The Campaign for the ‘Fair Tax’ is a Waste of Time

I’m desperate to write about something other than Iraq, so let’s close the week and switch to the neglected topic of tax policy.

Politicians are loath to deal with the problems at hand, and instead focus on matters “in another galaxy in a place far far away.” Such is the eternal quest for tax reform. Rather than trying to shape the current code to be more favorable to savings and investment, grandiose schemes (Al Gore would call it a “risky scheme”) are floated to scrap the current system and replace it with something totally new. 

The latest proposal is the so-called “Fair Tax,” which would replace the federal income tax with a national sales tax at a rate anywhere between 23 and 30 percent on all retail purchases. It has the endorsement of dark horse Republican presidential candidate Mike Huckabee and is the subject of much favorable comment from other Republican presidential candidates as well as support from grassroots anti-tax groups.

Unfortunately, this campaign is an absolute waste of time and just gets politicians off the hook from making suggested changes that could actually be implemented within a reasonable time. Politicians should tell us what they can actually accomplish, not what they would like to see in a perfect world.

Why is the Fair Tax a cop-out? First, it will never happen, certainly not anytime soon. The current code is firmly embedded in every phase of American economic life and repealing it is not in our near future. Such talk makes good short-term politics, but cannot in any way be called a serious policy proposal.

Second, a national sales tax interferes with a major source of state and local revenue, and as such, will be opposed by every governor and mayor in the country.

Third, it is less progressive than the current tax code and thus will be opposed by liberals and major interest groups that have a role in perpetuating the current system.

Finally, given that the 16th Amendment is unlikely to be repealed, conservatives should want no part of a scheme that authorizes a national sales tax without taking away Congress’s constitutional authority to levy an income tax. Otherwise, we’ll probably wind up with both, given Congress’s propensity to tax and spend.

Our candidates owe us their thoughts on what they reasonably can accomplish during their time in office. The Fair Tax is not a serious idea. A far better idea for Republican candidates would be to tell us how they would preserve and deepen the Bush tax cuts, which are scheduled to expire in 2010, and which most Democrats have promised to cancel.