For all of those who have worked on behalf of the FairTax effort in the past, we are appreciative of their efforts. The National Review article below recognizes the virtues of the FairTax as well as the gains FairTaxers are now making across the country, and for that, we are deeply appreciative; however, we should resist all attempts to divide us when our cause is common enactment of a better tax system. Simply put, the FairTax is good for all Americans.
Comes the FairTaxThe latest in the push for saner, more effective taxation in the United States
The biggest success story of the 2008 Republican primary season isn’t about a candidate. It’s about an issue: FairTax, a proposal that would eliminate income taxes outright and replace them with a national sales tax. From relative obscurity a year ago, the FairTax campaign has come to dominate Republican politics at the grassroots level, especially in battleground states like Iowa, where the GOP’s state chairman has said, “The most important economic reform Congress can enact to win the fight against poverty is the FairTax.”
Implementing FairTax would, in short, throw the existing tax code out the window and replace it with a national sales tax. Given that most Americans hate the IRS with the heat of a thousand suns, it’s surprising only that a proposal to completely overhaul the American tax system hasn’t caught fire earlier on the campaign trail. But now, FairTax is smoking.
It broke into primetime in August, at ABC News’s Iowa Republican debate, when moderator George Stephanopoulos offered a bullet-point summary of the FairTax proposal and asked each candidate his position on it. Mike Huckabee was the sole candidate to fully embrace the FairTax proposal, which is part of the Iowa GOP platform and remains wildly popular there. Later that month, Huckabee stunned observers by finishing second in the Ames, Iowa, straw poll, even though he had limited resources and rented no buses to drive supporters to the poll. (By contrast, Mitt Romney had spent a sizable fortune wooing and busing supporters to vote for him.)
Of course, just because something is a popular issue in the Iowa fishbowl doesn’t mean that it will be an important electoral issue in the long run. However, the FairTax issue doesn’t appear poised to go away anytime soon. Ken Hoagland, the communications director of Americans for Fair Taxation (AFT), points out that his organization, devoted exclusively to pushing the plan, has signed up over 800,000 supporters — more than half of them in the last six months. FairTax is a frequent topic on talk radio, and popular radio personality Neal Boortz has been flogging the issue like a stubborn mule. FairTax is even slowly seeping into Washington. Boortz co-authored a book making the case for FairTax with Rep. John Linder, a Georgia Republican. The FairTax Act of 2007, awaiting committee hearings, has 64 co-signers, and that number has been growing steadily.
As the FairTax proposal has attracted supporters, it has also gained detractors. The proposal itself is enticing: abolish all federal taxes on personal and corporate income, gifts, estates, and capital gains, along with the Social Security, Medicare, self-employment, and Alternative Minimum taxes; dismantle the IRS; repeal the 16th Amendment, which allows the federal government to levy an income tax; and still draw the same federal revenues. But substantive criticism of the FairTax has come from both the right and the left.
To fill the government coffers, FairTax supporters propose a 30 percent national sales tax. Putting 30 percent taxes on new homes and cars could be withering. FairTax proponents respond that removing the hidden taxes inherent in the construction materials or car parts, along with making the creation of wealth tax-free, will result in lower prices for the finished products that would more than make up the difference.
But if FairTax is indeed a bad idea, it’s not an ill-considered one. Texas construction magnate Leo E. Linbeck Jr., the chairman of AFT, claims to have sunk over $20 million in academic and market research while formulating the FairTax plan. If you have a criticism of their proposal, chances are the group has a substantial rebuttal posted on its website. The plan has been endorsed by dozens of economists including Bob McTeer, former president of the Dallas Federal Reserve Bank.
Whatever the plan’s substantive problems, there is also the political problem of selling a total tax overhaul in a presidential campaign that subsists mostly in soundbites. Indeed, a National Review Online editorial recently advised the Republican contenders to avoid latching onto the issue: “There are too many possible lines of attack, and it would take too long to explain the issues.”
To date the most notable and vocal critic of AFT and its FairTax plan has been Bruce Bartlett, the deputy assistant secretary of the treasury during the elder George Bush’s presidency. Of the many lines of attack available to a trained economist such as Bartlett, he’s chosen an unusual one: an attack on its proponents’ credibility. According to pieces he has published in the Wall Street Journal and The New Republic, the idea of a national sales tax to replace the IRS was originally floated by the Church of Scientology.
It is a complicated tale. In 1967, the Church of Scientology lost its tax-exempt status after an IRS audit. A number of Scientologists then infiltrated the IRS and stole documents pertaining to the church in what was termed “Operation Snow White.” Eleven high-ranking Scientologists — including the wife of Scientology founder L. Ron Hubbard — served time in federal prison as a result. Scientology did not regain tax-exempt status until 1993, shortly after the group began pushing for a national sales tax to replace the IRS. If anybody has an axe to grind with the IRS, Scientology is Paul Bunyan. And AFT’s former executive director, Tom Wright, is a well-known Scientologist.
The taint of Scientology doesn’t address the substance of FairTax’s proposal, of course. A good idea is a good idea. For their part, AFT’s executives deny there’s any meaningful Scientology connection. The Scientology proposal for a national sales tax, championed by a now-defunct group called Citizens for an Alternative Tax System, was relatively unsophisticated and lacked the economic rigor of the FairTax. Hoagland puts it this way: “Apparently they did have a proposal, but one might as well say that the Space Shuttle finds its genesis in a flying fish. There are a lot of people who hate the income tax. Scientologists are apparently some of them.” Indeed, one suspects that Tom Cruise’s star would still be burning brightly had he used his Scientological fervor to attack the tax code rather than psychiatry.
Under the leadership of Wright, the FairTax movement appeared to be hitting a wall, and there were grumblings on Capitol Hill that his overt Scientology was keeping people at arm’s length from the issue. After his departure last fall, FairTax hired David Polyansky as its chief operating officer and Mike Rose as its national director of grassroots. Polyansky, a Marine who took the job shortly after returning from Iraq’s Anbar Province, has a grab bag of political experience; Rose is a veteran campaign guy. The two joined forces with Hoagland, and their political strategy ever since has been nothing short of masterful.
“Our thought from Day One was to go into these early primary states and organize them like a campaign,” Rose says. “Start with state chairmen and then go in and create county chairmen, and make sure it’s as nonpartisan as possible. Then organize it the way a campaign would, so if there’s a rally going on we know who to call on the ground to organize it and how many people to expect beforehand.”
Thus a gleaming FairTax campaign bus has been driving around the country, appearing to huge crowds and piggybacking on candidate events, as the issue has been brought into the political consciousness. But time will tell if support for the specific FairTax proposal is real, or if there are merely hundreds of thousands of Americans happy to see somebody — anybody — suggesting comprehensive tax reform. “We think at worst we will force a debate on the federal income-tax system. At best we will drive this to the floor of the House and Senate. Anywhere in that spectrum is healthy for the country,” Hoagland says.
For now, Hoagland and AFT remain enthusiastic about the issue. “There aren’t that many moments in American history where the public will actually dominates the public-policy process, but it does happen from time to time. It’s what makes you believe in what you learn in civics class: that it is a nation by and for the people. Usually it’s not,” Hoagland says. “There are so many benefits across the board under the FairTax that we think we can unite the country, get past the polarization that so beleaguers the country, and unite Democrats and Republicans against the self-dealing of Congress.”
Hoagland may be getting ahead of himself when he speaks of the potential of FairTax to heal a divided nation. Still, his lofty words go a long way to explaining the organization’s recent success. The jury may still be out on whether the FairTax is sound policy, but for the time being its promoters have a great stump speech.