking my take on the fair tax. Here was my response:

I'm certainly not an expert on the fair tax or any straight consumption tax, but I have heard a lot about it. I understand it to mean the abolition of our current tax code (how can that not be a good thing?) and replace it with a 23% sales tax.

In principle, as a conservative, I think I have to be in favor of this. Taxing income, especially on a graduated basis, has always seemed counter intuitive to me. It is essentially penalizing people for being productive; in fact the more productive you are, the more you are penalized. In addition, what I mean by a graduated basis is, the top 1% of income earners pay 40% of our taxes and the top 10% of income earners pay over 75% of our taxes (or something close to that). On top of the inherent unfairness in this, the tax code itself is so complicated (it costs the US over $1 billion in lost work time for Americans to take the time to calculate and file their taxes) and has so many loopholes that companies spend a lot of effort to try to hide their revenue from taxation. A fair tax enables everyone to pay the same tax rate (23% on all you buy) which is inherently fair, I believe. By removing the current tax codes, products become exponentially cheaper. I think it is a win-win situation.
Critics of the fair tax are usually lefties who believe in income redistribution and social engineering. They like the idea of the richest people paying the most taxes and the poorest people paying none (although there is a fair tax bill in the house right now that would give a rebate back which would make the tax rate zero percent for most poor folks). I doubt this or any other fair tax bill will pass any time soon because the left has successfully framed the issue in a class warfare context. Conservatives say the fair tax means everybody pays the same rate, Liberals will say that the fair tax is a regressive tax system that balances the checkbook of the government on the back of the middle and poor classes (and who would want that, right?). Imagine a family of four where one household makes $50,000.00 and the other makes $1,000,000. The millionaire family will likely pay a far lesser percentage of its total income on things it buys than the $50k family. Because the 'rich' are now paying less of the total percentage of their income and the 'poor' are paying more than the rich (though less then they would under our current tax system), the lefties will argue that it is unfair.
So support of the fair tax comes down to what you think is fair. Is it fair that everyone pay the same rate regardless of income (as conservatives will argue) or is it fair that the 'rich' pay a lower percentage of their income than those who are 'poor' (as liberals argue)? There maybe a third strand of people who like the idea in principle but have a lot reservations about how such a radical tax change could be practically implemented.
Count me in this third group.

Full post as published by SoapBox Law on December 01, 2007 (boomark / email).