September 6, 2007

Bruce Bartlett And His Scientology Fixation

When Bruce Bartlett wrote a scathing critique in the Wall Street Journal eleven days ago on the Fair Tax, I pointed out although much of what he wrote intrigued me, his strange use of Scientology's long-defunct connection to the proposal amounted to demagoguery. This led to a brief e-mail exchange between Bartlett and me, in which he claimed that "I didn’t actually mean to smear the FairTax by mentioning the Scientology connection," and that "As far as I know, there is no direct connection between the FairTax organization and Scientology." I offered to post his replies as a means of clarifying his intent, but he replied that he would respond in more detail in another forum.

He's as good as his word. Today, Bartlett writes about the Fair Tax at The New Republic, and he drags Scientology back into the argument again. This time, however, he extends it into a smear by claiming that Fred Thompson channeled L. Ron Hubbard to endorse the proposal:

In a strange confluence, the Scientologist proposal happens to be nearly identical to one of the trendiest conservative tax proposals of the year, the so-called FairTax, which has been endorsed by John McCain and Fred Thompson, as well as second-tier presidential candidates Mike Huckabee, Tom Tancredo, Duncan Hunter, and Democrat Mike Gravel. Georgians John Lindner and Saxby Chambliss have introduced FairTax legislation in the House and Senate that would establish a 23 percent national sales tax.

But, when you mention any hint of the nexus between Scientology and the nrst--as I did briefly in a recent Wall Street Journal op-ed--you'll be denounced by FairTax supporters as a smear artist. This retort, however, is simply evidence that these FairTax supporters don't know the history of their own proposal. That's too bad. Perhaps if they understood its origins in Scientology, they might have a greater appreciation for its inherent flaws.

Once again, Bartlett uses an association that even he acknowledged as out of date to paint the Fair Tax proposal as some sort of spooky cult-like obsession. Not only that, but he insinuates that mainstream politicians like John McCain, Thompson, and Mike Huckabee (a Baptist minister) have fallen under Hubbard's sway. Instead of arguing against the actual proposal, at least at first, Bartlett opts for the scare tactic, and it's just plain wrong.

For the record, I'm a big skeptic of the Fair Tax. Mostly, that skepticism comes from a near-certainty that the states will never repeal the 16th Amendment. Some of it comes from the suggestion that a consumption tax will not require some sort of analog to the IRS in order to manage the rebate system, and that since the rebates are conditioned on income (see update below), the analog would probably be just as intrusive. None of my skepticism has anything to do with L. Ron Hubbard or Scientology.

Scientology no longer promotes the Fair Tax. After they received their exemption, they dropped the entire idea as irrelevant to their organization. They're hardly the first people who wanted to close down the IRS, and they're certainly not going to be the last. If Bartlett wants to argue against the proposal, then let him argue against the specifics of it -- not use Scientology as a bogeyman or claim that those who would consider replacing an income tax with a consumption tax channel dead cult leaders.

Bartlett concludes, "In short, the FairTax is a crackpot scheme from beginning to end. That would be true even if the Scientologists hadn't authored it." If that's so, then prove it on the facts of the proposal. If Bartlett has confidence in his position, then he wouldn't need to use the scare tactic to preface his argument.

UPDATE: As a number of readers have pointed out, I'm wrong on the prebate being based on income, so income reporting would not be necessary. However, as Stephen Macklin points out in the comments, the Census Bureau would have to work harder for both more accurate counts and analyses of poverty levels, as the amounts of money are based on the latter.

I still don't think that there is a chance that the 16th Amendment will be repealed, though. Too many members of Congress have too much at stake with the tax code in its current form to support getting rid of it altogether. The flat tax may be a more realistic goal, since it would not take the supermajorities necessary for a Constitutional amendment.

Read more about the fair tax here.

UPDATE II: Sorry -- I meant "fair tax" for the link above, not "flat tax". My apologies.


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Comments (34)

Posted by Stephen Macklin | September 6, 2007 5:35 PM

I'm on the fence with the Fair Tax - mostly because I don't see the 16th amendment going away either.

But you are wrong about the rebates. They are not determined by size of income. But by size of household. There would be no need to track income - but certainly we would need a more accurate census.

Posted by John Steele | September 6, 2007 6:06 PM

There's a lot of that going around in America today --- if someone you don't like supports something then it must be fatally flawed simply by their support.

Posted by Skipper Smith | September 6, 2007 6:23 PM

Scientology has NO connection to The Fair Tax, the program originated by Congressman Linder of Georgia.

From the website, there is a letter written by the CEO of a public organization that is promoting The Fair Tax in response to the Wall Street Journal article:
Here is a statement from Leo Linbeck, Chairman of Americans for Fair Taxation, regarding that Bruce Bartlett column which appeared in The Wall Street Journal over the weekend. To find out what Mr. Linbeck is talking about, just read the main body of Nealz Nuze!

Dear Editor,

The FairTax was developed many years ago, totally independently of any other proposal, group or movement. The FairTax is a product of more than $20 million of advanced economic research, as well as detailed conversations with citizens as to their preferences defining the best possible national tax system.

Many groups and individuals have agitated to replace the deeply flawed income tax system apparently including the Church of Scientology. As a founder of Americans For Fair Taxation, I can state categorically, however, that Scientology played no role in the founding, research, or crafting of the legislation giving expression to the FairTax.

Mr. Bartlett is equally wrong about many other aspects of the Fair Tax. We are disappointed but hardly surprised by such distortions about the FairTax from the very economist who once opined that the income tax system just needed, a little "tweaking".

Leo Linbeck, Chairman and CEO
Americans for Fair Taxation

I hope this makes a difference, but we all know that from this point on opponents of the FairTax will be able to demagogue any supporter by simply stating that "my opponent is involved with the Church of Scientology in trying to change our tax system.

If the people of this country were not so ill-served by this hideous government education system that is suffocating our nation this type of demagoguery wouldn't work.

While I agree that the likelihood of repealing the 16th amendment is small, it is diminished further by people spouting misconceptions and (sometimes intentional) falsehoods to denigrate it further.

Posted by Al | September 6, 2007 6:28 PM


I'm with Stephan in the first post.

Think of it this way: Illegal alien -> no rebate.

This right here would be a strong incentive for getting people the heck out of the shadows.

Posted by RBMN | September 6, 2007 6:37 PM

As I understand it, every individual gets the same amount of rebate, and for some, that means the standard rebate will be more money than they paid during the year, making their rebate net income. If you spend very little, and thus pay very little tax, the rebate is more like a bonus. But if you spend money hand over fist, the rebate won't provide you much comfort at the end of the year.

Posted by Kevin T. Keith | September 6, 2007 6:44 PM

Well, I already regarded a national sales tax as loony, but I knew nothing about the Scientology connection.

Reading Bartlett's article, I felt he made his case perfectly well, and perfectly clearly. I got no impression that he was claiming the Republican candidates were followers of Scientology or had been "under [its] sway". He merely points out that this loony idea has been uncritically embraced by many, mostly on the far right.

As for his argument against a sales tax, it has nothing to do with Scientology. He points out that he was attacked for mentioning Scientology's close connections to early sales-tax advocates and organizations, and he then documents those connections. But he goes on to make a series of explicit, technical criticisms of the tax scheme as those advocates themselves present it:

the FairTax is deceptively calculated . . . [on] the post-tax value of the item. . . .

Unlike every other sales tax in the world, the FairTax actually applies to everything . . . the government buys. Unfortunately, the FairTax proposal doesn't take into account this increase in government spending. . . .

The FairTax would track every household's monthly income and then cut checks to minimize the pain, a logistical challenge that will ultimately resemble some welfare state nightmare. What's more, this would cost gobs of money, forcing further cuts in spending.

For these and other reasons, every reputable tax expert who has ever looked at the FairTax has concluded that the true tax rate would have to be much, much higher than 23 percent (or even 30 percent)

Those sound like perfectly fair criticisms. If it's true that Scientology no longer endorses a national sales tax, that should have been mentioned, but nothing he said was unreasonable or unfair, or irrelevant to evaluating this program. It is, in short, a crooked and unworkable scheme, deceptively promoted, and the fact that it arose from an equally deceptive attempt to manipulate government policy for the benefit of a particular religious group doesn't sound like a "mere" coincidence.

Posted by Carol Herman | September 6, 2007 7:00 PM

Well, it wouldn't be worth much as a really, really, good smear; if it didn't mix up apples and oranges.

I'm guessing Fred Thompson's "splash" was bigger than I thought?

That's one of the things with the Internet. I'm alone, at home. Just me. And, my computer. And, I didn't hear sounds of my bathtub, overflowing.

But Fred Thompson's IN. Yesterday, Leno said he did this "on the cheap." So, good for him!

With how many indians on the nomination stage, under-going debates grilling and flipping? And, Fred goes to the Tonight Show. As if Jay Leno's audience was huge. (Johnny Carson's audience was huge.) Leno's is small potatoes. Ah. Except for the Internet. Because Hot Air showed me the clips. And, that was a winnah for them, too. Up and out of the box, before midnight, Pacific. I know. Because I went to bed before midnight.

And, ya know what? You're not a real condendah, if people aren't sending insults your way.

Scientology? When did that become a "hot button issue?" Heck, Mitt Romney's a Mormon. Is 2008 the year we really mix it up with the faith based?

I hardly know where to look.

As to ALL campaign promises, do take them with lots of salt. Sure. Salt could be bad for you; but believing in Santa; and then finding out he's not there, maybe, that could be worse?

We're entering the season for campaign promises.

Ah. Up at InstaPundit, Glenn Reynolds has a good link. Seems Fred Thompson actually spent time learning about computers and security. A place where we really do seem to lose secrets, easily.

What kind of president would Fred Thompson make? Is the whole job scripted?

But even scripts can't foretell the future, ya know?

I'm just glad he's out there. I think, ahead, some of those little indians will drop out of sight. Anybody's got any ideas on how we can discount Ron Paul? He's got the real kooks. All stirred up. And, I hate that. I want my contestants coming to me; well, like Fred Thompson said. Like we'd hear the Lincoln-Douglas debates.

And, not sound bytes. Otherwise? I might not pay attention anymore.

Posted by Ron C | September 6, 2007 7:12 PM

Uh huh...

Every CPA, tax 'expert' and rip-off artist in the tax biz is violently opposed to tearing down the IRS and the 20-volume tax code.

If taxation were made simple, cheap and highly successful, these people and those standing in line with their hand out at the nearest government tax-distribution office would pitch an enormous bitch. They fear loss of the 60% of my earnings that I have to pay every year - plain and simple.

I might have to pay less, and they fear they might not get more!

Ergo, expect that any proposed tax change - no matter if it would provide more money to the fed-behemoth through fairer means - will be viciously attacked by freeloaders and those who enrich themselves via the current Byzantine system.

Posted by Stephen Macklin | September 6, 2007 7:17 PM


The fact that many years ago Scientologists proposed some form of national sales tax that bears little or no resemblance to and is in no way connected to the Fair Tax is irrelevant. The only connection between the two is in the mind of Bruce Bartlett and anyone intellectually feeble enough to buy his line of BS.

You seem to equally eager to buy into his dishonest criticisms of the Fair Tax proposal.

The Fair tax is calculated as an inclusive tax - the same way income tax is calculated. If you purchase an item for $100, tax is not added to that sale. $23 of that sale is tax $77 goes to the retailer. Based on their research, the Fair Tax authors determined that if you purchase an item for $100 today 23% of that cost is taxes (including the taxes on the income you used to purchase the item). The Fair tax would replace those hidden taxes.

As I said in the first comment, the rebate calculation is based on household size - not income. A CEO with a wife and three kids earning $5 million a year gets the same rebate as a janitor with a wife and three kids earning 20K.

The guy making $5 mil is probably going to spend a lot more money than the guy making 20K so he is going to pay a lot more tax. The rebate will be meaningless to him, but it will mean something to the guy making 20K.

The Fair tax is not a perfect solution - but if you are going to find fault with it, at least have the decency to criticize it for actual faults without making things up.

Posted by richard mcenroe | September 6, 2007 7:27 PM

Keep your hands off my engrams, Captain.

And while you're at it, tell Governor Romney to stop raiding the wagon trains for more brides...

Posted by duggersd | September 6, 2007 7:50 PM

Steven answered most of your criticisms far better than I could. One thing not mentioned is this: "Unlike every other sales tax in the world, the FairTax actually applies to everything . . . the government buys. Unfortunately, the FairTax proposal doesn't take into account this increase in government spending. . ." First, of course it makes the government pay the tax. However, the government is also collecting the tax. On top of that, due to the fact that the taxes that are currently "hidden" in the price of an item, with the new system the price of said item will be about 23% less, therefore the amount the government will have to spend will be about the same.

Posted by Steffan | September 6, 2007 7:52 PM

I like my engrams the way they are, thankyouverymuch.

Scientology became an issue when Tom Cruise started pushing it in every venue that he could reach. Of course, according to the late and revered Jim Baen, Scientology itself is the result of a bet between L. Ron Hubbard and John Campbell.... and ISTR something about exploring the simplest way to make a fortune in the modern world, as well. It worked out for Hubbard, and Scientologists are very quiet neighbors, so I'm not concerned with them one way or the other.

My complaint about the Fair Tax is, why don't they show us all the numbers up front?

Posted by RW | September 6, 2007 7:58 PM

Excellent analysis. Thus far, the best 'argument' presented against the fairtax proposal on this thread is "well, it probably wouldn't pass muster, what with it being so difficult to overturn a constitutional amendment"....which begs the question: why in the world would any GOP voter or web site even mention the fact that Mitt Romney or John McCain are pro-life, much less push for the election of a pro-life president & the hopes of justices who interpret - and not legislate - the law? Why even discuss Rudy's or Fred's stances on abortion? Ahem!

Anyone care to discuss the duplicity? (go ahead and type, you know you're trying to come up with something mentally, since it's such an OBVIOUS case of double standards)

Posted by JLawson | September 6, 2007 8:01 PM

Steffan -

If you can't find them here...

Or here...

Or here...

Then you're not looking. And if you've got a question that ISN'T asked - check here...



Posted by RW | September 6, 2007 8:04 PM

"My complaint about the Fair Tax is, why don't they show us all the numbers up front?"


There was a #1 best selling book by Boortz/Linder that went through the numbers. There is a web site that goes over the frequently asked questions, including the difference between exclusive and inclusive taxes.

Apparently, Bruce Bartlett hasn't taken the time to peruse the site or book, either.

Posted by Scott | September 6, 2007 8:18 PM

Kevin, re: "I got no impression that he was claiming the Republican candidates were followers of Scientology or had been "under [its] sway".

Perhaps you could look at the title of the article; "Fred Thompson channels L. Ron Hubbard.
Dianetics, the Tax Plan"

Perhaps you missed that. It might also have something to do with the fact that the word "Scientology" or some variation thereof is used 18 times. Republicans, Scientology, Scientology, Republicans. Say that real fast 20 times or so and it becomes a fact, like, Saddam was not trying to by uranium in Niger. Guilt by association.

Posted by Carol Herman | September 6, 2007 8:46 PM

They say Hubbard was a charismatic. So, typically, you get cult followers. And, yes. A lot of money "flowed in." Enough to support a couple of generations of lunatics? Do I know?

Tom Cruise never turned me on.

I don't think Scientology works as a "religion." (Though I met a woman, once, who came from a large Catholic family; and she says that now that she's a Scientologist, she watches them climbing the walls. When they have her over for dinner. No, she hasn't been stuffed and served, yet.)

As to Flat Tax. Whatever. If it's part of campaign promises; it's on par with lying. Or at least not deliverying.

It's a graduate program, though, in Santa Claus stories.

Isn't it just amazing that politicians can still sell ya "free lunch?" I guess people don't ask where it's been before?

On the other hand, the Internet IS changing politics. No questions about it. (Just like the affirmative action folks, changed good books into bad. And, college educations into jokes.) Okay. At one time college educations were full of beer and sex. And, it was the first time young adults were away from home.

In today's world, though, our "young adults" can stay that way till they're over the hill.

Maturity tends to take its time showing up in our culture.

Oh. Today, at InstaPundit, talking about Fred, Glenn Reynolds put up a link to COMPUTER TECHNOLOGY. I didn't know, in 2000, when Fred was still a senator; he steeped himself in computer technology; because he tried to bring good computer laws, that would govern our government agencies.

More important ahead, too, will be those people who actually understand computers; like Fred does. So they don't just earmark cash for garbage.

Who know? We might not tackle taxes; but maybe with enough pressure, all those pansies in congress will begin to fear the wrath of lots of people? You thought only Vietnam made people angry enough to act?

Any-hoo; for the battles ahead, you'll have to pay attention to the "advances" grabbed by the dunder-heads in congress. Who are now looking to put cops on the defensive. How so? By challenging them when freaks go out of their ways to do "public disturbances."

Can't wait to see how those over-inflated gas bags in congress end up dealing with the mess from "wide-stance Larry's" long (overdue) goodbye.

Okay. Taxes and death on the other hand, are guaranteed. But not in russia. They don't pay taxes, because they don't earn wages. Bread and vodka are state subsidized. Worthless shits end up running governments.

I'd sure like to find a way around all the incompetents.

Seems the Legacy Media, as it destroys itself, might offer up some clues?

Posted by tom bri | September 6, 2007 8:49 PM

I agree that the fair tax would require some sort of huge, intrusive agency to administer it, like the IRS. My suggestion is, if possible constitutionally, that the states administer the fair tax, and split the proceeds with the feds.

The states already collect sales tax, so they are already set up and running to collect the fair tax, little new needed.

Posted by Kevin T. Keith | September 6, 2007 9:02 PM


You seem to have lost sight of the argument you claimed you were making.

Your original post was an attack on Bartlett's article as unfair - your closing sentence describes it as a "scare tactic". My response was to note that the article presents relevant arguments and is not misleading in the ways you suggest.

You accuse me of "making things up", but all I did was cite the explicit technical arguments Bartlett makes, in response to your claim that his article was unfounded.

Now you make a substantive attack on the arguments themselves - which is certainaly a more relevant issue, but not the issue you started with.

Sadly, this attempt is as weak as the first.

Briefly, in regard of the Scientology history: note that none of the denials the current tax advocates make addresses Bartlett's actual claim. He does not say that Scientologists wrote the current sales-tax bill, only that they organized early discussions of the subject with some of the political figures who are currently part of the anti-tax movement. Linbeck carefully claims that his organization, AFT, was not founded by Scientology, but Bartlett states explicitly that its founders had attended Scientology-run meetings on the sales tax scheme and then founded AFT without Scientology backing specifically so they could deny the Scientology link for political purposes, exactly as Linbeck is now doing.

The discussion of actual tax issues, however, is the real problem.

If you purchase an item for $100, tax is not added to that sale. $23 of that sale is tax

That's insane. Nobody calculates sales or value-added taxes in that way. It doesn't even make sense. Assuming, as you say, that 23 out of a hundred dollars paid is tax, what is the tax rate? 23%? Really? Then, what is that 23% of? It's not 23% of the price of the item - it's about 30%, as Bartlett correctly says. It may be 23% of the money that leaves your pocket, but that's not a tax (it includes the tax, but you don't pay the tax on the tax). So the tax rate is, what? . . . 23% of the final net cost including the tax itself? That's absolutely idiotic, and obviously misleading. (Calling it an "inclusive tax" means nothing. It's a made-up phrase. You can't "include" the tax itself in the calculation of the tax rate.)

It also doesn't parallel the structure of income taxes. Both income tax and sales tax have a similar, very simple structure that can be easily and honestly explained (though of course they tax different things). A tax is, quite simply, a charge you pay - usually calculated on a percentage basis - based on some specified value. For income tax, the tax base is the value of your gross income; for value-added taxes, it is the net income from sales at each step in the value chain; for import tariffs, it is the value of goods imported; for sales tax, it is the price of the goods sold. It's quite simple: you state the value to be taxed, and you calculate the tax on that value. The tax rate is the percentage of the taxable value that the tax is equivalent to, and you calculate the tax very simply by multiplying the taxable value by the tax rate percentage. Nowhere - not for income tax, and not for sales taxes levied by non-insane human beings - do you back-calculate a tax rate after calculating the tax - a calculation the average person could not even figure out how to do. Your example is simply false. Say you make an adjusted gross income of $50,000, and your net tax rate is 30%, taking all adjustments into account: how much tax do you pay? If you said anything other than $15,000, you're ready for Scientology. If your net income tax rate is 30%, you pay 30% of your income in tax; if the sales tax rate is 30%, you pay 30% of the price of goods in tax. That's the only way it's done.

It's breathtakingly obvious that the tax nuts are saying 30% is 23% only because it sounds smaller. They're using a math technique nobody in the world uses, simply to mislead people. By that same technique - expressing adjustments as a percentage of the final adjusted price - cutting the price in half is a 100% discount: a classic math fallacy. Your defense of it is equally fallacious, and your stated example is simply false.

As for "hidden taxes" - what taxes are hidden? You pay tax on some of your income, and you also pay tax on some of your spending: who doesn't know that? Likewise, you get tax breaks for some of your income, and some of your spending is tax-exempt. Parcelling out the taxes into different parts of the money-supply cycle makes it possible to tailor taxation for fairness and policy purposes, which explains the exemptions for medicine and the higher taxes for luxury goods. (And spare me the whining about "double taxation" - all money gets taxed repeatedly.) In fact, the reason retail prices aren't listed "inclusively" is precisely so people will recognize the tax that is added on at checkout - it's stated explicitly every time you buy something, and I don't know anyone who isn't aware of their income tax withholdings. Claiming that condensing all forms of taxation to a single value on a single kind of transaction is a matter of "revealing hiddent taxes" is nonsensical - but when you note that that value is in fact wrongly calculated and falsely stated as part of that same argument, you get a clearer sense of what is being hidden and who is hiding it.

Finally, it is apparent that Bartlett, and you (at first), and I, were wrong about the basis of the tax rebate. That is an actual, substantive counter-argument to one of Bartlett's criticisms. Well done: after two posts and a string of comments, you have something to say that is true. Now, why simply having children should yield a string of tax rebates irrespective of any other factor whatsoever, and of any actual financial factor specifically, I don't know, but at least you've got the facts right in that one case.

The general policy, however, is a crazy as Bartlett makes it out to be. And his arguments to that conclusion - excepting the incorrect basis for the rebates - remain untouched.

Posted by Kevin T. Keith | September 6, 2007 9:09 PM

Perhaps you could look at the title of the article; "Fred Thompson channels L. Ron Hubbard.
Dianetics, the Tax Plan" Perhaps you missed that.

Perhaps someone will inform you that the article authors do not write the headlines.

It might also have something to do with the fact that the word "Scientology" or some variation thereof is used 18 times. Republicans, Scientology, Scientology, Republicans. Say that real fast 20 times or so

Try saying it the last 19 times without the word "Republican", since that one appears in the article exactly . . . once.

Functional illiteracy is a sad thing. You see people sometimes, in restaurants for instance, pretending they can read the menu and then just pointing to something and saying the first thing that comes to mind because they assume that word will be on there somewhere. Or just making stuff up completely, throwing in a few catch-phrases they heard to make it sound like they know what everyone is talking about. The words . . . the actual text, those horrible black squiggles on the page . . . they must be so frightening . . .

Posted by RW | September 6, 2007 9:31 PM

If you purchase an item for $100, tax is not added to that sale. $23 of that sale is tax

That's insane. Nobody calculates sales or value-added taxes in that way.

A company costs a product, including operating costs and other insundry items, based on forecast for 'average price per product' made. Part of the operating costs are the payroll taxes of all salaries included (indirect & direct). They throw corporate taxes on top of that. Then they add in the proposed margin to give a final sales price.

If you think a company makes a product for, say, $75 and then throws in a margin that dictates a $100 sales price and after they get all their net sales together, they then calculate what part they have to send to the feds; well, that's insane. And definitely not a standard business practics.

Sales & value added taxes aren't proposed to replace the income/corporate/payroll taxes that make up all products in the USA so they're exclusive sales and thus added on. A product that costs $100 today to the customer has the operating costs, margin and, yes, taxes included in the final sales price. It all gets pass down to the customer. Remove the income/payroll/corporate taxes from the business & the price of the product will no longer represent that inclusion, dropping the operating costs & allowing the fairtax to take the place of the other taxes. It's really not that complicated.

There can be things wrong with the fair tax, but getting past the point of strawmen & arguing apples while comparing potato chips is apparently still an impediment.

Posted by unclesmrgol | September 6, 2007 10:07 PM

Carol thinks Scientology is not a religion. Scientology fought very hard to be classified as a religious organization, and hence excempt from federal taxation. As far as our Government is concerned, it is a religion.

FairTax: I have real problems with the proposal as put forth on the website.

First, let's assume I am a builder named Unclesmrgol. Unclesmrgol goes to Home Depot and buys new lumber. He has to pay the fairtax because the lumber is new. He builds the house, and then sells it. The house sells for 100% more than it cost Unclesmrgol to build it. The buyer must pay a fairtax because the house is new. By my estimation, the fairtax has just been levied twice on the lumber. To prevent this double taxation (which is an aim of the FairTax), we have to have some form of deduction, and the tax laws just got complicated again.

Second, let's assume I am Unclesmrgol, Inc. (in other words, a corporation). The corporation intends to make and sell new widgets, and all those widgets are made from new materials. But Unclesmrgol is newly incorporated, and it is in need of plant equipment and buildings. The type of building you need to make widgets without them escaping or being stolen by pirates is special and none are available old, so Unclesmrgol, Inc. needs to construct a new building. Unclesmrgol is going to attempt to compete in the widget business with Greatgranddadgates, Inc., whose business was capitalized and operational under the previous laws. Now, Unclesmrgol has to recover its capitalization expenses in its profit, and all of those expenses are taxed via the FairTax; is there any chance that Unclesmrgol will become competitive with Greatgranddadgates within a year? Two years? Ten years?

I don't think the problem is as simple as FairTax makes it out to be.

The equalizer, of course, would be an initial tax on the worth of every holder of value (property or dollars), but who would want that? (Imagine old people who had to sell their home in order to liquify enough assets to pay the tax.)

Posted by Ian | September 7, 2007 12:29 AM

RW, do you not think it unfair to calculate income tax rates and sales tax rates differently for the sake of comparison? Such a comparison would make income taxes appear more attractive. Pretty simple, yet made such a big deal about by those biased against permanent reform that, minimally, would return $250 bil (in compliance costs) to the private economy!

Posted by Bob | September 7, 2007 12:38 AM

One thing that keeps being left out of the discussion is the fact that the FairTax also replaces the highly regressive FICA and Medicare taxes. This provision combined with the tax prebate means anyone earning at the poverty level will pay NO taxes to the Federal Government. I don't understand why the Champions of the Poor and Downtrodden (Dems) aren't demanding for its passage.

Posted by donald | September 7, 2007 6:09 AM

My dad, an IRS goon says that the fair tax is the real deal, would revolutionize the country and has exactly no chance of being passed. This is for three reasons. Entrenched beauracracy first (Of course). Second, it is not possible that the repeal of the 16th amendment would happen (And to be fair to Boortz and Linder, of which too many commenting, and Bartlett is ignoring) list right away as an action that would have to happen before it was implemented. Last, the only people who would be affected in a possibly negative way would be senior citizens who comprise the largest voting block in the country. Bruce Bartlett is part of the reason I no longer can read the WSJ (I know he's not there anymore). I can get slanted news reporting from the AJC, and frankly the editorial page lost me with their attacks on me personally (That includes all of you) on the immigration debate.

Posted by Mikem | September 7, 2007 6:19 AM

To unclesmrgo, your example is wrong. There are wholesale companies that have tax exempt status. They purchase sales tax emempt goods to create a finished product which is then purchased by the consumer. Your example fits into this scenario.

It also highlights why some form of state and federal IRS agency will be required.

I support the Fairtax because it simplifies tax collection for the consumer and does make life easier. I also believe that with the IRS watching fewer customers (just businesses) versus individuals and business, they will be able to collect the taxes more efficiently. Estimates vary on the amount of income that is not reported and thus not taxed. Now all retail transactions will be taxed and that is where the government can concentrate its enforcement efforts.

Posted by Robert Wray | September 7, 2007 7:21 AM

Ed, There is no need to repeal the 16th ammendment! If you read it, it does not REQUIRE Congress to tax incomes. It just gives them the power to do so. Might as well quote it, since it's short: "The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the severl States, and without regard to any census or enumeration."
I don't know why people use the 16th ammendment as the obstacle to the Fair Tax. The real obstacle is the loss of power that Congress and lobbyists would experience. The second obstacle are the people who knock the Fair Tax without reading the book about it by Congressman Linder and Neal Boortz.

Posted by RW | September 7, 2007 7:44 AM

"The second obstacle are the people who knock the Fair Tax without reading the book about it"

As evidenced by people like Bartlett and even the initial entry of this topic (prior to the update). I'd say the third is the 'attitude' that is entrenched into the psyche that assumes that the only way to change the tax system is to adjust the rates on the current income tax scheme that is already in place - as if the machinations that were put into place vis-a-vis the payroll taxes weren't revolutionary.

Folks, as long as you have tax RATES (be they income tax rates or a 'flat tax') you'll have politicians who put forth exemptions to qualify under those rates, which his why we have the debacle that is currently in place. The volumes necessary to print the tax code are there because of the varying degrees of deductions that the pols/lobbyists have pushed through. And, I love this part:

the Census Bureau would have to work harder for both more accurate counts and analyses of poverty levels, as the amounts of money are based on the latter

So, instead of the current practice where each one of us keeps receipts on every expenditure that we incur during the calendar year that correlate with the "acceptable" item for deduction, maintain the receipts for every donation to charity, know - the penny - what our mortgage interest deductions are, maintain how much we put into our 401K, keep tabs on the gain/loss that our investments made & report to the gov't, take the hours necessary to fill out our 1040 forms by April 15th (including our W-2s in the mail, because our right to privacy doesn't include some peon at the dept. of treasury knowing our income level) DO WITHOUT OUR MONEY DURING THE YEAR because it was withheld and sent to Wash. DC, sending in the regressive payroll tax (where we may or may not get returned by way of social die, it's gone, you forfeited it) and pay any penalties in case you didn't have enough withheld during the year......the census department would have to work harder.

Seriously: cry me a freaking river.

Posted by mrlynn | September 7, 2007 8:06 AM

Writes Robert Wray: "I don't know why people use the 16th ammendment as the obstacle to the Fair Tax."

The reason is because we all assume that if the 16th Amendment is NOT repealed, we would end up with a national sales tax AND an income tax. Given the nature of politicians in government, especially Democrats, this assumption is almost certainly correct.

The idea that the sales tax would be built INTO the price you pay for an item, and not calculated on top (as all sales taxes are today) is abominable. That's the problem with a VAT; you don't see most of it.

Re Scientology, I didn't know about a bet between Ron Hubbard and John Campbell (editor of Astounding SF). It wasn't of course a 'religion', but a cockamamie system of therapy that Hubbard (a mediocre SF writer) invented. I actually read his Dianetics as a teenager. After adopting the bizarre name of 'Scientology', the members of this cult decided to become 'a religion' in order to escape taxes. My mother is fond of saying that "If politicians had any balls, they'd tax the churches the same as everyone else—look at all the money they take in!" I can't say she's wrong.

/Mr Lynn

Posted by Dennis Clark | September 7, 2007 8:47 AM

You may well be correct "…the states will never repeal the 16th Amendment…" There is in this statement a very bold statement; the states are wedded to the 'soft bribery' offered by the tax code.

The voters need to know this and how to change it. The fair tax cannot be implemented until the 16th amendment is repealed. The fight will not be quite as simple as it seems on the surface; it should however, bring about a healthy debate. It should stir up the citizens to find out how the prices they pay are constructed. The hidden tax burden on everything we purchase (e.g.: every tax payer in the United States is currently paying $0.51 per gallon of ethanol produced.)

Tax breaks and subsidies not good business drive too many decisions.

Posted by Ray McKee | September 7, 2007 9:54 AM

This article and the comments just prove you can't argue with idiots. The mathematics and facts in Bartlett are ficticious. Yet these idiots, instead of actually learning about the fair tax, pick up on this ludicrous article and cite it as factual. Also, although the fair tax does not depend upon repeal of the 16th amendment, it is not up to Congress to repeal it. This is the function of the people. Only three-fourths of the states need to approve the amendment for it to become law.

Posted by Michael Nikisher | September 7, 2007 10:30 AM

The flat tax link actually links to the FairTax web site.

Posted by Al in St. Lou | September 7, 2007 1:41 PM

The flat tax link links to the "fair" tax web site where there's a link to a PDF document that purportedly compares the two taxes. Right in the big bold title of the "white paper" (which it ain't) you see that they declare the "fair" tax to be "real reform" and a flat tax to be "more of the same." Has any disinterested economist examined the two proposals and written an unbiased comparison?

Posted by unclesmrgol | October 5, 2007 10:53 AM


I am not wrong. Under Fair Tax, the ONLY tax is the Fair Tax, and there are no deductions from that tax -- only classes of items which are taxed.

Note that Fair Tax makes much to do about things that are new and subject to the tax, and things that are used and not subject to the tax.

I think you need to read the papers on the site much more carefully.

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