Tom Knapp (L) is running for United States House in Missouri’s 2nd district and he has already started to go after his Republican opponent, Todd Akin, for co-sponsoring Fair Tax legislation.
The following are concerns Tom Knapp has mentioned about the Fair Tax:
First and foremost, understand this: The “Fair Tax” is not a tax cut. Its proponents claim that it is “revenue neutral,” i.e. that Americans would pay just as much in taxes through the “Fair Tax” as they did through the taxes it replaced.
Secondly, the “Fair Tax” would put America on the dole. Every man, woman and child in the United States would receive a monthly check from the government. In theory, that check would represent an advance rebate (proponents call it a “prebate”) of part of the tax. In fact, eligibility for the check would be completely unconnected to actual payment of the tax.
Thirdly, while proponents claim that the “Fair Tax” would “eliminate the IRS,” exactly the opposite is true. A federal tax bureaucracy would still be required to administer the “prebate” program, and to police interstate tax fraud and “prebate” fraud … and fifty more bureaucracies would have to be created to assess and collect the tax at the state level.
Fourthly, proponents of the “Fair Tax” are deceptive in describing how large it would be. They characterize it as a 23% sales tax, when in fact it is a 30% tax.
He then goes on to give this opinion of what the Fair Tax could do to the American economy:
Finally, there’s a good chance that the “Fair Tax” would wreck the American economy in transition. The tax is assessed on new, but not used, goods. Care to guess what will happen to our nation’s automotive and homebuilding industries when the price of new cars and homes jumps by 30% and the price of used cars and homes doesn’t? Time and supply/demand will eventually bring the prices of used goods back into proportion with those of new goods … but until we get there, whole sectors of the economy will be, at best, on life support.
Click here to read Tom Knapp’s full post on the Fair Tax
Like Tom, I have many concerns about the Fair Tax. One concern is that those who have saved and invested their money are going to be taxed twice under a consumption tax. For example, if I have a Roth IRA I have already paid taxes on that money. When I spend the money I would once again have to pay taxes on that same money. In my opinion, we would greatly punish people who are being financially responsible.
While I would love to eliminate the IRS, I don’t think it is possible in the short term. I would prefer to cut spending, slowly cut taxes while at the same time paying down the national debt. The reason we cannot quickly cut taxes is that we have to cut spending first which is something the Bush administration failed to understand. The Bush administration and the Republican controlled Congress cut taxes, but refused to simultaneously cut spending and because of that we now have a huge deficit. Of course, many think a large surplus would be good, but that would result in less money going back into the economy which would not be good. When there is less money for the American people to spend there is less money to be invested in things such as new businesses which create employment. Instead, I prefer a small surplus each year to pay down the national debt. Until we cut spending and significantly lower taxes and the national debt I see no reason to give politicians any additional methods of collecting money.