Choosing the Flat Tax over the Fair Tax

After my recent post on "bashing the IRS," I got several emails and comments asking whether a national sales tax might be a better idea than the flat tax. I'm a big fan of proposals such as the Fair Tax. I've debated in favor of the national sales tax, done media interviews in favor of the national sales tax, written in favor of the national sales tax, and even defended the national sales tax in congressional testimony. As far as I'm concerned, we should junk the IRS for some type of single-rate, consumption-base (meaning no double taxation), loophole-free system. The flat tax is the most well-know approach for achieving these goals, but the national sales tax also would work. Indeed, the two plans are different sides of the same coin. A sales tax takes a piece of your income (but only one time and at one low rate) when it is spent, and a flat tax grabs a slice of your income (but only one time and at one low rate) when it is earned.

So why, then, do I devote most of my energies to a sales tax? The answer is that I don't trust politicians. I fear that they will pull a bait-and-switch, and implement something like a Fair Tax but never complete the deal by getting rid of the income tax. The European experience certainly serves as a warning. Nations across Europe began implementing their version of a national sales tax (the value-added tax) in the late 1960s. Voters often were told that other taxes would be eliminated or reduced. But all the evidence shows that VATs simply led to a much higher tax burden and a much bigger burden of government.

I don't want that to happen in America, as I explained 13 years ago for Reason and two years ago for the Media Research Center. But this video is probably the best summary of my argument.



By the way, some fans of the Fair Tax say the solution to this problem is an amendment to the Constitution. I fully agree, but then I point out that there are not even enough votes to approve a watered-down balanced budget amendment, so that seems an unlikely path to success. That being said, if we ever reach this point, and are able to repeal the 16th Amendment and replace it with something that unambiguously would stop the politicians from ever burdening America with an income tax, I will gladly offer my support and push a national sales tax

Is the FairTax Political Poison?

I have a question for my friends who support a national sales tax. First, some background. Beginning with the defeat of Woody Jenkins in his Louisiana Senate race back in the 1990s, various versions of the national sales tax have caused political headaches for GOP candidates. Even candidates from conservative states, such as Sen. DeMint in South Carolina, have been put on the defensive because they said good things about the FairTax. The latest example comes from the Pennsylvania special election for Rep. Murtha's seat. As this Wall Street Journal column points out, the winning Democratic candidate hammered the Republican because of his support for the FairTax. So even though I have said very nice things about a national sales tax, testified about the virtues of the national sales tax, and debated in favor of a national sales tax over the current system, I am increasingly convinced that the flat tax is the only plan that is sufficiently immune to demagoguery. Can anyone give me a persuasive argument about the political viability of the FairTax?

Democrats turned the table and ran against Mr. Burns on taxes. The GOP businessman had flirted in the past with supporting the FAIR tax, a version of a national sales tax that supporters want to replace the income tax. Mr. Critz's ads blasted Mr. Burns for supporting a 23% sales tax increase without mentioning the income tax elimination, and the GOP seems to have been caught flat-footed. Republicans can rightly complain that this is unfair and that Mr. Critz will vote to raise taxes when Mrs. Pelosi gives the order. But they need a real-time campaign answer to the tax-hike charge. Whatever the merits of the FAIR tax in theory, we've long thought it is a political loser because voters figure they'll get the sales tax without losing the income tax. At a minimum, FAIR tax supporters shouldn't have left Mr. Burns defenseless on the subject. By the way, this is also a political warning to Republicans inclined to fall for the Democratic trap of agreeing to a new value-added tax in return for lower income-tax rates.

A Flat Tax-Sales Tax Debate from the Archives

I only vaguely remember this debate that took place at Furman University, and I never saw this recording until it arrived in my inbox today. I invite fans of both the flat tax and FairTax to watch this debate and let me know your thoughts.

Many of my arguments, by the way, also apply to the debate on the value-added tax. Simply stated, I don't trust politicians when they claim a VAT won't be used to increase the overall burden of government.

Current System, Flat Tax, Fair Tax, or Value-Added Tax?

Here are four very short videos produced from an in-office interview I did at the Heartland Institute last week. Which tax system do you prefer?

I talk about the current internal revenue code…



...and the flat tax...



...and the national sales tax (Fair Tax)...



...and the value-added tax (VAT).

The Flat Tax: Good for America, Bad for Washington

America's biggest fiscal challenge is excessive government spending. The public sector is far too large today and it is projected to get much bigger in coming decades. But the corrupt and punitive internal revenue code is second on the list of fiscal problems. This new video, narrated by yours truly and produced by the Center for Freedom and Prosperity, explains how a flat tax would work and why it would promote growth and fairness.