STRC 1111
Issues Analysis
Name: Timothy X
Date:
Term Topic Question: Should Congress replace the federal income tax with the “fair tax”?
Issue #1
Proponent for FairTax
Americans for Fair Taxation
Is the FairTax a regressive tax?
Argument or Claim
AFT proposes that the FairTax would
ensure that no citizen pays any tax up
to the federal poverty line based on
family size by issuing a prebate every
month to compensate for any tax
spent. Also by purchasing used goods,
one could avoid paying taxes over
that limit.
Source of Argument or Claim
Fairtax.org
Opponent against FairTax
Joe Miller an analyst for
FactCheck.org, President’s Advisory
Panel on tax reform, Mike Moffat an
economist for about.com
Argument or Claim
Mike Moffat says that under the plan
families, the poor, and seniors would
pay more taxes due to tax credits,
spending distribution, and double
taxation respectively.
The President’s Advisory Panel’s
study showed that even with the
prebate, The top 10% would have less
tax burden and everyone else would
have an increased tax burden.
Joe Miller states that anyone making
less than $15,000 or more than
$200,000 will be helped by the
FairTax.
Source of Argument or Claim
About.com
Factcheck.org
Govinfo.library.unt.edu
Additional Perspectives
2
Issue #2
Proponent
Derek Clark of Geek Politics,
Is the FairTax enforceable?
Argument or Claim
The PAP states that the reduced number
of tax return filings would be
advantageous.
Derek Clark says that the increased
transparency of the tax makes it more
enforceable because there are less loop
holes to take advantage of.
Source of Argument or Claim
GeekPolitics.com
Opponent
Mike Moffat, President’s Advisory Panel,
Jeff Schnepper from MSN Money
Argument or Claim
Mike Moffat states that businesses could
buy items for personal use and claim it as
a business expense and that the prebate
would perpetuate a rising tax rate which
would become unfeasible.
The PAP states that a nation sales tax
would give rise to cash sales which would
not be traceable and therefore not taxed.
With a sales tax there is no third-party
reporting which is proven to decrease tax
evasion.
Jeff Schnepper also says that there would
be an increased black market which
would involve untraceable sales but also
adds that the current FairTax would not
be enforceable because special interests
would try to create exemptions within the
tax.
Source of Argument or Claim
About.com
Govinfo.library.unt.edu
MSN.com
Additional Perspectives
3
Issue #3
Proponent
Americans for Fair Taxation
Is the FairTax revenue
neutral at a 30% tax
rate?
.
Argument or Claim
AFT claims that the evasion assumption
of the PAP was too high and would be
similar if not less than a current 16%
(2007). Also, they claim that calculations
done by the Beacon Hill Institute and Dr.
Kotlikoff support their claim that only a
30% tax rate would be enough to remain
revenue neutral.
On the encroachment of state revenue,
AFT says that states receive equal
portions of revenue from sales and
income taxes.
Source of Argument or Claim
Fairtax.org
Opponent
President’s Advisory Panel
Joe Miller
Argument or Claim
The PAP states that with a prebate
involved with the FairTax, a 34% sales
tax would be needed assuming low
evasion rates and 49% using higher
evasion rates.
Miller tells how there may be faulty
calculations in revenue and quotes Bill
Gale that a 39.3% sales tax would be
needed to stay revenue neutral and also
quotes Laurence Kotlikoff, a FairTax
supporter, who states using Gale’s
formula would mean a 31.2% tax rate.
Source of Argument or Claim
Factcheck.org
Govinfo.library.unt.edu
References
Additional Perspectives
4
Excerpts from the fairtax response to the Mack/Breaux tax panel report and recommendations. (2007). Americans For Fair Taxation. Retrieved
October 3, 2010 from http://www.fairtax.org/PDF/Excerpts_from_response_to_tax_panel-103006.pdf
Clark, D. (2009, January 29). 10 pros and cons of the fair tax [Web log message]. Retrieved November 1, 2010 from http://geekpolitics.com/10-prosand-cons-of-the-fair-tax/
Miller, J. (2007, May 31). Unspinning the fairtax. Retrieved November 1, 2010 from http://www.factcheck.org/taxes/unspinning_the_fairtax.html
Moffitt, M. (n.d.). Fairtax - income taxes vs. sales taxes. Retrieved October 30, 2010 from http://economics.about.com/cs/taxpolicy/a/fairtax.htm
President's Advisory Panel, (2005). Federal tax refor. Retrieved October 31, 2010 from http://govinfo.library.unt.edu/taxreformpanel/finalreport/TaxPanel_8-9.pdf
Schnepper, J. (2008, January 29). Is the fair tax really fair?. Retrieved from October 31, 2010
http://articles.moneycentral.msn.com/Taxes/Advice/IsHuckabeesFairTaxReallyFair.aspx?page=1