Posted by
Matthew Cole on Monday, February 25, 2008 12:14:15 AM
I am glad to see that the FairTax movement is gaining national attention. It has even been mentioned in Republican debates. Mike Huckabee has made the FairTax a main part of his platform. Of course, whenever anyone tries to creat any significant change in government for the better, establishment politics will always try to derail it using whatever means necessary. In this Republican election, John McCain represents all that is wrong with national politics in America today. Politicians like him like our current progressive income tax, because they know that they can use it as a tool to create social policy. They manipulate the tax code in order to reward certain groups that they like, and to cause problems for those they don't like.
They know that by manipulating the current system, they can get away with many things that the taxpayers would never put up with if the system were more transparent. Imagine if our government gave poor people $800 in housing assistance, but gave some of the more wealthy people $2,500 in housing assistance. I am certain that most people would demand to know why the government is giving money to those who don't need it. The current system allows the government to get away with doing exactly that. The government doesn't have to give people a check for $2,500. They simply allow for them to claim a home mortgage interest deduction. The result is basically the same. The federal government is short $2,500, and somewhere in America, an individual has $2,500 more than he would if certain politicians had not created that particular tax deduction. In this way, the current complex tax code of over 67,000 pages of loopholes that allow politicians to grant special favors designed to buy votes that they would not dare try under a more transparent system. That is why the Washington insiders like John McCain will do anything to stop any real reform in the tax code.
During a Republican debate, John McCain tried to make advocates of the FairTax, like Mike Huckabee, appear to be dishonest in their claims. McCain claimed that the rate of 23% proposed in the FairTax was not accurate, and that the real rate would be approximately 30%. Having seen no evidence of this, I played around with numbers to see how exactly John McCain got this number. Let's imagine that a customer goes into an electronics store and buys a TV that happens to be priced at exactly $100 for the sake of simplifying the math. Since the FairTax is an inclusive tax that is embedded in the cost of that TV, $23 of the $100 paid for the TV go to the federal government. This means that the actual cost of the TV without taxes is $77. Since the income tax is an inclusive tax that is withheld from earned income, it only makes sense to make the FairTax an inclusive tax as well. McCain obviously had to re-evaluate the tax rate as an exclusive, rather than inclusive, tax in order to get 30%. Since $23 is approximately 30% (29.87%) of $77, John McCain used deceptive mathematics in making his claim. By doing this, he has used two different standards in making his comparison. To be fair, let's apply McCain logic to the current system. Let's assume that a random worker has an income tax rate of 25.35% and payroll tax of 7.65%. This adds up to 33%. This means that he takes home (excepting state taxes) 67% of his earned income. Using the McCain method of evaluating rates rates as exclusive instead of inclusive, we get the adjusted rate of 49.25%. McCain's attacks on the FairTax fall apart when using a fair comparison.
For McCain to make this error would mean that he is either lying or too incompetent to handle simple math; both of which should make him unfit to be president. As much as he claims to be about "straight talk", it would be nice to hear some from him once in a while. Two of the three remaining Republican candidates, Ron Paul and Mike Huckabee, have significant tax reform, which includes eliminating the federal income tax, as a part of their platforms. Hopefully, unlike Obama's empty promises, this is the beginning of "change we can believe in."