Head on over to The New Dominion and read the op-ed on the so-called Fair Tax. The money quote:
As a result, replacing most federal taxes with a national sales tax would mean very large tax increases on most Americans and very large tax cuts for the wealthy.
Yep, that’s what I call fair – NOT!
VIVIAN J. PAIGE | All Politics is Local 
P.S. — I finished the more complicated analysis. The Personal Income Tax variability factor WAS lowest, at 24. Sales Tax variability was slightly higher, at 30, and Corporate Income Tax variability was 109.
Without 2006 (when the sales tax on food was changed), the variability factor drops to 28.
Well, I did ask for questions.
First, the OP-Ed is so full of fallacies it is hard to address them all, but I’ll hit some of the most oft repeated.
1> Brookings and the Joint Committee on Taxation did not score the FairTax as written, they made assumptions about how it might be altered in Congress, exempting many things that are covered by the FairTax and then determined the 23% (inclusive) rate would not be enough. The FairTax does not exempt anything other than investment(including education) and is revenue neutral at 23% as written.
2> The whole 23%/30% thing is semantic rather than real. A can of soft drink that costs $1 now contains about 22.4% embedded federal tax. (the FairTax.org website has plenty of documentation) For an explanation of embedded taxes, see http://www.lpva.com/Archives/Editorial/Tabor/20040106.shtml
When the FairTax is in place and competition does its thing, the can of drink will cost about $.77. plus $.23 tax, so it will still take $1 to get it out the door. $.23 is roughly 30% of $.77 which is how we usually express a sales tax, as an exclusive rate. But $.23 is also 23% of $1. When we compare the FairTax to the current system, we use the 23% inclusive description because that is how income and payroll taxes are expressed. It still takes a dollar to buy the drink either way you express it. If you expressed the current system as an exclusive rate, the 15.3% that goes to FICA (employer and employee share) would actually be 18% and a 28% income tax rate would be 39%.
3>Consumption is far less volatile than income as a tax base. Again there is documentation on the FairTax site. But it makes common sense if you think about it. When times are tight, we run up the credit cards and spend down savings to buy what we need so the swings in income are always more extreme than the swings in spending.
4>Please read the Kotlikof paper. I chose that one because Kotlikof is well know as a Liberal and I expect you would trust him. He analyzed the FairTax under 43 sets of income, age and family size and determined that the buying power of 42 increased. The only group that fairs poorly compared to the current system are those living on inherited wealth.
5> Try to think, as Warren Buffet put it, in terms of stuff, not dollars. What matters is not what is written on our tax returns (there would be none with the FairTax) but what our buying power would be, and the buying power of the working poor would rise more than any other group..
Further, the USA is the ONLY developed country in the world that relies entirely on taxing income. Though some others also have an income tax, our competitors rely on consumption (VAT) taxes for the bulk of their revenue. Consumption taxes can be border adjusted, income and payroll taxes cannot. That, not union labor here or cheap foreign labor, is what is killing our manufacturing sector. With the FairTax we will rapidly become a net exporter of cars and other complex machines, not an importer.
Sometimes it is very frustrating trying to do the Democrats job of raising the poor to the middle class for them, over the screaming objections of the Party. But that is what we have been working for 16 years to do.
These credits are provided to land owners who either donate outright or grant easements. More info here. These are state tax credits and like other state tax credits, can sometimes not be used by the person who gets them. So, they are sold to others for their use.
No, regular health insurance has no such credit. The LTC insurance credit is new for 2006. In the past, it has been a deduction. LTC insurance is different from health insurance in that it goes towards nursing home care.
Vivian,
My comment was directed at you as the final sentence of your post showed that you agreed with the editorial. Did I get that wrong?
I dislike the appelation “Fair Tax.” “Fair” is a subjective term. to some people, “fair” means that everyone pays the same price for the same services. For others, “fair” means paying the same percentage of one’s income. For yet others, “fair” means that some people should pay even higher percentages, because they have more disposable income.
Thus the adage that democracy is three wolves and a sheep deciding what’s for dinner.
If ten thugs threaten a rich man, take half is money and say, “You can keep the other half,” it is theft. If the people enact a tax that applies only to the rich, and threaten jail for non-payment, it is democracy.
Brian: I agreed with the quote as everything I’ve ever read or seen on the Fair Tax (as well as the Flat Tax) that was ostensibly objective comes to the exact same conclusion: it will cost lower income taxpayers more money while saving upper income taxpayers money.
Vivian,
The “Fair Tax” will actually save the poorest taxpayers a substantial sum due to its prebate. If you’d like, I’ll send you a copy the book by Neil Boortz and John LInder (R-GA). It’s actually not nearly as bad a read as you might think – how many books about tax policy mention Donald Duck?
YES on fair tax, but situation is it will never happen.