Neal Boortz: The FairTax Book - what a baby

I've been reading up on the FairTax. Mr. Neal Boortz, syndicated talk show host, wrote a book with Congressman John Linder called The FairTax Book: Saying Goodbye to the Income Tax and the IRS. I absolutely do not support the idea of the "FairTax" based on his book.

The kicker for me shows up on page 78.

Neal Boortz has just finished explaining on page 77 how "The federal government will pay the states one quarter of 1 percent" for collecting the "FairTax"; in addition, "the same amount will also be paid to the business that collects the tax". Basically, the states and businesses turn the collection of the "FairTax" into a venture that adds to the bottom line. What are the ethical implications? The incentives of collecting taxes have changed wildly under the FairTax.

Further on page 77, Neal points out that it is really all just conjecture that prices will go down, like for your doctors visits. I have my doubts about the FairTax making any prices go down (they might be able to do it with legislation, but most companies will not drop 26%). The FairTax will result in higher prices overall.

Then on page 78, Neal calls for the Federal Government "to pay the consumption tax along with everyone else". He goes on to say, "Remember, the FairTax is neutral. It plays no favorites. We've had enough of 'playing tax favorites' game with the present system..."

And this is what I find so crazy about his perspective. Neal seems to have forgotten that although the FairTax doesn't "play favorites", politicians do. The incentives for spending start to include paying for states to regulate and collect the tax, and paying companies to collect the tax as well. I can see the quarter of one percent slowly ticking up over time as states and businesses refuse to collect the tax because it costs them more money than they receive. I believe the FairTax places more pressure on politicians to create pork barrel spending, not only do they get money invested, but the companies that lobby them get a piece of the pie as does the state government.

In conclusion, the FairTax's big claim is that it is meant to be revenue neutral. Let's take a look at the idea "that the federal government will send every family in America a prebate". Most recently the Federal Government alerted some 130,000,000 tax payers to expect a check from the Federal Government. And what did this one time mailing cost the US taxpayer?

$42 million dollars

Now let's times that by twelve months, that gives us $502 million dollars, nearly a half billion dollars, for the yearly mailing of prebates. Of course, we times this by the FairTax and we add an additional $151.2 million for an amazing total of $655.2 million dollars just to get the prebates into the American taxpayers' hands. (I ignore death payments that would need to be stopped, also fraud, and the terrific cost of returned mail.) The FairTax is not revenue neutral.

The FairTax may sound like a good idea, but somebody needs to, as Mr. Thomas Sowell suggests in Applied Economics, "Look beyond stage one", the FairTax doesn't look as happy go lucky as Mr. Boortz childishly puts it in his book.