I spent some time today reading through the extensive literature available at FairTax.org, the tax reformation organization which GOP front runner Mike Huckabee supports as part of his economic policy. I have to say, they have done their homework there to answer questions I had from the snippets I had read about the FairTax plan.
As a general concept, I utterly support the concept of abolishing the federal income tax, and replacing it with a Federal Sales tax. It's a system which has the ability to completely solve all the inequities in tax law which allow loopholes and shelters to be built for the ultra-rich, and place a disproportionate burden on the middle and lower classes. A tax on consumption is the most honest tax possible, and rewards fiscal responsibility, while also drawing revenue on sources currently exempt from the system, such as money earned in illegal operations including drug sales and gambling, and pure cash ("under the table") jobs in adult and other cash heavy industries. It also provides a channel for dealing with the very expensive issue of illegal immigrants who draw from the system without paying into it. Taxation on their consumption allows them to contribute to the system they benefit from.
The biggest concern with any flat federal sales tax system is that it provide true tax relief for the middle and lower class, both in simplification, and in exemption of certain basic goods and services from taxation. In the FairTax plan, this is handled using a "Prebate" system, by which qualified families receive a refund check for the value of taxation up to the poverty line of spending. This is where the plan begins to fail in exactly the same place as previous flat tax legislation attempts.
Any bureaucratic system which must "qualify" who is allowed to receive benefits designed to address socioeconomic inequities will become the failing point for that system, as evidenced by the welfare and social services system. The application, review, and enforcement of those guidelines, which themselves change frequently, lead to massive overhead in administration, and poor service to the taxpayer in question.
Additionally, when parsing the qualifications necessary to be a "qualifying family" (PDF) , I was extremely disappointed to find that the parameters in place to denote qualifications are remarkably skewed in favor of a stereotypical Right Wing Family Values poster. Gay couple? Sorry, you don't qualify as family. Non-custodial Dad who still buys all the school clothes and supplies? Nope, only goes to the custodial parent. Six artists sharing a loft in order to make ends meet and produce beautiful art? Oh, hell no. You don't qualify.
The solution to potential inequities is very simple, and works across the board. The consumption tax must be sliding scale based on product type and cost. This is not as complicated as you might think. Grocery stores are already equipped for the WIC program, which issues vouchers for certain classes of foods up to a certain cost. That value is sorted out during scanning of groceries, and the balance of the bill is paid in cash. In a sliding scale system, uncooked food and household items with a value of less than twenty dollars would be completely tax exempt. A poor family spending twenty five dollars on mostly one and two dollar grocery items would pay no sales tax at all. Additionally, exempt the first hundred dollars on home utilities and car payment, and the first five hundred dollars on mortgage/rent. Add an additional 5% in in taxes to purchases over $25,000. Tie those exemptions and additional levies across the board to the Federal inflation rate, so that the system remains equitable over time.
A pure consumption tax would represent an astounding evolution in fair, simple taxation for American citizens, while remaining revenue neutral. Given the currently untaxed revenues which would be swept in, it actually has the potential to earn more, on lower percentages of taxation. However, there must be an integrated set of exemptions built into the lowest consumption level, that does not discriminate against households which do not conform to a white bread Ward and June Cleaver template. It's the only way any FairTax actually would be.
Subscribe to:
Post Comments (Atom)
Spread the word...
5 comments:
Ian, all you've done here is rehash projected numbers and studies, which all rely on the system running smoothly. None of them adress the unlikelihood of the prebate system to fairly exempt the lowest class consumers, because of the template it requires for qualified families. Address that issue, and I can get behind it.
"Six artists sharing a loft in order to make ends meet and produce beautiful art? Oh, hell no. You don't qualify."
This kind of thinking is a case of "the bad chasing out the good." Some people will never be happy, even though FairTax will work, and that it is infinitely less deficit-ridden than the current system.
Hope you, and the other starving artists, don't have to chop up furniture and burn it for heat.
Ian, my rebuttal is not complicated, and yet you have rejected it twice now. Do you just not get it?
Yes, it is an economically feasible plan. I know this. I noted it in my post. It is also, however, a plan ridden with social inequities.
Front load the discounts for poverty by exempting staples. Make up for it by backloading luxury purposes. Is that complicated? I really don't think so.
The moment you start exempting, you're on track to bring back a growing tax code, and growing an industry to game it. FairTax takes care of the front-loading most adequately (per the last link posted).
The worry over "bringing back a tax code" is a red herring at best. There is still going to be a tax code, focused on the retailers who are collecting the tax. That code most certainly can include base product exemptions for staples and utilities as I described in my post. Additionally, you are looking at a bigger bureaucracy to administer a system of eligibilities for the Prebate than you would be to add on exemption tracking.
Ian, my hang up with the FairTax plan was straightforward, and despite you linking more and more of your promotional material, not once have you addressed the actual concerns I raised.
1. A non-custodial father like myself who pays for the majority of products and childcare expenses will not be eligible for the Prebate.
2. Any household which does not conform to a married mother/father template will not be eligible for the rebate.
This affects a large majority of the voting base that FairTax is supposed to be helping. The Prebate system is structured like a welfare program, complete with applications and eligibilities, and checks coming once a month. For you to state that the exemption system would be more problematic than an entirely new social services type agency to administer the prebate is simply ludicrous.
We don't need a taxation system setup like another welfare program. We need a taxation system which treats all demographics and households equally. If your group is not willing to front load the system with some basic exemptions, using the existing WIC infrastructure, then it sounds to me like this really is another opportunity to screw the poor. Those who most need the prebate are most likely to not receive it, either due to eligibility issues, or to the hassles of dealing with another bureaucratic agency similar to HRS now.
Post a Comment