Why the Fair Tax Won’t Work
By: Warner Todd Huston
In theory, I like the Fair Tax idea. I have to say, I find it completely illogical that many people today who earn up to $50,000 a year, end up paying no Federal taxes at all. Why, exactly, should they get away with paying nothing? It simply makes no sense that those in the highest tax brackets pay nearly all the taxes, and everyone else gets off free of charge. We all use the same government, after all. Why should it be free to so many?
But wait, you say, they aregetting thousands a year withheld and sent to Washington, right? Aren’t they paying taxes, then? Well, certainly the lower middle classes are being deprived of a part of their income for most of the year as true and criminal as that is. But, in the end, they are not paying Federal taxes because most of them get nearly all of it back at the end of the year. Washington just had the luxury to have had the use of it (and the interest it might have generated) throughout the year, right up until they send it all back. But it is, indeed, all sent back for many who could afford to pay something.
You donâ€™t have to take my word. Any tax preparer will confirm this fact.
In any case, the Fair Tax idea sounds quite a bit more equitable. Everyone pays something. Further, they can control, to some extent, what they do pay by not consuming when they don’t have to.
Recently, to explain the idea, Fair Tax proponent Doug Patton, puts it this way:
The Fair Tax would replace all federal income taxes. No more federal withholding. No more Social Security withholding. No more Medicare withholding. No more stealing from the paychecks of American workers before they even see it and then pretending to give them a refund, without interest, at the end of the year. No more saving receipts for tax deductions. No more IRS audits. No more April 15th.
Sounds great, right? If this were the method of taxation, I’d go for it.
Unfortunately, we have one little thing that dooms the fairness and the equitable nature of the Fair Tax plan.
It’s a little, tiny thing called the 16th Amendment to the Constitution of the United States. And it states:
The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.
This Amendment kills the fairness of the Fair Tax. Unless the Fair Taxers can get this Amendment eliminated before they get their plan passed, we WILL end up with both a national sales tax and an income tax. Mark my words.
Why do I say that?
Well, it plainly says it right there for everyone to see: “Congress shall have power to lay and collect taxes on incomes.” What could be clearer?
Now, it might be true that, once passed, the Congress will repeal all their IRS laws and requirements. It is quite possible that a Fair Tax fever will sweep our old tax structure right out of existence. But, a tax laid aside is not a tax dead and a law ignored is not a law repealed.
Even if we were lucky enough to have a Congress exuberant enough for the Fair Tax plan to sweep away all our old taxes, with the 16th Amendment still lurking there in the Constitution, we would have but to wait for a time when a different Congress would begin the efforts to tax income all over again. And they would do it quite despite what any previous Congress said. After all, it says we can tax income right in the Constitution! It would be a temptation that no Congress could long resist.
Of course, this Fair Tax panacea would also not necessarily be put in place by the individual states and need not be. As Federalist 33 clearly says, the individual states have their own completely Constitutional powers to tax and they are powers separate from the Federal government. As Alexander Hamilton wrote: “The inference from the whole is, that the individual States would, under the proposed Constitution, retain an independent and uncontrollable authority to raise revenue to any extent of which they may stand in need, by every kind of taxation, except duties on imports and exports.”
So, a Federal adoption of the Fair Tax plan would not assure that the states would follow suit. In fact, many states would raise their taxes even higher since the Federal government would to some extent be dropping theirs.
But that is a minor quibble compared to the fact that without eliminating the 16th Amendment, we’d eventually — and sooner rather than later if I know the greed of government — have both a national consumption tax via the Fair Tax plan AND a Federal income tax piled neatly right on top.
Heck, Congress doesn’t even need a Constitutional Amendment to breach the Constitution. The Constitution has already been breached. As Article 1., Section 8a, says, “all duties, imposts, and excises shall be uniform throughout the United States.” A graduated tax is hardly “uniform” because it hits some people differently than it does others. Who could imagine that the Founders thought that people of middle income would often pay no tax while the upper reaches of the income bracket would pay nearly all of it?
Sure the Fair Tax is a great idea in theory. But, I have to stand against it until we change the Constitution with a Constitutional Convention. And, unfortunately, that is a rare thing nearly impossible to arrange. Worse, we would have to expect politicians that derive power from the tax code to be the ones to call it to order. And that is probably the biggest fantasy of them all.