|I disagree with the article. Joshua is right, this is something you need to do a little study on. Take a look at the web site.|
The FairTax isn't perfect, but it is a powerful step towards reducing the size of government, and a gigantic boon to the economy.
The Prebate Ted mentioned is a political necessity to get it passed, and it is small. It is not the $10,000 he mentioned - it is equal to what someone at the poverty level would be paying in sales taxes. If you live on $1,200/month, and the sales tax on a substantial number of purchases for a person at that level would be, say, $200, then that is what is sent to everyone. It is equivalent to saying, "If you are poor, you don't pay very much in sales taxes - only a little. And to be fair, if you are not poor, you get a discount on your sales taxes, equal to what the poor people get."
If that poverty level person saves their money and doesn't spend much, they would come out ahead - subsidized. If they spend all the money they make, that $200 goes back to the government in sales taxes. But everyone gets that same amount - rich or poor - it is not going to some and not others. That universality makes it fairer than the progressive feature we have in the current system. It makes it possible to pass a bill that would otherwise be stopped by those who would see the elderly on fixed incomes and the poor being hurt. I would never sanction a scheme like this prebate as part of an Objectivist government. As an Objectivist I'm working towards a minarchist government that collects only voluntary revenues (like the insurance premium on contracts, or fire insurance you pay to the fire department, etc.)
But, it is silly to imagine that we can jump from here to there in one long leap. Apart from a bloody revolution, which we don't have the support for, we have to move in stages. I advocate and vote for each step that is in the right direction (if it is better than other steps that are available).
Yes, the FairTax comes with the "promised" repeal of the 16th amendment which requires much more to get passed - but that is the nature of any constitutional amendment. However, the elimination of the income tax code itself and the end of the IRS is actually part of the FairTax bill and passes with the same majority, at the same time, as does the FairTax itself. Repealing the 16th amendment is to ensure that the IRS or something like it doesn't come back in the future.
The complaint that it will be converted into a VAT tax to make it less visible is valid, but it is also meaningless, since right now, we are in the middle of a giant tax muddle made up a great many different taxes - all spread around between businesses and individuals. And people are already talking about a VAT to add onto the Income tax and all the other taxes. It would be much better to have a large, but honest tax, right in front of us instead of the multitude of hidden taxes that are not understandable, not visible, not logical, driven by special interests, tweaked by congress annually, and a Killer burden on American business in a global economy.
The reality is that the IRS and the income tax, with capital gains tax, payroll taxes, loop-holes, alternative minimumns, death taxes and all of the insane, nonsensical regulations that nobody understands is making out country unable to compete on the global market. It discrimates against saving, investing and producing and it causes massive dislocations and inefficiencies in the marketplace that aren't even measurable. It is such a mess that it isn't even possible to count how many ways some thing or someone has been taxed over the course of the year. An income tax on businesses is like a VAT tax - when you buy the product, you pay the taxes of the entire supply chain as part of your purchase price - except that it is hidden.
We will never be able to move forward towards real fiscal health without doing away with the entire concept of a tax on income, on producing, on investing, or on business.
The FairTax makes the burden of government felt - painfully - each and every purchase that is made. That in itself, it is the best possible way to reduce federal spending by creating the direct link between national spending and what it costs to buy things. Every single budget proposed could be explained to every citizen as "This budget will increase/decrease your purchases by this many cents on every dollar you spend."
Keep in mind, that the actual cost of goods and services would go down by much more than 23% (realized efficiencies in the marketplace, no supply chain embedded business income or payroll taxes).
Rearranging tax collecting is the first step to reducing federal spending. You'll never make any lasting headway as long as the Income Tax Code is still on the books along with it's gaggle of fellow tax laws. The best step is to not elect anyone that doesn't support the FairTax, then lobby to shift services away from the Fed to the States on the principle of States Rights and local representation, and let the states compete with each other on who will violate economic reason the most or the least. Both those moves are the strong tactical moves to end up with a government that respects individual rights. Moving in stages, going on strike, or picking up a gun - those are the choices.
Neither this nor any other proposal I'm hearing will address government spending. Unless you are a supporter of the Libertarian party and expect them to win and make everything better all at once. To reduce government spending what is needed is a balanced budget amendment - that stops borrowing and eliminates the need to print money. The other thing that is needed is to get rid of the Fed and the Central Banking system - take credit and the control of the interest rate away from the government. The FairTax, a Balanced Budget Amendment, and an end to the government run banking and credit manipulation - do those and all of the rest of the ideals shared by Objectivists will become much, much easier.