I like Kotlikoff, but fortunately Kotlikoff isn’t going anywhere. His Purple Tax retains the institution of the IRS and increases the likelihood of a 5th-column incremental re-introduction of the income tax. The FairTax keeps the return of the IRS and the likelihood of a concurrent income and consumption tax at bay.

~Jim

You may be right, but could you tell us why you believe the Fairtax won’t simplify tax collections?

Thanks, because I can’t find any mention of a tax on my haircut receipt. Would you agree that indirect taxes do not affect my individual tax burden at all? And if you don’t agree, tell me how you would measure the amount of those indirect taxes?

I doubt that college students are very likely to view the Fairtax scheme through the eyes of a retiree? So, here are a few comments for your consideration.

(1) How is it fair to force retirees, who have paid into the Trust Funds for 45 years or so, to resume paying for their benefits with their sales tax dollars? HR25 mandates that 14.91% of the sales tax goes to the General Fund, and the other (roughly) 8% goes to the Trust Funds. Wouldn’t it be more fair to have retirees pay a 15% sales tax, while everyone else pays 23%? A two tier tax system such as that would be very easy to implement, and would certainly solve a very knotty and unfair transition issue.

(2) How is it fair to double tax after tax savings when spent? The Fairtax taxes both income and wealth. Retirees probably own the bulk of the wealth, and much of that wealth was previously taxed. Another transition issue for which I can’t find an easy solution.

(3) Despite repeated claims by Fairtaxers that investments won’t be taxed, Section 801-804 of HR25 lays on a large implicit service charge (tax?) on both interest bearing investments such as CD’s, and debt instruments such as mortgages and credit cards. Calling this implicit tax a service charge does not change the resulting increase in loan costs or the reduction in investment income.

(4) One of the most egregious Fairtax claims is that we all will get 100% of our pay/pensions, and retail prices will remain about the same. This is the long discredited “free lunch” Fairtax myth, probably started by Neal Boortz when he co-authored the first Fairtax book in 2005. Many advocates are fond of saying that 22% in embedded taxes will be removed and the 23% sales tax added for a net decrease in retail prices. Wrong on two counts. First, if we get all our pay, then the strictly business related tax costs that can be removed average 10%. Remove the 10% and add the 30% sales tax, (not 23%), and retail prices rise by 17% on average. There is no free lunch!

(5) Taxing governments as proposed in HR25 is very likely unconstitutional under our republican form of government. The reason given by Fairtaxers for federal taxation of State and Local government operations is that we need to prevent unfair government competition with the private sector. But that problem was already addressed by Section 704 of HR25. Any government agency that sell more than $2500 per quarter would be considered a government enterprise, and would be required to collect and remit the sales tax. The playing field was already level. Taxing governments as proposed increased the Fairtax base by around 18% and lowered the sales tax rate by 7%. Perhaps 23% looked better than 30%??

Good luck with your discussions!