I had so many comments on my Fair Tax post that I wanted to respond to some of the points made:

First, several people made the point that Europe has a Value Added Tax (VAT) that is more than the 10% figure that I quoted. All of the research that I read made a distinction between the VAT and a national retail sales tax like the Fair Tax. This distinction is based on the mechanics of the tax. The value added tax looks at what a firm adds to the value of a product where a national sales tax is an excise tax levied at the point of sale. The end result looks similar because the VAT is passed on to the consumer. However, the VAT requires firms to report the value added at each stage of production. A national retail sales tax does not require any such reporting other than that the national rate has been applied. The figure I used looked just at those countries using a national retail sales tax and did not include those countries using a VAT.

Second, several readers expressed frustration at the current tax system and argued that we are essentially paying the same rate as what the Fair Tax would impose. That may be true, but I don’t understand how that merits scrapping the current system. If the Fair Tax does the exact same thing, why should switch? The tie goes toward stability, does it not? People have planned, not just in the short term, but in the long term for the tax benefits of the current system. Revolutionizing the way we tax would upset the expectations of a millions of Americans and businesses. Thus, doing something that drastic requires not just generalized frustration, but serious injustice. Generally, I think that frustration with the current tax system has made people over-eager to do something else. I don’t deny that the current system has its flaws. Indeed, it should be flatter and simpler. However, taking the extreme position of overhauling what we have and disturbing the expectations of those who are paying taxes seems unwise to me.

More rebuttals to come

Labels: fair tax, mike huckabee, Taxes