Free Liberal

Coordinating towards higher values

Honing the Fair Tax

Thanks for those who've sent yet MORE letters in support of the Fair Tax. Great discussion!

I'm feeling somewhat misunderstood, first off. I've said I find the Fair Tax appealing in concept. Having been around Washington for 25 years, though, I can share with you an observation: Grandiose plans generally don't happen. Instead, Congress tends to be highly incremental in everything it does. So, a tax overhaul, while appealing, runs up against the institution's well-established proclivity to not rock the boat too much. (I'd except wars from this tendency, where Congress and the President tend to overreact to perceived threats.)

As to Mr. Pritikin's point about corporate taxes being embedded sales taxes, that's somewhat true. I note, however, that corporations are legal fictions, effectively created and enabled by the government. Personally, if the stockholders had to pay for their limited liability privileges above and beyond a Fair Tax or any other tax, I'm not opposed to that. I agree that the corporate income tax is NOT that, but let's be aware that corporations DO have collectively granted privileges, and be open to the notion that the commonwealth should be compensated for that quid pro quo.

I do take his point that the current tax system is more distorting to the economy than a Fair Tax would be, and it'd be helpful to lessen the distortive effects of the current "system" of taxation.

Mr. Neighbors also makes a good point. Fewer actually use the mortgage interest deduction than we might think. But that's NOT my point. My point is that the housing special interests are VERY, VERY powerful. FairTax.Org would probably need something like 80 million members to match their influence. 800K is impressive, but their pockets are simply nowhere's near as deep as the mortgage bankers, homebuilders, etc.

Ultimately, though, while any tax reform is helpful, it's really a sideshow, IMO. However taxes are raised pales in comparison to the government's spending levels. It's my assertion that we need to come up with incremental steps that reduce the size of government first and foremost. My strong preference is to do so in a strategic manner, so that the most economically vulnerable are least affected by the inevitable dislocations.

Reduce government from 40% of GDP to 30 or 20% of GDP, and FairTax might move my dial. A tall order, indeed, but it's my take on the appropriate priorities.

-Robert Capozzi