More Ranting

November 30, 2007

I can’t let go of this Mike Huckabee-IRS thing quite yet.

What does he want instead of the current tax code?  The so-called National Fair Tax!  Okay, let me start by saying that I’m no fan of the current tax code.  It’s complicated as hell, it’s filled with loopholes and gimmicks, the vast majority of which are geared toward the rich.  But at least on a conceptual level it’s progressive — it has a sliding tax scale that is intended to place the greatest burden on those who can most afford to pay, while easing the burden on those least able to afford having a bite taken out of their income.  Now, again, in practice loopholes and deductions have allowed the wealthy to shelter portions of their income, and as a result middle income taxpayers now pay proportionally more taxes than do many in higher income brackets.

That’s not right.  The tax code should be simplified and made more fair — in many respects, doing the former will lead to the latter.

But let’s look at this “Fair Tax” that Mike Huckabee and other Republicans are supporting.  What is it?  It’s a national sales tax.  According to its proponents, if we do away with income taxes and corporate taxes and estate taxes, and go to a national sales tax of 23% — yes, that’s right:  23%! — we can achieve the same rate of revenue influx that we have now.  Let’s set aside for the moment that many people dispute this claim, placing the actual figure at anywhere from 30% to 50%.  We’ll take Mike and his friends at their word.  23% it is.

Are they nuts?!  23%?!  Do you want to pay 23% more for everything you buy?!  I certainly don’t.  But that’s besides the point, too.  Nobody likes taxes of any sort.  So let’s look at the two biggest problems with this approach

1) It’s a regressive tax.  This isn’t a sliding tax scale.  Everyone pays that 23% no matter their ability to pay, no matter their income.  The proponents of this tax may exempt food from the tax — I don’t know for certain, so I won’t even talk about food, except to say that if food isn’t exempted that only serves to make this tax even more unfair that it already is.  But let’s talk about clothing, shoes, blankets, heating oil, aspirin, cold medicine, telephones, cars, and every other item that people buy and have to have.  The proponents of the “Fair Tax” say that it’s fair because it only taxes consumption and so people who don’t have as much money won’t buy as much and therefore won’t pay as much.  But there are things people HAVE to buy.  Don’t less affluent mothers and fathers have to clothe their children?  Don’t they still need cars to get to work?  And aren’t they entitled to buy things that they don’t absolutely have to have?  Don’t they deserve to be able to buy their kids presents for birthdays and holidays?  This tax makes it more difficult for them, and since they will be paying exactly the same rate on these items as their wealthy counterparts, it is an unfair tax!

2)  It’s a stupid tax.  Ask any economist what has been fueling American economic growth over the past decade and they’ll give a simple answer:  consumer spending.  Budget deficits have been growing, the dollar is weak, the housing market is sputtering, and yet the third quarter economic stats for the U.S. were pretty good.  Why?  Say it with me now:  consumer spending.  So why — WHY?! — would you want to implement a new tax system that is guaranteed to slow the rate of consumer spending?!  As it is, we are on the very precipice of a recession.  The Fair Tax, were it to be implemented tomorrow, would push us right over the edge.  And no matter when it’s implemented, as consumer spending falls in response to this tax, revenue will fall with it, forcing Congress to raise the sales tax rate, which will then further depress consumer spending, which will then force Congress….You get the picture.

So it’s unfair and it’s stupid.  But it SOUNDS so good; it gives Mike and the rest of the GOP an excuse to say that they’re going to rid us of the scourge that is the IRS.  So you’ll continue to hear about it for the next year or so.  Then, hopefully, this terrible idea will fade back into the obscurity it so richly deserves.

Today’s music:  Jerry Garcia and David Grisman (So What)

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