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FairTax Foul Play -- Tax reform is being spun negative in the
South Carolina race for the Senateby
Paul Gessing Oct 19, 2004 Inez Tenenbaum, the Democratic party's choice
for the open Senate seat for South Carolina, has chosen to make tax reform,
specifically her opposition to it, the centerpiece issue of her candidacy.
At every opportunity she has attacked her Republican opponent, congressman
Jim DeMint, and his plan to eliminate the IRS and replace the current system
with a national retail sales tax. A recent Tenenbaum ad accused DeMint
of "supporting a new 23 percent tax on middle class families" that would "bankrupt
Medicare by 2009." To date, however, she has offered no alternatives of
her own.
Advocates of the "FairTax" plan,
including DeMint and more than fifty of his House and Senate colleagues,
are not supporting higher taxes or a "new" tax. Rather, the FairTax legislation
(H.R. 25) would repeal many federal taxes, including personal income, estate,
gift, capital gains, alternative minimum, Social Security, Medicare, self-employment,
and corporate taxes in favor of a flat, 23 percent national retail sales
tax. To make this system fair for low-income Americans, all taxpayers would
receive a "pre-bate," so that no one would pay taxes for consumption up
to the poverty line.
Inez Tenenbaum clearly hopes
that voters don't understand basic economics and that they will forget
about the price-ratcheting effect of producer, employee, and hidden consumer
taxes buried in the current price of every good or service Americans purchase.
Of course, economists understand the impact of hidden taxes, and their
studies have shown that when these embedded taxes are removed, prices will
come down.
Dale Jorgenson, former chairman
of the Economics Department at Harvard, has projected an average producer-price
reduction of 22 percent for goods and services in just the first year after
the adoption of the FairTax.
In addition to having a smaller
impact on consumer prices than detractors may suggest, abolishing the IRS
and eliminating the current tax code will provide significant economic
and time benefits to taxpayers. The overall IRS-induced paperwork burden
is currently estimated at a staggering 6.7 billion hours per year with
annual costs of $225 billion for tax filing, record keeping, and tax-accounting
advice (the equivalent of about $850 for every man, woman, and child in
America). By abolishing the current tax code, the FairTax would lower total
compliance costs by an estimated 95 percent. Thus, the immediate impact
of implementing the FairTax will be an improved standard of living for
all Americans and, with a lot of paper-shuffling out of the way, will mean
that people will have more time to spend with family and in productive
work.
Tenenbaum and Democratic critics
of the FairTax are simply being disingenuous in labeling Jim DeMint a "tax
hiker." Rep. DeMint has proven himself to be a great friend of taxpayers,
having received "A" grades on the National Taxpayers Union's comprehensive
fiscal scorecard in four of his five years in office. Does Inez Tenenbaum
like the fact that Americans have to waste billions of hours and dollars
complying with the tax code? Does she like the fact that all of us -- rich,
poor, and middle class -- lose out because the tax code creates inefficiency,
incentives to cheat, and thousands of loopholes for special interests?
In the parlance of today's youth,
Tenenbaum is just being a "hater." She is more than willing to put someone
else's ideas down, and in the process she is hoping to focus attention
away from her own past votes to increase taxes and her lack of a viable
alternative.
Instead of attacking DeMint
for coming up with tax reform solutions, Inez Tenenbaum should come clean
on the issue. If she thinks America can do no better than the 50,000-page,
loophole-ridden tax code we have now, she and her special-interest allies
who engineered so many of those loopholes should just say so. But Tenenbaum
should not get a free pass when she tells South Carolinians that her opponent
wants to "raise" taxes.
Paul
Gessing is director of government affairs for the National Taxpayers
Union. |
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