From Bruce Bartlett, economic advisor to Reagan and GW Bush
FairTax - Bartlett's critique#
"One problem with analyzing the distributional consequences of the FairTax is that its supporters sometimes argue that
after-tax incomes will rise by enough to pay the higher prices for goods and services once the 23 percent is added to the prices people pay today. At other times, they argue that prices will fall once income taxes currently embedded in prices are removed, implying a free lunch in which everyone is better off and no one is worse off. Actually, it?s a double free lunch because not only do you get to keep all the taxes currently withheld and pay no more for goods and services now, but you get the rebate as well..."
If you believe in the tax fairy.....
The author closes with:
The most important question to ask, I believe is - "If the FairTax is revenue neutral, someone groups will pay less in taxes than they do now, some more. Who will pay more?" Usually the answers I get are "it doesn't matter" (sure), "no one" (which is impossible if the FairTax is revenue neutral) or "tourists and illegal immigrants who are now paying sales taxes" (but the FairTaxers will argue that the FairTaxes are just replacing the 'embedded' taxes in prices; so
if you believe that this must be false as well).
The real answer: People making between $30,000 and $200,000 a year
