Still Another FairTax Fan
Hello!
I blogged a bit about the FairTax plan over at my blog Milblog, and I was rather surpried when Joshua asked if I’d like to be a contributor to this blog. So here we go.
Firstoff, who am I? I’m nobody special. I’m Joe Average citizen. I’ve got a high school diploma, spent ten years active duty in the USAF, got out with no special skill set I really wanted to take advantage of in the civilain world, and fell into computers right when the IBM PC-XT was introduced. (Yep, that long ago! I’m a dinosaur in computer years...) I don’t have a degree, but I’ve got some pretty decent troubleshooting skills and can usually figure out what’s wrong with something when it goes bad whether it’s computer related or not. (I figured out the problem with our fridge when two Westinghouse repairmen couldn’t manage it. They’re a lot less complex than you’d think... but I digress.) Show me a problem, and I’ll try to figure out a fix.
I’ve been employed since 1973 in one job or another. One thing that’s been common in all my jobs is that I’ve paid taxes. I’ve paid income tax, medicare and social security taxes. I’ve seen taxes take from 25 to 30% of my paycheck on a consistent basis for over three decades. I’ve watched the government for the same length of time - and been variously amused and disgusted at the antics of the folks we seem to keep electing when it comes to what they did with the taxes.
But one thing that’s been fairly consistent is Congress trying to use ‘tax reform’ as an instrument of social change - with results that somehow never quite seemed to be what they envisioned. For example, in 1990 Congress passed a little rider the the Omnibus Budget bill called the “Luxury Tax”. This bit of legislation applied a 10% tax to new boats over $100k, new aircraft over $250k, and new cars over $30k, as well as a few other things. This was above and beyond any ordinary state and local taxes the purchaser might face. The theory behind this tax, I suppose, was that the ‘rich’ would complain but they’d still buy.
I was interested in general aviation aircraft at the time and watched the ripple effect. I saw Beechcraft and Cessna damn near go out of business. Folks stopped buying aircraft. They cancelled orders, and had to lay off a lot of their workers. Folks who were looking to buy something in the $200k+ range bought used aircraft instead. Rep. Nichols introduced a Repeal of the Luxury tax, and included this in his speech.
Beech Aircraft in my State has been devastated by the luxury tax. In the first 3 months of 1991, the company lost new retail orders totaling $77.6 million for 39 new aircraft specifically due to the luxury tax. That represents a loss of 255 jobs for 1 year for working men and women.
That amounts to a net loss to the Federal Government of $1.6 million. How much revenue did the luxury tax generate? $16,000. That’s not even enough to pay for the collection of the tax.
According to a study done by Temple, Barker, & Sloane for the Fair Tax Coalition the luxury tax on automobiles, effective January 1, 1991, has created a permanent drop in demand of at least 20 percent for vehicles priced over $30,000. The drop will lead to a $135.5 million loss in revenue to State and local governments in 1991. Also, at least 3,320 Americans will lose their jobs.
The luxury excise tax has contributed to the impending loss of up to 19,000 blue-collar manufacturing jobs and bankruptcy for countless small, family-owned business across the United States. According to the National Marine Manufacturers Association, the boat tax cripples America’s ability to compete abroad with domestically manufactured boats. The unit level of sales of inboard cruisers in January and February were off by 62 percent and 56 percent respectively from forecast levels. (full speech available here.)
The real problem was with Congressional attitudes. I don’t think they got the idea that a “luxury” tax was just that - a tax on a luxury item that people might WANT - but didn’t NEED. Folks bought used aircraft, or didn’t fly. Folks bought used boats... or spent their money elsewhere. An attempt to ’soak the rich’ failed completely and had some pretty severe unintended side effects - to the point where it was repealed in three years.
I watched as Reagan cut taxes way down - and revenue to the government doubled within a decade. (Good thing, too - in order for Reagan to get his way with tax reform and the military rebuilding he wanted (which we BADLY needed after 4 years of Carter’s neglect) the Democratically controlled Congress insisted on spending $1.50 on THEIR programs for every $1 Reagan spent on Defense. Sometimes you’ve got to dance with the Devil to get what you really need. Reagan agreed.) Coincidence? I don’t think so. And the extra money that companies had got plowed into basic R&D during that time and fueled the tech bubble of the ’90s.
It’s become pretty clear to me there’s a pattern. When taxes are raised, folks lose their jobs. When they’re dropped, the economy booms. Our current tax code is a holy (and loop-holey) mess of patches and addendums cobbled together over the years with exemptions for this, that, and the other thing until it’s hideously complex. Unless you’re doing a 1040-EZ, you’re going to need either a professional tax preparer, a tax preparation software package, or about two weeks of close study of the various forms you’re filling out. (And don’t call the IRS for help - you’ve got a 50% chance of getting the right answer.) Realistically, there’s no excuse for that level of complexity. It’s apparent there’s something broken in our tax system.
What’s the solution? I think one possible solution is the Fair Tax. There may be others - but ‘reform’ of the current tax code is iffy at best. A VAT? Well, it’d keep the IRS employed - do we really want to go that route? Instead, let’s simplify the system as much as possible. And that means using the FairTax system. It doesn’t get much simpler than that.
One last thing... If you look at taxes over the last 40 years, the pattern is clear. Drop taxes and the economy booms. Raise taxes, and the economy crashes. Greenspan played a balancing act during the Clinton years, but toward the end the economy got away and headed into a recession. Bush dropped taxes, the economy started to recover... and then 9/11 hit. If he hadn’t continued dropping taxes - if he’d raised taxes instead... by historical patterns we’d likely be in a full-fledged depression.
It’s time to break the cycle and scrap a system which can’t be reformed or salvaged. Read the book, think about what you read - then contact your representatives and let them know what you think. If you believe that taxes should be used as a means of control, you’ll likely not agree with the FairTax plan. If you believe that people should determine for themselves what to do with their money, then the possibilities for growth and progress with the FairTax are incredible.
J.
