Have you heard of the “fair tax?” Throw away all taxes and just institute an across the board sales tax on everything. It sounds like a good idea at first, right? The problems arise when you stop to really think about it.
Forget about the problem with the actual legislation. It doesn’t eliminate the IRS as promised just changes the name. It doesn’t eliminate state income taxes, local city sales taxes, lodging taxes, or even federal gas taxes as promised, just adds to them. It would encourage the expansion of a nearly impossible to monitor underground economy. And it has built into the actual legislation a system of rebates basically neutralizing its “non-progressive” selling point. Forget about all that.
Let’s take a few seconds and look at the basic idea itself. Is the basic idea really fair?
As I see it the “fair tax” falls short do to one basic flaw. It mixes essentials (things we all need to exist) with nonessentials. Here are four scenarios that will help you understand why this is a problem.
1) A meteor is heading to earth. In a unique moment of unity (and for the sake of this example) all the scientists agree on what to do. They have designed a spaceship and it will go to the meteor and blow it up (or move it or turn it into whipped cream it doesn’t matter here). The problem is that it will cost a huge amount of money. In another unique moment of unity all the world governments have agreed on how to pay for it. First problem solved. The new problem is that they have come up with two different plans. You have to pick the plan they should use.
The first plan is that every human on earth each must pay the same amount - one million dollars each to pay for the rocket. If you don’t have the million, the government will take everything you do have and you must work off the remaining amount you owe. The advocates of this plan say it’s fair because each person must pay the exact same amount of money to continue to live.
The second way we could pay for it is that everyone is taxed 5% of their net assets.
In the first example even though everyone benefits in the same degree (the benefit is that the earth is not destroyed) not everyone solders the same burden. Only the rich come out unscathed. In the second example everyone losses 5% of their assets. Everyone is saddled with the same burden although each pays a different amount.
The planet Earth is an essential. Without it we die. The bill for the spaceship should of cause be based on what people can afford - not on the same number for everyone
I know a 5% tax on net worth is not progressive. And I know you think this example supports your “faire tax” but just hang in for little while more. Sometimes ideas are not one-liners. Sometimes ideas are complicated and take more than a second to explain.
Next scenario….
2) There have been a number of devastating voting scandals recently. Hackers have figured a way to bring our voting system to its knees. Once again in a unique moment of unity all the scientists have come up with a solution - voting machine that is unhackable . (I know nothing is unhackable, heck that isn’t even a word but again for the sake of this example, go along with this.) The problem is that the machines will cost a lot of money. To pay for this, the government has instituted a poll tax. Everyone who votes pays the same amount - $5,000. Is this fair? If you even begin to say “yes, this would be fair” don’t bother reading any farther. Go directly to the library and read about Supreme Court decisions on poll taxes.
Liberty is an essential. Access to voting (the taxes we pay for the machines) should be based on the amount a person can afford, not on arbitrary one-number-fits-all rule.
Next scenario…
3) Two men are accused of committing the same type of crime. They are both innocent but each still must be tried. The trial is to be held in 30 day. The judge sets bail. Each must pay the same amount - $1,000. The innocent poor man does not have the money and must spend the 30 days in prison. Because he can’t come to work the poor man loses his job, and because he doesn’t have a job he is evicted from his apartment. When the trial rolls around he is found innocent (because he is). The innocent rich man, on the other hand, posts bail, spends the 30 days going about his business and when the trial roils around is also found not guilty (and he is). Even though they were both asked to pay the same amount in bail, were they treated equally?
Now let’s say they were both found guilty (and now they really did do it). They beat their wives. The judge treats them the same. Both men must pay a fine of $10,000 or 30 days in prison. The poor man can’t come up with the money and goes to jail (as he should). The rich man writes a check and walks out of the courthouse. As he is leaving the bailiff overhears the rich guy say to his lawyer, “Hell ten grand! I’ll write a check for twenty grand so you can bring the bitch back and I can smack here around again.”
Justice is an essential. It must be based on a person’s means. I’m not saying lower the amount of money the poor man has to pay. I’m saying if he is just as guilty, raise the amount the rich guy has to pay. Raise it to an amount he (the rich guy) also cannot afford so he too must spend time in jail.
Now see what I just did? I introduced a situation in which it was fair to take into consideration how much money a person makes to when deciding on monetary fairness.
Next scenario… hang in there remember I said sometimes things are complicated.
3) We have two people. One is rich, one is poor. They are the same in every way. They are even the same height, weight, and physical condition. They both take in about 2000 calories a day to sustain them. The taxes on the bare minimum amount of food for a person of their height weight and build to live (the 2000 cal a day) are about $3000 a year for each. Under the “faire tax” both of them must pay the same amount - $3000 a year. That is a minimum amount of money each must pay every year to live.
Just as we established a planet is an essential and should be taxed a percentage of a person’s net worth so too are the 2000 calories an essential.
In this case you are asking each person to give the same flat amount of money for an essential. You are not asking them to suffer the same boredom - say 5% of their net assets for that essential. You’re asking each to pay $3000 flat. Weather they are Bill Gates or some homeless guy who happens to be the same height and weight as Bill Gates, each must pay at least $3000 minimum to live. As in the case of the meteor, the homeless guy will be saddle with a impossible bourbon while the Bill comes out relatively unscathed. If this idea is unfair in the case of the meteor (each need a planet under their feet to live) how is it faire in this case? Each needs the 2000 calories to live.
To be clear, please do not think I am arguing against taxing nonessentials. If a “fair tax” means taxing 5% on all nonessentials, sign me up. I am all for taxing video games for the poor or yachts for the rich. (Although the people who make yachts and video games might not like that) I am only against this “fair tax” if it taxes essentials at a flat rate. Essentials really need to be taxed according to means. So,you’re probably thinking, it’s an easy enough fix this. We could just exempt a few foods, say milk and bread from the tax. What about produce? Ok and produce. Now I’ve introduced a couple of exemptions into the” fair tax. “
4) Finally, to wrap this up (thank God). Let’s make it even clearer. Image two men, (last two guys I promise) both are the same, same build, same height and same strength. They are both steel workers. They make I-beams for our bridges, our battleships, the buildings we live and work in. Both work equally hard and both make a respectable salary. (as they should) But neither can afford health insurance. The problem is that one of the men has a genetic blood disorder. It was diagnosed when he was a child. He is prescribed a complicated and expensive regiment of drugs. As long as he stays on them he will stay healthy, and continue to build big metal things and contribute to the American way of life. But if he deviates from the regiment he will die. The man with the blood disorder works the night shift and extra hours at the factory to pay for his drugs and treatment. He doesn’t complain because he thinks everyone must play the hand he is dealt. But along comes the “fair tax.” Because he consumes more (namely those expensive drugs, bimonthly doctor visits, and continual blood monitoring tests) he pays more in taxes then the healthy man. They both contribute the same to society, yet the man with the medical problems must pay more in taxes to live. And understand, I am not saying here that it is unfair that the sick man must pay more for his treatments. Remember I said he doesn’t mind working more for those treatments and that medication. What I am saying is, it is unfair that he has to pay more in taxes on top of that other burden. Surely, this man can be given a tax break? Maybe we could apply some small bit of a sliding scale!
And here is where it starts getting complicated. If you n give our deserved steelworker and people like him a little tax break to make it truly fair, then which medical expenditure should be eligible Should it be only life threatening ones or could we include expenditure that address chronic pain like arthritis? Are eye glasses essential? A draftsman or surgeon would say they are for him or her to make a living. Maybe you go back to the previous example and you exempt food from the “fair tax.” Is bread exempt? Is a twinky? It’s a food, I think. What about toilet paper? It’s not food but it’s kind of essential. What about cleaning supplies? Is a clean house an essential? Is hygiene essential?
I’m not saying our tax system works. It obviously does not. But just because our tax system is not fair in its present state it is a fallacy to automatically come to the conclusion…therefore this other tax system is fair. That conclusion does not necessarily follow from that premise. In critical thinking class this is the definition of the fallacy of a non-sequitur.
What I am saying is that you’re fooling yourself if you think a one size fits all tax system will be more fair. The “fair tax” sounds good when you say it fast. It probably looks good on a bumper sticker, but that’s not how ideas are, and that’s not how the world is. The world is complicated and messy, and yes sometimes even anti-intuitive… and unfortunately (if we ever come up with one) that’s probably how any real fair tax system is going to be.


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