Guest column Facts and the Fair Tax


Sunday, September 26, 2010

— Many publications have consistently written with contempt about the Fair Tax, but have obviously done so without bothering to conduct even the most perfunctory research on what it actually does and does not do. I expect that kind of “shoot first, aim later” approach from the local tabloids, but the Arkansas Democrat-Gazette editorial staff is better than their understanding of the Fair Tax would reflect.

The Fair Tax is hardly a “halfbaked” idea. It is the result of over $22 million dollars of scholarly research involving economists from Harvard, MIT, Stanford, University of Chicago, Boston University, and other prestigious universities.

In a nutshell, the Fair Tax is a flat tax, but instead of taxing our productivity (income, investment, savings, capital gains, or inheritance), we are taxed at the point of consumption at the retail level on new items. It is flat, fair, finite and family-friendly. It is totally transparent, unlike the hideous tax structure we currently have and is not a value-added tax that assesses taxes at production points, but remains largely hidden to the consumer.

The criticism that it would hurtthe poor is the surest evidence that the critic is ignorant of the prebate built into the fair tax, which untaxes consumption of our basic necessities, and which the studies show actually creates the greatest benefit to those in the lower third of the economy, significant benefit to the middle third of the economy, and some benefit, but less, to those in the top third of the economy.

Here’s what the Fair Tax will do:

1. Eliminate the IRS and its indecipherable 67,000 pages of tax code so complex that even Treasury Secretary Timothy Geithner and 41 members of the White House staff seem unable to understand it (or else simply unwilling to comply with it).

2. Release $13 trillion of U.S. capital back into our economy that is presently legally (but unfortunately) parked offshore to protect it from the ravenous tax rates.

3. End the nightmarish accounting and legal nightmare for small business operators (and large ones) and allow them to actually make business decisions instead of tax decisions.

4. Eliminate an estimated $500 billion of expenses related to compliance with the complicated tax code that produces nothing but government paperwork.

5. Virtually eliminate the underground economy by making taxpayers out of illegals, prostitutes, pimps, drug dealers, gamblers, and others who work “off the books.”

6. Restore a person’s full paycheck-many people will receive their first full paychecks with no deductions taken out.

7. Eliminate the hidden and embedded tax on all the things we purchase, which is approximately 22 percent.

Unfortunate and

misguided or perhaps dishonest

statements have been made about the Fair Tax, some of which stems from the utterly nutty critique some years ago by Robert Bartley of the Wall Street Journal who went so far as to try and allege that the Fair Tax was a secret plot of the Church of Scientology. Some point to a supposed study of the Fair Tax by the Bush administration, which was a consumption tax, but not one that involved the all critical prebate. Some simply fail to understand the power of the prebate for low income earners or have failed to recognize how significantly the political dynamics of Washington would change if Congress were no longer able to manipulate the tax code so as to create winners and losers according to the whims of Congress rather than the free marketplace.

The so-called sticker shock of a 23 percent tax rate seems ominous until one realizes that with the various payroll taxes, hidden taxes in our purchases, etc., the average American already pays almost 33 percent in taxes now at the federal level.

The Fair Tax would be a legitimate economic stimulus package by creating a level playing field for manufacturing. When U. S. companies are having to factor in the embedded taxes on our side, but our competitors in China don’t, we have a hard time keeping our manufacturing and our jobs here.

I recommend reading The Fair Tax by Congressman John Linder and Neal Boortz or the follow-up book by the same authors, The Fair Tax Answers, or go to and then at least base whatever criticism on something other than internet chatter and less than complete understanding of the facts of the Fair Tax.

Mike Huckabee is the former governor of Arkansas. He was a Republican candidate for president in 2008.

Perspective, Pages 83 on 09/26/2010