The FairTax has been getting a lot of attention lately, including support from Presidential candidates Mike Huckabee and Fred Thompson. It sounded good to me when I first heard about it - I am in favor of fairness - but after hearing some more about it from responsible conservatives like Bruce Bartlett, I've realized that it does not entirely live up to its name.
Perhaps they should call it the FairerTax, since, while fairer than the ridiculous tax system that we currently have, it does not come close to the model of Pure Fairness that someone like Aristotle would have expected out of a tax system.
The most fundamental problem with the "FairTax" is that it is paying for government spending by taxing ordinary people like you and me, every time we buy anything. If the government is the one buying goods and services, then why should the America people get stuck with the bill? Shouldn't that be the government's responsibility?
Of course it should be. That is why I am promoting a new tax plan, which I call the Government Tax. The idea, in a nutshell, is this: whenever the U.S. government spends money on something, the U.S. government should have to pay for it.
The details, for my wonkier readers, look like this. The Government Tax consists of a 100% sales tax on all spending by the United States federal government, including all goods and services. When the government buys a $1 million tank, it pays an additional $1 million in taxes. When it spends $100,000 on military escorts to the President's convoy, it also has to pay the $100,000 Government Tax. The government sends out a $740 Social Security check? Then it pays the $740 tax. The math works out the same way with all of the other pens, salaries, treasury bills, and whatnot that the government pays for.
All other federal taxes, including the income tax and the payroll tax, will be eliminated under my plan. Thus, in addition to the obvious fairness benefits, the Government Tax would vastly simplify things and make tax collection far more efficient and far less distorting on the economy, since ordinary people wouldn't need to worry about the tax implications of all their decisions.
I won't bore you with all the math, but calculations similar to those performed by the brilliant minds behind the FairerTax demonstrate that the Government Tax would be sufficient to cover all existing federal spending, without any deficit or any additional revenue from other taxes. Projections also suggest that it will allow us to afford the coming budget increases for Social Security and Medicare due to our aging population (not to suggest that we don't need major changes in both of those "entitlement" programs - another iffy naming).
What do you think, readers?