The FairTax? No Thank You

Sales Tax for A New Nation? Yes, Please!

by Russell D. Longcore

As the most recent “silly season” of a presidential election is beginning, the FairTax idea is being bandied about once again. The FairTax is a concept promoted in “The FairTax Book” by talk show host Neal Boortz and Republican Congressman John Linder. It is basically a national retail sales tax that is meant to replace ALL Federal taxation. Boortz’s idea overlays a national sales tax on a 50-state America. But it has some dangerous and ill-conceived downsides.

First, and most important to me…is that the FairTax seeks to solve the problem of taxation for the United States of America. We here at DumpDC do not care about the future of the USA. We seek to bring our influence to bear…such as it is…to encourage states to secede from the Union and become new nations. We’re all about secession here at DumpDC. So we are trying to convince a big dysfunctional nation that smaller is better, and that individual nations are better than the confederacy of serf states presently comprising the USA.

We believe that a national sales tax, unencumbered by tax loopholes, is the very best method of collecting taxes to operate any government. But many features of the FairTax don’t make any sense for a new nation. I wrote about taxation in a New Texas HERE.

Next…the FairTax tries to be “revenue neutral.” That means that it seeks to collect roughly the same amount of money in taxation that the Federal Government presently plunders from Americans. But Washington is a Category 5 spending hurricane, destroying the nation with taxation and inflation while it continues to borrow trillions so it can spend even more. For the FairTax to be revenue neutral is to reward the current criminal and unconstitutional behavior of the Congress and whatever President occupies the White House.

In a seceded state…a new nation…there will be no Social Security and Medicare. There will be no gaggle of three-letter bureaucracies that gobble up tax money. If the new nation creates their national money based upon gold and silver, there will be no central bank. I contend that the national sales tax should be set in the new nation’s Constitution at 10%, and alterable only by a Constitutional amendment.

Next…in the first edition of the FairTax Book released in 2005, America has not yet begun the runaway economic train to oblivion. So Boortz makes a lot of statements that are no longer true now that it’s six years later. For example, Boortz talks about how the FairTax will make America so attractive that corporations who have moved operations offshore will flock back to the USA to take advantage of the business-friendly taxation of the FairTax. But in 2005, Congress had not completed the bailout of the banks, the auto makers, and some insurance companies. Congress and the President had not borrowed trillions of dollars over and above taxation. No stimulus packages had been enacted. And, the US Dollar was not in imminent danger of collapse back then. Besides, big business did not move their operations offshore just because of taxation. Labor costs, the costs of crushing regulations, and even some raw materials costs, are drastically reduced or eliminated outside the USA. So I contend that most US businesses with offshore operations would stay right there…offshore.

The FairTax as proposed will be assessed as a national sales tax at 23% on all goods and services sold at the retail level. The sales of used or formerly owned goods would not be subject to the sales tax. So sales transactions between individuals would not be subject to the FairTax.

Chapter 9: The FairTax ‘Prebate’…The Key To Fairness

Boortz takes the first six chapters building a case against the tax loopholes that the Washington special interest lobbies have successfully gained over the years. He tells us how outrageous it is that certain groups get tax exemptions at the expense of others. But then Boortz creates his own tax exempt group for the FairTax, and then goes one better. The FairTax places ALL Americans on the government dole. That this idea came from a purported Libertarian should boggle your mind. At the very least, it should bring into severe question the Libertarianism of the authors.

The FairTax is based on the premises that “the poor” should not have to pay the Federal tax, and that none of us should have to pay the FairTax for the necessities of life. Boortz/Linder propose what they call a “prebate”…a monthly check issued in Washington, that allegedly reimburses “every family for the sales tax that the family will pay on all spending up to the Federal Poverty Level…” Presently in 2011, the Federal Poverty Level is $22,350.00 for a family of four. That’s American poverty for you…an inflation-distorted income level where most families have refrigerators, microwaves, multiple TVs, cell phones, computers and an automobile.

But I ask you…why should anyone be exempt from paying a national sales tax? Even if the poor are on government assistance right now, they pay state sales tax on most purchases. They drive the same roads, get the same fire and police protection, and receive many of the other benefits of civilized society that the rest of us that DO pay taxes also receive. In the FairTax book, page 88, Boortz says, “For them, it’s all benefit and no burden.” Further, many of the poor receive thousands of dollars in government assistance that NONE of the rest of us enjoy, simply because they are lumped into the group known as “the poor.”

I contend that in a new nation that created a national sales tax as its only revenue source, no human being would be exempt from taxation. Little Johnny buying his bubble gum would pay, just like the richest person in the nation. No favorites. No class warfare. No income tax. No other forms of taxation. Just a national sales tax.

Chapter 10: Underground and Offshore Economy…Taxed At Last!

Before we begin looking at this chapter, just contemplate that chapter title for a moment. “Taxed At Last??” Since when does a Libertarian have a goal to tax more people and gain more revenue for DC? Isn’t the essence of individual liberty and property rights found in avoiding taxation to the limits of the law?

This chapter proves that the ridiculous IRS code has an unintended consequence, which is tax evasion. Of course it does. There will ALWAYS be an underground economy…a “black market”…when there is taxation enforced or when there is some prohibition enacted against goods or services for which there is a public demand. In like manner, the IRS code has created an offshore economy as Congress has enacted tax loophole legislation. But Boortz goes a little crazy on page 96 when he says, “But there’s an even larger tax-avoidance drag on our economy: those who avoid taxes absolutely legally.”

A drag on our economy? By avoiding taxes legally? Neal, whose side are you on?

Even though the underground economy does not pay income taxes, it pays sales taxes when it spends its money. So, with liberty in mind, we should be much more concerned with minimizing government taxation and maximizing individual liberty and property rights.

Then, on page 100, Neal steps over the line of reason. He equates laundering money from criminal activity with legally keeping an offshore bank account. Quote: “If a criminal stashes his ill-gotten gains in one of these (Offshore Financial Centers), all he needs is a simple debit card issued by that offshore bank to access his funds…it’s estimated that 1-2 million Americans are using such accounts.”

Then, on page 104, Boortz says something that makes me think that he does not understand basic economics. He states that trillions of dollars in American wealth sits offshore. Quote: “This is money that is not creating jobs and driving economic growth in our country…and would come flowing back home if the income tax…were replaced by the FairTax.”

But capital does not create jobs all on its own. And capital’s reason for existence is not to create jobs…it is to create profit for those holding the capital. Basic economics says that demand for a product or service motivates entrepreneurs to create those products and services to satisfy the demand. Jobs are the labor costs of any goods and services. Capital that creates goods or services without a demand wastes capital…like communism did in the Soviet Union. Demand comes first, Neal…not capital. And demand can be as simple as your stomach growling. Demand is destroyed by runaway government spending and inflation which plunders capital and evaporates its value. Get rid of runaway spending and inflation and people will once again have the discretionary income to satisfy their demands.

Chapter 12: The Opposition: Where Will It Come From?

Neal hauls out the bogeymen who will naysay his self-perceived brilliance. He talks about how Americans cheat on their taxes as a matter of course. But most Americans practice tax avoidance, not tax evasion. And under a 23% national sales tax, there will be a new wave of tax avoidance. But tax avoidance is not tax evasion. Evasion is fraudulent and illegal. Avoidance is intelligent money management. Boortz blurs the line between the two extremes.

I thought Neal Boortz was a Libertarian. He says he is a Libertarian. Libertarians embrace smaller government. But what is there about creating a taxation system that sends every American a monthly check that sounds even remotely Libertarian?

The answer? There is nothing about the FairTax that is either sensible or Libertarian. It is yet another big-government shell game, designed to perpetuate the out-of-control spending of the Congress at present levels. Boortz says he doesn’t MEAN to do that, but it still happens nonetheless. Once again, the law of unintended consequences wins.

The FairTax also exposes a certain political naiveté of Boortz. Who really believes that the FairTax would never exceed 23%? Who believes that the FairTax would ever be less than 23%? Who believes that Congress would EVER pass the FairTax into law? Who believes that the FairTax would have any effect on Congressional spending?

So here’s your choice, America. Choose between a 23% Federal sales tax added on top of whatever sales taxes you pay on the state and local level…which could EASILY total 30% or more, and 10% taxation in a state that becomes a nation by secession.

30% or 10%. Hhhmmmm….

It’s the biggest no-brainer in the history of earth.

Here’s the money quote for today: Secession will happen LONG before the FairTax happens. Even if all of us do nothing to promote our ideas, reality is going to cause the United States government, the US Dollar and the America economy to collapse. Which do you think will arise from the ashes of the USA…secession or the FairTax?

Secession is the Hope For Mankind. Who will be first?

DumpDC. Six Letters That Can Change History.

© Copyright 2011, Russell D. Longcore. Permission to reprint in whole or in part is gladly granted, provided full credit is given.

8 Responses to The FairTax? No Thank You

  1. Redman says:

    Here is link that explains why a FairTax is not fair and destroys Constitutional protections against taxation: http://www.losthorizons.com/tax/TaxReform.htm

  2. sth_txs says:

    One of my issues with the national sales tax is that it starts with the premise that most of the junk the Federal Government does needs to be continually funded. Therefore, I’m against it and won’t settle for anything less than the abolition of most of what has been created.

    I’ve listened to Boortz on ocassion when I’m in the car on the road just to see what he is saying at that time, but I don’t regard him as a libertarian. I know there are various ‘purity’ levles here, but he is far from what I would consider libertarian.

  3. Louisiana Steve says:

    The only fair tax is no tax, but if we have one, it must be fair. For most, a fair tax means a fixed rate based upon some aspect of the economy, i.e. a national sales tax. In my opinion, a fair tax is a fixed amount, not a fixed rate for everyone. Sounds crazy? Doesn’t the constitution say we are all equal? Then why should I pay more than the next guy in tax when we are viewed as equal citizens under the law of the land. This kind of discrimination cannot be allowed to continue. Think about it.

    • dumpdc says:

      Dear LA Steve- Fair is a place you take your pig to win a blue ribbon. The word “fair” is a connotation word, a word devoid of meaning that only illicits an emotional response. Your concept of fairness is likely not mine. What we desire is equality, not fairness. And a fixed amount is not equality. By the way, the Constitution says NOTHING about equality. The Declaration of Independence states that all men are created equal. The national sales tax raises revenue for the government without favoritism. Russ

      • Louisiana Steve says:

        Russ- I respectfully disagree that a national sales tax raises revenue without favoritism. If everyone consumed goods and services in the same amount, then I would agree. Unfortunately, this is not so. In fact, a national sales tax is a regressive tax in that it penalizes lower income families to a greater extent in terms of disposable income. As for my understanding of the word ‘fair’, it’s a term describing the act of not giving an advantage to one person over others. Regretfully, the federal government has perverted the act of fairness (and equality) through the redistribution of wealth, affirmative action, fair trade, etc.

        As a practicing CPA for 30+ years, I’ve prepared thousands of tax returns. I’ve seen the ‘fairness and equality’ in the faces of taxpayers every year. It’s not a pretty sight. Paying thousands of dollars in taxes more than the next guy is not equality by any stretch of the imagination.

        Furthermore, a national sales tax combined with existing local sales tax rates could add an additional 20% or more to the goods and services you currently consume. That’s not a pretty sight either.

        To me the only ‘fair’ and ‘equal’ tax is no tax at all. However, we must be realistic and find a workable solution. Russ, you may define the word ‘fair’ differently that me but I think our concept of fairness pretty much the same.

        Also, thanks for pointing out that ‘equality’ was in the Declaration and not the Consititution. I stand corrected. I’m honored that you took the time to address my comments and look forward to following your blog and the argument for secession in the future.

      • dumpdc says:

        Dear LA Steve- Read the article again carefully. My article says that the fairtax makes no sense whatsoever for a state that secedes and becomes a new nation. And I do not care about taxation here in the USA. In a new nation, there would be no federal tax plus state, since there would be no states. We’re talking the difference between the USA and France…USA is 50 states, France is one nation. I have proposed that the national sales tax fund ALL government, including local governments like counties and cities. I have proposed that all other taxation, like property tax, be abolished. There is no method of taxation that is 100% equitable to every human being, since taxation is done by force. But in my opinion, the sales tax is the most equitable. Either everyone pays a tax, or no one should pay a tax. If you have a suggestion about taxation in a seceded nation/state, I’d like to hear it. Russ

  4. […] by Russell D. Longcore, DumpDC […]

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