In the wake of Buzz’s comments on The Tax Bomb post (TownHall version), I guess I should explain why I am philosophically-opposed to a national sales tax. It’s been a few years since I did this (I thought I put it here, but it must be my old age showing), and I’m still a bit under the weather (literally; it’s a rainy, ugly Thursday here in the land of cheese and beer), so I may jump around a bit.
First, let me be clear that the current tax code is fouled up beyond all repair. Its tentacles reach into every crevice of life, and at nearly 20% of Gross Domestic Product with promises of ever-increasing taxes, it simply takes too much money. My ideal tax code would be an absolute-flat tax where everybody that works pays the exact same amount. Of course, that would require the death of the welfare state and the reduction of the federal government to its absolute minimum core Constitutional principles, two items that even Republicans are loathe to consider.
That brings me to my first objection to the FairTax; it does not do anything to begin the process of actually reducing the amount of money going to government. Indeed, at 23% of the gross sales, or if you prefer to use the traditional sales-tax percentage, 30%, it is expressly designed to not reduce the amount of money going to government.
Next, the fact that it would tend to be paid in drabs and dribbles mostly-hidden from the view of the consumer is odious. Indeed, the fact that, other than the purchase of vehicles and homes, it would go by all-but-unnoticed makes a national sales tax more-likely to be increased in any given year than the individual income tax. That is borne out by the history of the sales tax here in Wisconsin. 25 years ago, it was 4%. Then came a “temporary” percentage-point increase to 5% that somehow became permanent. The counties whined that they needed more revenue streams, so they were given the authority to lump in a 0.5% sales tax, and most counties, including Milwaukee, promptly tapped in. Milwaukee wanted to replace its convention center, so in went a 0.25% sales tax on prepared food, 2% tax on hotel rooms and 3% tax on car rentals in Milwaukee County (to an unelected board). Then Bud Selig came knocking for cash to “help” build a new ballpark, and in went a 0.1% sales tax in the 5-county area surrounding Milwaukee. In short, a restaurant meal that was taxed at 4% when I was young is now taxed at 5.85%, a 46.25% increase that, once inflation is taken into account, is something north of 300%.
I also take umbrage with is the concept of a “prebate”. Ultimately, the supporters are going to have to make the hard decision of keeping the IRS to verify, either through income or amount of purchases, the amount of the “prebate” to give to a particular individual, accept that the “prebate” is yet another welfare program, or jettison the concept and thus lose whatever left-of-center support might otherwise be gained.
As for the dreams of eliminating the IRS and the “underground” economy, I don’t suppose many of the supporters of the FairTax have had to deal with the BATF. Moonshiners have, and the BATF makes the IRS look like altar boys. Speaking of moonshiners, 221 years of taxation and zealous enforcement didn’t exactly stop their underground economy.
One more thought on the underground economy. If you’ve ever underreported the amount you paid for a used car because you didn’t want to pay the entire amout of the state sales tax, raise your hand. Apparently enough of you did so that many states now base their used-car sales tax on the Kelly Blue Book value instead of the actual sales price. Keep in mind that the state sales tax is anywhere between a quarter and a sixth of what the FairTax would be.
