Fairness
Let’s start with the semantics – my favorite part of politics [ facetiousness detected ]. We are talking about the FairTax Act. If we judge this Act by the standards held by recent legislation – like the American Clean Energy and Security Act, America’s Affordable Health Choices Act, and American Recovery and Reinvestment Act – I have to assume that the FairTax Act taxes people unfairly and is not specific to America.
So, despite traditional congressional naming conventions, could the FairTax Act be in some ways fair? It certainly depends on your perspective. Essentially a FairTax would abolish income tax, capital gains tax, and all other types of earnings taxes – and replace them with a federal sales tax, levied by current state systems. Certainly, anyone under the assumption that the rich should be taxed more because they have more will see the basic concept as unfair. But the FairTax act includes tax credits that would make all purchases up to the poverty level – or something – tax free. Still, squeezing successful people for money would be more difficult, because they’d have to spend it for uncle same to grab his share, which means he won’t be able to write a quick bill that taxes the sox off the rich to set up entitlements. Some won’t see that as fair.
If you’re a person who believes it’s government’s job to provide certain services, and a person’s tax share should reflect that person’s use of those services – then the FairTax might be fair. It just depends on how you calculate it. Everyone is a consumer and benefits from government services about equally in that regard – national security, roads, infrastructure, regulation, law enforcement, and so on. Entrepreneurs benefit even more by doing business with the aid of such services. But then, we all have the freedom to innovate and do business. That’s one of those freedoms provided.
And if you’re one of those people who believe each person should simply pay an equal share – with exceptions for those who simply can’t afford it – then the FairTax is exactly fair. You’re only taxed for what you spend – what you use. You’re free to work as hard as you like, make as much money as you like, and you still pay as much tax per unit of stuff used as the next guy.
No rational person can use ‘fairness’ in deciding legislation – the word is vague and arbitrary. Obama used it in his campaign for crying out loud. For some it seems fair for five friends to split the bill five ways. For some it’s fair that each person pays only for what they order. And to some, like Obama, it’s fair for the guy with the highest income to pay the whole bill and also give the guy with the lowest income money for lunch tomorrow. The FairTax is like paying for what you order plus a little extra to pay for the friend who forgot his wallet.
One definite fair thing about the fair tax is how government spending would be conducted. The FairTax act requires taxes be revenue neutral. In other words, if government spends more they have to visibly tax more. No more of the Obama-type free gifts for everyone – I’ll make the rich pay for it. This would help resolve a big weakness in democracy: The majority electorate voting for monetary gifts from the minority. For example: the false idea that we can all have free healthcare would be a harder snake-oil to sell.
Likewise there would be direct visible ramifications to irresponsible spending and pork-laden bills of all types – no more free money.
Viability
Viability of the FairTax is something fun to ponder. I mean, if it’s viable to have the IRS – a country-sized bureaucracy – lording over every productive/profitable move we make, slicing off a piece of every inch of progress we make – then shifting taxes from income tax to a streamlined spending tax should be perfectly viable – mathematically. Nothing should cost more. Right now we pay for a company’s taxes when we buy its products. Under the FairTax we’d pay the same taxes but they’d be visible.
You might worry about a tax on spending causing a reduction in spending – which would be BAD in this economy. And it might cause a reduction in spending if we abruptly switched. But – fundamentally – a FairTax would lower prices.
How? How would a 23% sales tax reduce the cost of goods? Well, we’re already paying that 23% tax, but in a less efficient way and based on our output and not our consumption. Once the punishment for productivity is removed, there will be more productivity – obviously. And productivity leads to efficiency, innovation, and investment – which all make everything cheaper as it has been since the concept of The United States of America began.
Of course this concept goes both ways. People will see the punishment for spending. Rather than having 1/3 of their wages taken they will see a 23% tax. This will cause people to reflect longer before making large purchases and people will be overall less inclined to make purchases. (which may be a good thing long term because people will stop buying garbage and start demanding better and healthier stuff) And of course, this affect will be at least somewhat offset by the fact that people are bringing home 1/3 more cash to spend.
And from Uncle Sam’s and stat’s perspective – revenue cash flow wise – the continuous nature of sales tax is a good
thing. We just saw California keel-over and about die because they are so reliant on rich-people income taxes, like capital gains tax, which dries up completely during recessions.
So the concept is certainly viable. The implementation would have to be realistic of course. So the guys who give Obama his numbers would have to be killed and fed to dogs just to be sure. And this is assuming Obama’s agenda is at least partially crippled, since all his ideas will require a lot more than a silly 23%.
This system could also lend some extra flexibility. For example, in times of war the tax could be raised slightly to pay for it. This would lessen war debts and spread the sacrifice around. Or maybe it could be used as a market control – like how the Fed manipulates interest rates. When the economy gets too hot you could raise the sales tax. When it gets too low, you could lower it. We would just have to keep the lesson learned from the past few decades about not abusing market manipulators. (The idea of Fed controls was to soften peaks and valleys. Instead we used them to heighten peaks.)
Likelihood
As far as legislation goes, FairTax is highly thought-out, conceptually and actually. It has loyal support, mostly on the right, but including one Democrat. And it’s claimed that the FairTax Act is non-partisan.
Of course, the FairTax is by no means non-partisan. Sure, by Obama’s standards of bipartisanship this bill, like the House healthcare reform bill, is bipartisan because is does include support by one democrat. But seriously, passing the 
FairTax Act would be a total and unmitigated disaster for the long held agenda of the Left. It would also make getting elected a true nightmare for Democrats. There’s no way in hell the Liberal Democrats will let something like this pass – if they can at all help it.
A FairTax would make it impossible to specifically tax millionaires and billionaires. And without all that lute there’s no way to finance – or pretend to be able to finance – all the bright ideas and experiments the Left would like to try. And without all that lute, Democrats can’t make their promises to “the little guy” – promises like free healthcare, free homes, free education, high paying low skilled jobs, and all the other impossible yet expensive proclamations.
So any effort to actually pass the FairTax will have to come from the Right. But Conservatives – as the name implies – are not enthusiastic champions of any monumental change. The average Republican in office today is totally engaged in slowing down Obama’s attack on business.
Right now the momentum is in the total opposite direction of the FairTax. We have energy taxes coming down the congressional chute. We have a healthcare reform bill being finalized in secret – because its public support has taken ill – and who knows what kinds of taxes/fees/penalties will emerge from that pile of dirty-porky-compromise. And the current Washington idea of ‘fair’ is to spread the wealth around.
HOWEVER – momentum has a nasty and abrupt habit of shifting direction, especially when crazy Liberal face-lift enthusiasts from San Francisco are running roughshod over congress and spending every oz of the Liberal savior’s political capital in his first few months in office – trying to force-feed the country the most belligerently partisan
spreader load of legislation seen in recent history.
And if we know anything from recent history, we know that the population is averse to such behavior. We can add that to the economic climate, the fact that our economic policies and current legislative efforts are crippling business, the slow realization that Obama is a tentative and inexperienced leader, the perception that he’s gentle with national security while people’s underwear is being weaponized, the general creeping feeling that his charming personality really isn’t going to de-nuke and otherwise save the world, the abuse of the dollar, the porkroast cook-off and spending-spree they’re having with all our tax dollars – and created dollars – and you will soon see a backlash against whatever and whoever is most prominently in charge of whatever.
And if the FairTax manages to ride that backlash – assuming it’s hard enough – we might see it make it to law. It will have to be a hard backlash though, fed by worse than the semi-permanent 10% unemployment we have. Another one trillion in ‘stimulus’ won’t hurt.
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Raging Kitty