The FairTax and 9-9-9 Are Deception From the Right

Donna Wiesner Keene

10/6/2011 3:38:00 PM - Donna Wiesner Keene

Remember stop, look and listen before you cross the street? Follow this cautionary tale before you swallow the balanced budget language of Presidential candidate and former Governor of New Mexico Gary Johnson and the 9-9-9 tax system of former CEO Herman Cain. Simple slogans can be dangerous.

Lobbying the FairTax for a year sent me further and further from Fair Tax mania. FairTax advocates claim that their national sales tax is simple, good for the economy, and an equitable way to finance the federal government. They even suggest the IRS would simply disappear. Such claims are made in the book, The FairTax Book: Saying Goodbye to the Income Tax and the IRS by Neal Boortz and John Linder. None of these claims are true.

For many years, the FairTax billionaire advocates, fresh from a success in changing Texas tort reform law, hired economists to work their policy magic. Most bad bills die mercifully in committee. Instead, like many potential laws that sit on legislative desks too long, complexity (in the tax world, loopholes) formed to help get FairTax out of committee.

My paid efforts began by adding advocates to The Coalition for Fundamental Tax Reform; in a few months we represented more than 13 million voters. Voters know the current tax system is the most wasteful in the world and is helpful only to special interests and their politicians. FairTax and flat tax advocates got along temporarily to provide the new Bush Administration with support for strong policies that were good for the economy.

Unlike Obama, George W. Bush did not attempt widespread reforms. Although even the static Congressional Budget Office estimated in 2001 that Americans waste more than half a billion dollars annually in tax compliance, the White House and the Treasury Department made tax cuts their goal. It was an early warning sign that the Bush Administration was not willing to fight for the right.

Pre-9-11, Bush promised fundamental tax reform at the beginning of his second term. Representative Dick Armey, economist and Texas Republican, asked the Coalition to join him in passing a flat tax in Congress, signaling that it could pass in 2001 or wait decades, and foretelling his imminent retirement. FairTax advocates felt that their fundraising would suffer if they were in competition with a flat tax instead of blasting the current IRS loophole-ridden system, and refused to compromise for the good of the country.

FairTax claims to be a simple sales tax on purchases. Maybe for a tomato bought at the farm, but the land under one’s house or condominium is not consumed, merely used for a period of time. Land is still available when the house is demolished, so even though county appraisals of land verses buildings is arbitrary, such calculations will necessitate saving old files and filing for future refunds of consumed vs. not consumed. So much for simple and paper-free.

Is the metal in your car recyclable? Was it consumed in a fire or crushed and recycled? That changes the tax -- and thus it goes. FairTax is not only confusing, it is arbitrary, depending on what lobbyist got to what FairTax policy person.

Cain’s 9-9-9 has the same problem, because sales taxes tax at every level of production. In the modern world, that means that any item – even food – is sold several times, so the “tax on tax” will greatly increase all consumer prices.

Likewise, liberal advocates asked about the poor, since the poor spend a higher percentage of their income on goods consumed, like food. The FlatTax solved this with a refund. Because poverty levels are also arbitrary, ALL families would get the refund check regardless of income.

In the 1930s, Social Security checks were originally a simple safety net for older workers. Your social security tracking number was private, and disability, underage children and survivor benefits were not invented. Now one of the largest drains on our government funds, the Social Security Administration is a mad house of inaccuracy and spends more money than most European countries. Just recently a man died who had been cashing his deceased father’s pension check for more than two decades. Conversely, a Vietnamese man paid taxes since the fall of Saigon but was told to go back to South Vietnam for more paperwork, because the agency did not have him in their system for benefits! The FairTax would expand this reach with another government check – claiming simplicity and fairness at no cost. It boggles the mind that conservative voters buy this assertion in the light of history.

Many voters understand that consumers actually pay corporate and sales taxes in their cost of goods. There is no personal tax vs. corporate tax vs. sales tax. It is all paid by the consumer.

FairTax advocates don’t want to reveal the actual tax rate needed and that they are actually arguing for a VAT, the value added tax that is well-known as a complicated and paper-heavy tax at every level of business – and which has literally crippled growth in Europe for decades. Internally, FairTax advocates readily admit their system is an unpopular VAT and that businesses would have to close out books with the IRS for decades to come – the IRS is still fighting 1990s taxes, so it won’t go away soon. The Internal Revenue System in the United States is the easiest way to take political prisoners, and it won’t disappear because a new tax arrives, regardless of the rhetoric.

But claiming 9-9-9 is any different or simpler is just as disingenuous. Governments never reduce or stop any means of taxation once begun – only revolutions do. To add a 9% sales tax while claiming to reduce corporate and individual income taxes to 9% is not only unworkable, it is impossible in our current system. Just ask anyone who watched the debt ceiling debacle.

Citizens are being fooled on many levels by Washington today, but the conservative-led FairTax and 9-9-9 tax increases play right into Obama’s hands.