Last Thursday Townhall contributor Hank Adler published a column on this website entitled “A Hard Look At The Fair Tax (sic)”. Almost immediately the emails started pouring into my show – literally by the hundreds – urging me to post a response to Adler’s rather stinging critique of the FairTax.
Since Congressman John Linder, the author of H.R. 25, The FairTax Act, and I wrote “The FairTax Book” in 2005 we’ve seen an unprecedented and ever-growing nationwide interest in this tax reform idea. Let’s face it, you have to be doing something to capture the imagination of the American people to have a book on taxes debut No. 1 on The New York Times Bestsellers List. There are some, though not in what we call the mainstream media, who think that Governor Mike Huckabee’s embrace of The FairTax is an important element to his rise in the GOP presidential sweepstakes.
Now to make this column worth reading for those of you who are not familiar with the FairTax, a very quick introduction is in order.
The FairTax eliminates all corporate, business and personal federal income taxes, all payroll taxes, capital gains taxes, dividend taxes and estate taxes, and replaces them all with one embedded sales tax on the sale of all goods and services at the retail level. Tens of millions of dollars in research show that the corporate and personal income and payroll taxes that will be eliminated by the FairTax end up being paid by consumers at the retail level. The average amount of embedded taxes in the cost of everything we buy at retail is approximately 22 percent. This would mean that we are replacing the embedded cost of our present tax system (22 percent) with the embedded FairTax (23 percent).
Every household in America will receive a check or a credit to an account at the beginning of every month equal to the amount of FairTax that household would be expected to pay during that month on the basic necessities of life. Poverty figures for various family sizes from the Commerce Department will be used to calculate the size of this “prebate.” This guarantees that nobody will have to pay the FairTax on the basic necessities.
OK .. there’s your briefest of introductions. Let’s move on to the reason for this column.