Wednesday, February 13, 2008

I Guess I Shouldn't Be Surprised, But....

I was listening to the radio yesterday and heard that a state representative was trying to convince Michigan to adopt "FairTax", the simplistic and unworkable concept of replacing all sources of state revenue with a sales tax on goods and services. This will take a constitutional amendment so, yes, they're working on a petition drive. Let's hope for Michigan's sake that, if the drive succeeds, the state's voters don't turn out to be as starry-eyed and foolish as the proponents of this "reform".

One of the leading proponents, Representative Fulton Sheen (R-Plainwell), promises, essentially, that this will be a break-even for Michigan - raise the sales tax to 9.5% on all services and new goods, and that will make up for eliminating property taxes, state income taxes, state business taxes, etc. (It isn't clear whether this is a standard "FairTax" sleight of hand, with a 9.5% tax actually translating into something more like 11%, or if, like FairTax, it will also require the government to pay taxes in order to disguise If joined with the "dream" of a federal FairTax, government spending would have to go up by about 40% to pay the "tax bill" (the government presently being tax-exempt), and the sales tax on any goods or services you buy will be about 40%. (New homes are taxed, "used" homes are not. So that $250,000.00 newly constructed home will cost you $350,000.00. That's certain to inspire a revival of the construction industry.)

Let's look at the promises made by the "petition drive":
The MI FairTax:
* Makes sure everyone pays their fair share
* Allows you to keep your entire pay check free of state taxes
* Un-taxes the poor with a rebate on the necessities of life
* Stimulates investment, economic growth and job creation

The MI FairTax is Simple:
* NO Tax Filings
* NO Loopholes
* NO Hidden Taxes

Hm. So the poor will receive a FairTax rebate simply by asking for it - no tax return necessary, and thus no verification of qualification. Purchasing your goods and services out-of-state and thus tax-free? Apparently you don't have to file a return so that the state can collect "Use Tax". And everybody who qualifies (perhaps just by asking) will receive a monthly "welfare check" from the state.

No tax loopholes? (Other than the big, obvious one of buying out-of-state?) Well, I'm promised that "all business-to-business transactions would be exempt" from the tax. So I start a small furniture showroom, buy my household furnishings for the showroom, then sell them to myself a few months down the line as demo units. That should lower my tax bill. No, wait - better. I'll declare that I am a journalist performing product testing, and thus everything in my house is owned by my business. I'll blog about wear-and-tear and product quality, and suddenly everything I buy is tax-free. Since I won't be filing a tax return, the government will have a hard time detecting my actions, let alone challenging them in court.
In short, the FairTax is too good to be true, and voters should not take seriously any candidate who supports it.
The WSJ and I appear to be on the same page on this issue....

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