Chuck Moulton, whom I count as a friend, recently wrote to Governor Johnson regarding his support for the FairTax. It seems to me that chuck either misunderstands or misstates a number of issues. For instance:
1) The prebate is definitively not an entitlement any more than a refund on your income taxes is an entitlement. It is a refund of taxes up to the poverty level, effectively untaxing the truly poor while at the same time building a modicum of progressivity into the tax;
2) First of all, seniors still pay income taxes on much of their retirement savings, and this expense will be a thing of the past. Additionally as to seniors, in as much as the compliance costs and taxes of the present system presently add on average a bit more than 22% to the price of everything that seniors (indeed everyone) purchase, and since we can expect to see substantive price reductions at least approaching that figure as the new regimen becomes entrenched, seniors cost of living will be dramatically reduced, amounting to a wash at worst for them;
3) The possibility of ending up with both an income tax and the FairTax is a red herring. Congress diddles with the tax code every year, increasing taxes, adding fees, eliminating deductions, etc. Of course there can be no guarantee that a future Congress will not attempt to reinstitute an income tax. Then again there is no guarantee that a future Congress will not institute a VAT on top of our present income taxes. To stick with an obviously broken and unfair system of taxation because of something that might happen down the road is myopic, at best;
4) The FairTax site adequately addresses Chuck’s 23% – 30% conundrum. In essence they are very forthcoming about the 30% figure, but use the 23% when comparing it to our present income tax rates. (If one pays an effective income tax rate of 22%, we don’t then back that out and then define it as a 28% rate on what he has left. Apples and apples Chuck;
5) The competitive issue is just the opposite of what chuck describes. The FairTax will make U.S. manufacturers more competitive when selling their goods overseas, and thus eliminate a large incentive to offshore American jobs. Further, the FairTax will encourage economic growth two ways: First by offering foreign manufacturers who wish to sell into the U.S. an incentive to locate factories on American soil, and Secondly by enabling the repatriation of up to $100 trillion of funds belonging to American citizens and companies that are now trapped overseas because of the adverse tax costs of bringing them home; finally
6) Frankly, we cannot allow a handful of radicals, or otherwise uninformed Libertarians, to block us from advocating and taking the bold steps necessary to turn around our economy and begin the process of restoring freedom to America. I can state without fear of contradiction that most LP radicals already oppose the governor because of his foreign policy positions, and a change in his advocacy for the FairTax will not swing a single vote nor produce another dollar in contributions.
If the FairTax achieved nothing but the abolition of the IRS, it would still count as the greatest single step forward for liberty since the Declaration of Independence. The opposition by some Libertarians is incredibly short-sighted and does nothing to advance the goals we all share.