John Linder’s only major point of advocacy in eight terms is his FairTax proposal, which would replace all national taxes with a 30% or more flat national sales tax. Proponents of the FairTax argue that it would draw businesses to the country, create jobs, increase most peoples’ real earnings, and increase government revenues—but many economists and tax experts believe that the FairTax proposal has major problems and would do much more harm than good.

Of course, Linder, Boortz, and other FairTax advocates are right about one thing: our country's tax code is too long, it is too complicated, it stifles economic growth, and it needs to be replaced. But the FairTax is absolutely the wrong solution. For a summary of some problems with the FairTax, please see Jay Bookman's editorial in the AJC. For more details about experts' opinions on the FairTax, please see “More on the Unfair Tax” below. For my tax reform proposal, please see the “economy” tab under “Issues”.

Linder and Boortz display stunning naiveté in their advocacy of the FairTax. Many states currently use sales taxes to generate some of their revenue, and those states experience serious tax evasion. To compensate for widespread evasion under the FairTax, our national government would have no choice but to raise the sales tax rate, placing a higher burden on honest taxpayers-- and most likely spawning even more tax evasion. How do Linder and Boortz plan to solve this problem? They want to abolish the IRS completely, and with nobody to enforce tax collection, how will they ensure that honest taxpayers don't get hit with a higher tab? They answer this question on page 124 of their second book, Fairtax: The Truth, by suggesting that “once the beneficial effects of the FairTax become obvious to all, we feel confident that the American people may come to consider it their patriotic duty to eschew avoidance schemes and play the game by the rules.”

Are these really the guys you want writing your tax laws?

Of course, while experts agree that the FairTax would make terrible policy (please see “More on the Fairtax” below), it's just as certain that it will never become policy. As Bookman writes toward the end of his FairTax analysis:

• ...The bottom line is, none of it matters anyway. FairTax supporters are being played for suckers by politicians who have signed their names in support of the proposal but have no intention of enacting such a crazy idea.
  
  
• Look at the record. Linder's "Fair Tax Act" has been introduced in every Congress since 1999, drawing scores of co-sponsors. For eight of those years, Republicans controlled both the House and Senate. Yet with all those co-sponsors and all that time under GOP control, FairTax legislation never got so much as one subcommittee vote on its provisions.
  
  
• That's because nobody, including its co-sponsors, takes it seriously. And if the idea was ignored when Republicans were in control, what does that say about its future under Democrats?
  
  
• To make matters even more farfetched, Linder now wants to hold off implementing the FairTax until we also repeal the income tax and the 16th Amendment. So a group that lacks the muscle to get a subcommittee vote on their pet proposal is now going to amend the Constitution with two-thirds majorities in the House and Senate and approval of three-fourths of state legislatures?
  
  

The FairTax is a terrible idea that will never become more than just that: a terrible idea. But John Linder is right about one thing: our country's tax code is too long, it is too complicated, it stifles economic growth, and it needs to be replaced. I advocate a sweeping reform of the tax system which will have all the supposed benefits of the FairTax but none of the big problems. My solution calls for two steps:
1) an immediate tax relief program, followed by
2) the creation of a panel of experts charged with completely rewriting our tax code-- not just trying to repair it, which was tried unsuccessfully a few years ago.

More on the Unfair Tax

In 2005, John Linder and talk-radio host Neal Boortz wrote The FairTax Book to promote their tax plan. Neither of the two has any economic credentials, and their lack of expertise shows: throughout the book, Linder and Boortz repeatedly make bold assertions without backing them up, and they make ambiguous statements that confuse many of their own followers, according to FactCheck.org. On the other hand, economists of all political persuasions say the Fair Tax proposal has a lot of problems. Prominent nonpartisan organizations and well-qualified individuals who oppose the FairTax include:

• The President's Advisory Panel on Tax Reform. The Panel was composed of economists and tax experts, and no member of the Panel was also a member of Congress. Please see:
  - The panel's analysis and rejection of a national sales tax
  - Information about the Panel members and their qualifications
  
  
• William Gale, former senior economic advisor to President H.W. Bush. Please see:
  -His paper, “Don't Buy the Sales Tax”
  -His recommendations for “Fixing the Tax System”
  
  
• Bruce Bartlett, deputy assistant secretary of the Treasury for economic policy from 1988 to 1993. Please see:
  -His January 2008 opinion on the FairTax in the Boston Globe
  -His August 2004 opinion on the FairTax in the National Review
  
  
• The National Retail Federation (NRF), the world's largest retail trade association. Fairtax proponents insist retail sales will sharply increase under the their tax plan, but the NRF disagrees. Please see the NRF's report
  
  
• FactCheck.org, a nonpartisan organization whose mission “is not to rule on issues of public policy but rather to reduce the level of deception and confusion in U.S. politics.” As such, they do not explicitly oppose the FairTax, but they raise several major concerns in their FairTax analysis
  
  

The above sources have reached the following conclusions about the FairTax, which are condensed here into a list of the “top ten” problems. For details, I invite you to explore the findings of the original sources, all linked above.

Top Ten Problems with the FairTax

1. Consumption taxes have a poor track record. Problems with past sales tax programs in various U.S. States and European countries would also cause trouble with the FairTax. Such problems include major difficulties with administration, collection, evasion, and enforcement of taxes. These troubles suggest that a major national sales tax in the United States would not work well.
   
   
2. The FairTax would raise taxes on the middle class. The FairTax would redistribute the tax burden by raising taxes on the bottom 90% of the income distribution and lowering it for the top 1%. This makes the so-called “FairTax” extremely unfair for the vast majority of taxpayers!
   
   
3. The FairTax would raise taxes on families who earn less than $275,000 per year ($200,000 adjusted for inflation since 1996).
   
   
4. FairTax proponents miscalculate their own tax rate. In order to keep the same amount of tax revenue flowing into the government-- a stated goal of the FarTax movement-- the tax rate would have to start higher than the rate touted by Linder and Boortz, and the rate would very likely spiral upward before long. Gale, Bartlett, and many other experts judge that the rate would have to be higher than 50%. Some experts place the figure lower, but nearly all agree it will be higher than 30%.
   
   
5. Rates of tax evasion would increase. Rates of tax evasion would be much higher under the FairTax than under an income tax system. For instance, some states have experienced up to 50% evasion of sales taxes when those taxes are high enough to constitute a significant part of each individual's total tax payout.
   
   
6. “The Fairtax would abolish the IRS” is a myth. Enforcement would be so difficult and so costly that a regulatory body like the IRS would be absolutely necessary, and that body would have its work cut out.
   
   
7. FairTax proponents make too many unrealistic assumptions. For example, the tax base-- the number of people being taxed-- would not be nearly as big as Linder and Boortz assume, and to adjust for this miscalculation, the government would have to push the tax rate even higher.
   
   
8. FairTax proponents miscalculate transition costs. The transition from our current system to the FairTax would cost much more than proponents admit.
   
   
9. Dishonesty and deception permeate the FairTax movement. Many leaders and key proponents of the FairTax movement skew the facts to where even the movement's supporters do not understand what they are advocating (see FactCheck.org's analysis)
   
   
10. Experts don't like the FairTax. Economists and tax experts of all political persuasions agree that the FairTax's problems would make it a poor replacement for our current tax code. Many of those experts are listed above as sources. Quoted here are the conclusions of the President's Advisory Panel on Tax Reform, issued in November 2005:
    
    “...the Panel does not recommend a full replacement retail sales tax. Without a large cash grant program to ease the burden of the tax, a retail sales tax would not be appropriately progressive [it would place too much of the tax burden on people in lower income brackets]. A cash grant program to make the tax appropriately progressive would cost at least $600 billion per year – which would make it America’s largest entitlement program. The Panel concluded that it was inappropriate to recommend a tax reform proposal that required the federal government to collect and redistribute this amount in additional revenue from taxpayers. The Panel also was concerned with administrative and compliance issues associated with a retail sales tax, as well as difficulties involving coordination with existing state sales taxes.”
    
    See the full Panel's full consideration here
    

Fortunately, we have better tax reform options than the FairTax!

Linder, Boortz, and other FairTax advocates are right about one thing: our country's tax code is too long, it is too complicated, it stifles economic growth, and it needs to be replaced. We need to completely rewrite the tax code and make it much shorter, simpler, and easier to enforce. I have read both of Congressman Linder’s books and while the FairTax is a cottage industry in and of itself, there is a much better way to do all this. My plan includes an immediate relief package followed by a call for Congress to appoint a committee of economists and tax experts to write a completely new code that satisfies these criteria.

For more information on my tax reform proposal, please see my “Economy” page on the “Issues” tab