Over at RealClearMarkets.
While he gets the basic idea of a flat tax vs. a consumption tax correct, there are a couple of things about the FairTax specifically that get left unsaid. One of his critiques of a consumption tax is that it could be regressive, as the poor spend a larger percentage of their income on goods than do the wealthy. For this reason, the Fairtax includes a prebate, sent out to every household, for the sales tax rate of the Fairtax on the poverty level of income. This, of course, guarantees that no one living at a poverty level of consumption is paying a single penny in taxes – you are only charged in taxes for anything higher then poverty level income, turning the tax into something that is quite progressive – in many ways even more progressive than our current tax system.
Another point worth mentioning is that the flat tax would still require spending time calculating your income and the tax owed – even if that would be much simpler than currently exists – and that lobbyists would continue to change the tax code, just like they do right now. What we currently have is what a flat income tax looks like after politicians have been mucking around with it for awhile. The author thinks that the Fairtax would be the tax subject to all of the lobbying, but for a variety of reasons that I’ve mentioned before, I think it is at least a bit less prone to lobbyists than income taxes.
