Fair Tax. Are We Ready For It?

If you read any conservative blogs on the Internet, odds are you have read about the Fair Tax. I am actually surprised that it took my most recent article on taxes to finally bring someone out of the wood work on this site. Thanks Slam Smith for setting me up so nicely.

First of all, I must say, in general, I support the concepts laid out by the Fair Tax people. There are a few things I disagree with, but that isn’t really the point of this discussion here. I like the idea of eliminating the Income Tax and shifting the burden from earning to spending. It works for me.

However, I don’t think that it will work with the system that we have now. According to the Fair Tax website, in order to have a revenue neutral tax reform, the tax rate would need to be 23%.

I know what you are thinking. “Ah-hah! That’s were Travis is having a problem. He hates ‘revenue neutral’ tax reform.” Oh, you all think that you have me pegged. Okay, so maybe you do. However, although the revenue neutrality is bothersome to me, I have a much bigger problem with this “fair tax.”

My problem comes down to simply doing the math. 23%. Think about it. Do you really want to have 23% added to you next purchase.

As I have told you, I recently bought a GPSr (Global Positioning System Receiver). And as I am really enjoying that right now, I will use it as just and example. The purchase price for this fine piece of equipment (at least it’s fine when I am using it properly, but that’s another story) was approximately $150. With Utah and local sales taxes (6.6% – .pdf), it actually ended up costing more like 159.90.

An extra $10 isn’t too hard to swallow. Well, it is when you think of all the extra $10 I am swallowing.

Now, let’s add on the new 23% tax. Remember that this is in addition to the $10 I just passed along to my local and state governments. That would mean that my now $160 GPSr is now $194.40. I just paid another $34.50 to buy my toy.

Okay, so that isn’t enough to scare you. Let’s say I bought a $1500 computer. That means that now I would be paying $444 (nearly $500) in taxes.

Still doesn’t bother you. Well, I just bought myself a nice used car for $15,000. Now, I am paying $4440 in taxes. Now that’s a big chunk.

So, how can I be supportive of the fair tax, and still be against it you might ask.

It comes down to one thing. We need to reduce services before we can go to a “fair tax.” The income tax has been a nice way to hide how much we really pay in taxes. And I think going to a “fair tax” would be an interesting eye opener to many Americans. But, unless we want a revolt on our hands, we need to cut back on services before we reform our tax system to a purchasing model. It’s the civil thing to do.

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