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What Is Fair Tax?

2008.November.9

If there was any battle that was doomed from the start in 2008, it was Mike Gravel‘s bid for the presidency. He stole attention in the Democratic debates by raising questions that Democrats aren’t supposed to ask, but showed less than 1% in every poll and primary that bothered to include him. Then he said that was just a springboard for his big goal: the nomination of the Libertarian Party, where Gravel came in fourth in a field of eight. The Libs ended up with Republican Bob Barr; apparently even Libertarians have to side with name recognition once in a while.

I don’t know enough about Gravel to say whether he would have been a good candidate, but he definitely had some interesting ideas. How many Libertarians do you know who want single-payer healthcare? One that has gotten my attention is FairTax, an initiative that would eliminate the IRS and address funding needs with a simple sales tax on new goods and services. It is largely supported by Republicans, but Gravel saw it as an important piece of his larger interest in direct democracy – returning government to the people.

Fair Tax also rebutts the shared Democrat and Republican mythos: Democrats tax more! Repulicans spend less! There’s this notion that if you might ever need government assistance for anything, you should support Dems because they’ll pay for it, but if you ever wanted to be rich (and who hasn’t at some point?), you should support Republicans because they’ll let you keep more of it. Americans for Fair Taxation mention the contradiction on their website: “Indeed, the tax code is manipulated by both parties in Congress alike with reckless abandon to punish enemies and reward supporters…”

The Fair Tax would tie taxation directly to consumption, holding more of us accountable to our own spending habits and making sure that wealthy Americans pay their share (but are not saddled with more). Visitors to our country would also pay the consumption tax, so one’s visitation or immigration status would no longer exempt them from paying taxes.

There are drawbacks, mostly tied to any transition from the existing system. There would appear to be a price hike of 30%, since proponents insist that the sales tax should be included in all quoted prices, but the bigger concern would be the entire segment of industry that would be completely eliminated. Accounting as we know it would be decimated, and an entire skill set that applies to every single sector would become obsolete. No small issues, these.

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