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Monday, August 08, 2005

FineTuning the Honing of the FairTax

At there's an interesting discussion going on about the FairTax. Rober Capozzi posted a response to letters discussing the plan giving his current thinking on the issue. I, of course, can't resist the temptation to respond to his response.

Capozzi writes: "Grandiose plans generally don't happen. Instead, Congress tends to be highly incremental in everything it does." I suppose any tax plan, incremental though it it, could be called "grandiose," although it hardly compares to the current tax code, which is a product of Congress.

I would call the Civil Rights Bill grandiose, however. And women's rights was no small flash-in-the-pan. Both were passed by Congress after a few legislators and some constituents demanded it. Congress is slow and often dumb but it is not stupid. Congress eventually does what its constituency demands. It is hardly news that the American people are fed up with the current tax code.

The fact that, as Capozzi writes, " corporations DO have collectively granted privileges, and be open to the notion that the commonwealth should be compensated for that quid pro quo" should pose no problem. If corporations don't have to pay taxes and can lower the price of goods, business should increase with the burgeoning economy. So what if they have a few special privileges granted by government; their contribution toward a healthy economy is compensation enough for government.

"My point is that the housing special interests are VERY, VERY powerful." That, of course, is a fair point. But it assumes that all of the housing special interests oppose the FairTax and I (a retired realtor) do not find that to be the case. There are many, many advantages for the housing industry should the FairTax be passed and those experts who take the time to study the issue and apply it to their own situation almost invariably discover reasons to support it.

Capozzi continues, "Ultimately, though, while any tax reform is helpful, it's really a sideshow, IMO. However taxes are raised pales in comparison to the government's spending levels. " That is true -- so it has been. On the other hand, the FairTax is a new proposal, and one developed after a decade of study and experimentation. It is no fly-by-night idea written by Congressional aides and small-town college professors. When economists from places like Harvard, Stanford, Rice, MIT, etc. develop something new like this, it's no sideshow.

Government spending is out of hand but that's not the fault of Congress. It's the fault of citizens who allow Congress to go on spending rampages with no protest at the ballot box. You can stop Congressional spending, but only if you mount a grassroots effort against it. That certainly never will happen with an economically oppressed citizenry like we have now.

"Reduce government from 40% of GDP to 30 or 20% of GDP, and FairTax might move my dial. A tall order, indeed, but it's my take on the appropriate priorities." Obviously you are not personally overburdened by tax issues. You probably have most of your taxes taken out of your paycheck so you have no idea exactly how much you are paying. If you are lucky enough to get a rebate at the end of the year, you're not counting the fact that if you had put the entire amount into a savings account, you would have earned additional money on it, money that the government earned -- and spent -- for you.

Others of your fellow citizens are not so fortunate. There are many, many poor people who can't get ahead because taxes take so much of their income they can't save. There are middle class families who do fairly well but would do better if they didn't have to worry about being bumped into a higher tax bracket. There are retirees on whom the tax burden is so bad they can't save to assure they don't run out of money before they die.

First we have to get the unfair and unreasonable tax burden off our backs; then we can take on other issues in Congress.


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