Bruce Bartlett Isn't Fair


In the Wall Street Journal he picks apart the Fair Tax like a hungry vulture come upon an abandoned skeleton depot:

State sales taxes have long exempted all but a few services because of the enormous difficulty in taxing intangibles. But the FairTax would apply to 100% of services, including medical care, thus increasing their cost by 30%. No state comes close to taxing services so broadly.

Consumers would also find themselves taxed on newly constructed homes. Imagine paying 30% to the federal government on top of the purchase price of your next house.

Since sales taxes are regressive–taking more in percentage terms from the incomes of the poor and middle class than the rich–some provision is needed to prevent a vast increase in taxation on the nonwealthy. The FairTax does this by sending monthly checks to every household based on income.

Aside from the incredible complexity and intrusiveness of tracking every American's monthly income–and creating a de facto national welfare program–the FairTax does not include the cost of this rebate in the tax rate. As noted earlier, the FairTax is designed only to match current revenues and does not cover any increased spending that it may require. Since the rebate will cost at least $600 billion the first year, either federal discretionary spending would have to be cut by 60% or the rate would have to be five percentage points higher than advertised.

Also, a funny thing about the Fair Taxers propelling Mike Huckabee to (de facto) victory in Iowa… Huckabee doesn't really support the Fair Tax. He says he does, but when you ask him about taxes he starts rapping about "the four Fs"—flatter, fairer, finite, and family-friendly. He wants to scrap income taxes while maintaining some kind of progressivity and regulatory system making sure taxes serve a social function. That's not really the Fair Tax.

Bartlett's done a good job analyzing the tax, but lot of the Fair Tax's appeal is to angry, populist, Buchanan-ish Republicans who hold the Wall Street Journal in equal esteem with Pravda and Black Inches (arguably NSFW), so I doubt this'll have much impact.

Bartlett's reason archive is here.

(Via Ramesh Ponnuru)