Subject: Rebuttal to Congressman Linder’s 6/10/05 FairTax Comments Comment: TO: President’s Advisory Panel on Federal Tax Reform RE: Congressman John Linder’s 06/08/05 Letter to the President’s Advisory Panel providing expanded explanation of the FairTax [H.R. 25 in the House; S 25 in the Senate]. Posted 6/10/05 as "Answers to Questions about the FairTax." Dear Advisory Panel Members: The good Congressman from Georgia provides operational explanations in his letter where the FairTax could be summarized as . . . * providing a more efficient yet simpler mechanism of federal revenue acquisition than the income tax, Flat Tax, or VAT. * functioning -- all elements considered -- as a more progressive tax than the income tax. * bringing the U.S. up to par with other OECD countries who already have national consumption taxes. The FairTax is superior to the VAT because of visibility, simplicity, efficiency and unison with existing state tax systems. The points above may be true in isolation, but here is why they are not a valid justification for a national sales tax: 1. Mere operational efficiency – that the FairTax is less cumbersome than the income tax – is no justification for subjugation of citizens and arbitrary seizure of their assets. Citizens should not have their money seized merely because they want to benefit from (spend) what they have earned. Like the income tax and VAT, the FairTax operates for the convenience of the state -- assessment is not related to native liability and the actual cost of government at the individual taxpayer level. And even if operational efficiency of a national sales tax is less onerous than the income tax or VAT, that does not mean it is a good tax system. There are still the issues of inhibition to free trade, attack on the division of labor, penalty on innovation, double taxation of retiree savings, discrimination on American commerce, manufacturing use-tax application, out-of-country tax avoidance, massive and costly rebate schemes, inducement toward evasion, black markets, and systemic forced redistribution. 2. The greatest misnomer in economic history is the term “progressive,” where assets are increasingly seized from citizens who produced them -- merely because the assets are produced or spent. The claim of the FairTax as more “progressive” than the income tax is not an attribute. Systemic, collectivized seizure of citizen assets through the tax code -- merely because people earn or benefit (spend what they earn) -- should not be the basis of a tax system in a country that is supposed to stand for liberty. The type and level of government spending, including any aid and subsidy, is determined by Congress, but the cost of government (the budget) is a finite amount which should be applied objectively against the tax base. 3. Other countries are not “way ahead” of us because they already have consumption taxes. Let the neo-socialist countries of Europe and elsewhere keep their social engineering schemes and convoluted tax mechanisms. The United States should be moving toward increased protection of individual liberty and a stable and objective tax system related to the actual cost of government. For further analysis see “Request for Comments #3 (Benefits and problems with various tax reform proposals)” at the Business section, then select the third item: “Critique of . . . Income Tax - Flat Tax - FairTax - VAT - Mod. & Cons.Income”. Sincerely, Timothy J. Gillis, Director The RPUT Project Maximus Profectus info@rput.com |