Bits and Pieces 3:The "Fair Tax" Isn't Fair to All

The “Fair Tax” proposal would replace income taxes with a “revenue neutral” consumption tax. To fund our government at the current level would require a national sales tax of  30%. The Fair Tax proposal  might simplify our tax codes, but it would also have ripple effects across our economy with unknown consequences.

Economist Mike Moffatt has identified the likely winners and losers under the Fair Tax proposal. Winners would be people who are inclined to save, people who can shop in other countries, those who can avoid sales taxes by unscrupulous means, and the wealthiest one percent who will get an average tax cut of about $75,000.

The losers would be the working poor, families with incomes less than $200,000, people who derive income from the current system (tax accountants, IRS employees and income tax lawyers), and seniors who have already paid a lifetime of income taxes and would now be taxed on spending as well.

The “Fair Tax” proposal would shift more of the tax burden to middle and lower income groups, those groups already benefiting the least from recent tax cuts. Our present graduated income tax code is based on the ideas that those who profit most from our country’s wealth, resources, and opportunities should pay a greater share of their bounty in taxes. The current system seems fairer and more pragmatic than shifting taxes to those who could least afford to pay.

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