FairTax good for America, bad for liberals...

This is a blog post from constitutiondefender. This article is linked back to constitutiondefender. If the author wishes me to remove this blog, I will at his request. I thought it was worthy of publishing, since we both support the same cause. - Big D.

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For those of you unfamiliar with the FairTax, It is a comprehensive taxation system devised by a group called Americans for Fair Taxation. The group spent some 23 million dollars to research and develop the idea which has been popularized in a book by Neil Boortz and has also been introduced in the 108th Congress as H.R. 25. In a nutshell, the system replaces ALL income taxes with a national consumption tax. There would be no income tax, no FICA, no estate taxes, and no capital gains taxes. The entire federal government would be funded by one very simple tax. I cannot possibly list all the details here. Please visit fairtax.org for more information.

Among the many advantages are:

1.) Simplicity: No tax returns to file, no need for a huge bureaucracy to enforce the tax code, fewer loopholes etc.

2.) Transparency: The amount we pay the government is obvious. Currently, when you buy something, you pay all the corporate income taxes of every business that had a hand in bringing that product to your door. And you've already paid taxes on the money you're using to buy it. This "cascading" tax effect makes it virtually impossible to know what portion of your income actually ends up in the hands of the federal government. The FairTax leaves no such ambiguity.

3.) Global Competitiveness. Obviously with no corporate income tax, the United States becomes an extremely attractive place to locate your business. Of 500 companies polled, 400 said they would move their operations to the US if there were no corporate income tax.

4.) Fundamental Fairness: The government can no longer use taxes to punish people for making money. Yet the system is still progressive. Since people who make more money spend more money, the tax burden distribution would not change much at all from what it is now. In addition, the program encourages people to save, effectively making all savings tax free.

This is by no means an exhaustive list, but it should be enough to get the idea across. For the life of me, I cannot think of a legitimate reason why any citizen wouldn't want a system like this. I can, however, see many reasons why liberal politicians should fear it:

1.) Simplicity: Eliminating government bureaucracy is anathema to the liberal big-government agenda. (This applies to the current fiscally liberal administration as much as it does to any Democrat candidate.)

2.) Transparency: Liberals would prefer to keep citizens in the dark about how much of their money actually ends up with the government. It's much easier to sell huge government programs to the public if they are kept unaware of the real costs.

3.) Global Competitiveness: With businesses freed from income taxes, keeping jobs in the US no longer requires the artificial hand of government intervention. This significantly reduces outsourcing as a hot-button issue, making it harder to mobilize the labor vote.

4.) Fundamental Fairness: Liberals have a long and rich tradition of punishing success by increasing the percentage you pay as your income goes up. While the Fair Tax is still a progressive tax, it gives all citizens more control over how much they pay in taxes by controlling their own consumption. Liberals don't like the idea that citizens should have control of their own money.

It should be clear by now that I support the FairTax, but I will take a minute to point out a couple difficulties which are logistical in nature. They aren't fundamental flaws in the system:

1.) Repeal of the 16th amendment: It is absolutely essential that government not be able to re-instate the income tax. This could lead to a dual taxation system which would be catastrophic. The amendment process is sufficiently difficult to pose a rather large hurdle for the FairTax to overcome.
2.) Transition: The transition from the current system to the fairtax system is littered with difficulties. For instance, money saved in accounts that are not tax-deferrable would get way overtaxed. Not only has income tax been paid on that money, but another huge tax will be levied when it is spent. Also, the FairTax would pretty much eliminate the very lucrative tax-preparation industry resulting in temporary job losses for countless advisors and CPAs. I should point out that these difficulties have been addressed by Americans for Fair Taxation, and I agree with them that the difficulties are not insurmountable.
I invite anyone to comment on what real long-term downside there could be to this system. First, make sure you go to fairtax.org and make sure you understand the basics of the system. They spent 23 million in research, so it not easy to casually refute their claims. They have the data to support their position.