Kansas is famous for Dorothy and the title of the book and film, What’s the Matter with Kansas? Both come to mind when I think about the idea of a ‘flat tax’ that is being played with by some in the GOP. For those who do not know the thrust of the book and film, author Thomas Frank wanted to find out why Kansas, an historic hotbed of left-leaning socialism and populist movements, moved so far to the conservative side of the political world. The answer: religion. Fundamentalist Christian churches in Kansas asked their congregations to become active in politics. And they did. Now, many in Kansas vote for religious rather than economic issues. As long as the candidate is a God-fearing, Bible-thumping Christian, he will win, even though his economic positions screw them. And, of course, they do.
I asked a right-wing blogger, who about 12 hours ago had a post on how he liked the flat tax , why he thought the flat tax was so great. I was curious about his post because I knew what he and his family were not wealthy by a long shot; I wondered if he really understood what the flat tax would mean to him and his financially strapped family. Sadly, he thought that the flat tax would be better for his current economic situation.
I left a Wikipedia link for their article on Flat Tax for him to read, but I’m guessing that he didn’t read it. Of course, lots of people in the Republican Party are excited about the flat tax and Fox News likes it too, so I’m guessing that he’s a subject of the slick propaganda.
The history of the flat tax concept ought to raise red flags immediately. The idea of the ‘fair tax’ was founded in 1994 by three Houston businessmen, Jack Trotter, Bob McNair, and Leo Linbeck, all millionaires. It was not a populist idea at all. Does anyone believe that these three men were thinking of the best interests of the people on the lower economic rung as they concocted the ‘fair tax’ plan?
Let’s get right down to it: the so-called fair tax rate will be 23% on any purchase made in the United States. However, additional state and local taxes would make the effective rate closer to 30%. My rate here in Ohio would be 30%. How’s that for an incentive to buy a new car, washing machine or TV set? In Ohio, food is not taxed, but with the ‘fair’ tax, it now would be.
State governments would be the collection agents for the Government tax. Imagine that scenario playing out. Not only that, but there is a ‘rebate’ section of the tax proposal which adds another layer of bureaucracy to the tab.
Not surprisingly, the ‘fair’ tax is regressive and affects households at the lower end of the economic ladder much more significantly than those at the higher end. The lower economic classes effectively spend all of their income on goods and services which is subjected to the 23% tax. Those at higher levels have more money to play with and, even further, dividends and capital gains are not subjected to the tax until they are ‘spent.’ It’s a win-win for the wealthy and a lose-lose for the poor. That’s why the GOP and the professional propagandists on AM radio are ‘selling’ it to their faithful.
By the way, the U.S. Government and all local and state governments will also be taxed on all of the items they purchase. Therefore the U.S. Government pays itself a tax on every new Army tank it purchases, which will bloat the Pentagon budget even more grossly. Bruce Bartlett, domestic policy adviser to President Ronald Reagan and Treasury official under President George H.W. Bush, notes, “Although Fair Tax supporters claim that the purpose of this provision is to prevent people from substituting government consumption for private consumption, the true purpose is to cut government spending by the amount of the tax.” Big government once again.
I go back to the blogger referenced above. Here’s the statement he made after I asked if he felt that the ‘fair tax’ would be best for him and his family:
…my family and I are in no other terms poor. For the past three years, or is it four now?, we have been living below the poverty level. I am not worried at all about what that is doing for my children’s character. They will be better human beings for the hardships they endure now. CS has commented in the past about how rich the “poor’ of America are. I have seen real poverty, in places like Cairo, Egypt. We do not have poor people like that in this country.
Having said all that, I firmly believe it is the current tax system that is keeping me down right now. The uncertainty of that tax code, the frequency with which it changes, for good or bad, is keeping money in “mattresses”, instead of out in the economy. Passing the fair tax would totally eliminate the fear that permeates the upper class’ spending habits right now. Passing the fair tax, or even 9-9-9 would provide an instant and enduring boost to the economy. And as a hard working man, I know that the way for me to get more money is to have more money out there for the taking. I’ll take a lot more. Considering that I am managing to survive in this economy assures me that I am right.
There you go.
Bruce Bartlett: Is the Fair Tax Herman Cain’s Ace in the Hole?
UPDATE: 10/31 8 AM
The blogger referenced above acknowledged that he did not read the Wikipedia article on Fair Tax, but said that he read the book by Neil Boortz on the matter and asked me if I had read it.
Neil Boortz, is an AM radio talk-show host, libertarian and, in 2005, co-wrote The FairTax Book with Congressman John Linder, proposing to implement a national retail sales tax in lieu of federal income taxes, payroll taxes, estate tax, etc. Due to his involvement with the FairTax, Boortz is featured in the documentary film An Inconvenient Tax.