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: Bench Memos - National Review Online

Unfair Tax -- By: Ramesh Ponnuru

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Ken Hoagland claims that the FairTax can raise as much revenue as existing federal taxes while the poor, the middle class, and the rich will all pay less. Taxing the underground economy will make up the difference. No. Drug dealers will simply evade the FairTax on their sales instead of the income tax on their proceeds. They?ll pay taxes on their own purchases, but their clients will be able to buy with untaxed dollars. Meanwhile, the high sales-tax rate will stimulate evasion from people in more legitimate lines of work. (There is no example of a sales tax as high as the FairTax that has avoided this problem.) The underground economy will be larger, not smaller.

Hoagland acknowledges that ?prices will not remain the same after the FairTax?; would it be so hard for him just to admit that they?ll rise? I defy anyone to translate the rest of his paragraph on the topic into English.

If he will re-read my article, Hoagland will notice that I already noted how FairTaxers defend their claim that slapping a $30 tax on a $100 purchase amounts to levying a 23 percent tax rate. His reiteration of this defense rebuts nothing in my article.

I am sorry if I offended Hoagland with my comment that FairTaxers ?generally respond to [certain] criticisms with what we would have to call flimflammery if we thought they understood the issues.? That line seems pretty mild to me. Hoagland?s contribution to polite discussion is to claim that some of the people I quoted in opposition to the FairTax have benefited from ?nest-feathering? under the existing tax system. He names no names. Pretty sleazy.

I agree with Hoagland that the existing tax code desperately needs reform -- and I said so in my article. If I merely thought the FairTax would be disastrous in practice, I would not feel any need to speak up about it, since there is no reason to worry that it will ever be put in place. What is destructive about this campaign is its potential to persuade people who want to reform the tax code to waste their time on a fantasy.

? Ramesh Ponnuru is a senior editor at National Review and a member of the board of the National Review Institute.

Full post as published by Bench Memos - National Review Online on March 24, 2010 (boomark / email).