I know I have a problem, but I am working on it. I have a rule -- no more than one link to any one post. I tried to resist, but this is brilliant
Shorter Steven Landsburg
If Mike Huckabee had proposed a completely different tax plan that has one point of similarity with the idiotic, doesn't-add-up, Scientologist-designed "FairTax" plan he actually proposed, then that completely different plan might be a good idea. So it is unfair to criticize him for offering the plan he actually offered.
As a sorta-kinda economist myself, I deeply resent the fact that many Slate readers probably think that Landsburg's stuff represents the way actual economists think, rather than being more finger exercises in vaguely economic reasoning: sometimes amusing, often disgustingly heartless and wrong-headed, never intellectually or morally serious.
I am now losing a struggle to find out just how bad Landsburg is. Also the first link is to an oped in the Wall Street Journal which is actually worth something. It is Bruce Bartlett's critique of the "Fair Tax" an easy target no doubt, but one left as smoldering ruins by the end of the column. Yes indeed, it was originally proposed by the Church of Scientology (makes enacting tax plans based on something Aurthur Laffer drew on a napkin look dignified).
Bartlett does miss one excellent point against the tax. "Since sales taxes are regressive--taking more in percentage terms from the incomes of the poor and middle class than the rich--some provision is needed to prevent a vast increase in taxation on the nonwealthy. The FairTax does this by sending monthly checks to every household based on income." The main (only) selling point of the FairTax is that, without income taxation, there will be no need to file tax returns every year to determine income. Instead they propose to determine income *every month*. Of course that is going to be simple. Now the 1040EZ does not continue on for a full page, because the IRS enjoys making things complicated. It does so because there are many sources of income. If FairTax proponents don't want to send that check to hedge fund managers, they will have to have people file forms every month. Then April 15th will no longer be special, because there will be a hassle on the 15th of every month.
Amusingly Bartlett makes an arithmetic error on a topic where he just argued about the exact calculation he blows. I see the Wall Street Journal's crack editorial staff applied their normal standards to an Op-Ed making a valid point.
If a product costs $1 at retail, the FairTax adds 30%, for a total of $1.30. Since the 30-cent tax is 23% of $1.30, FairTax supporters say the rate is 23% rather than 30%..
This is only the beginning of the deceptions in the FairTax. Under the Linder-Chambliss bill, the federal government would have to pay taxes to itself on all of its purchases of goods and services. Thus if the Defense Department buys a tank that now costs $1 million, the manufacturer would have to add the FairTax and send it to the Treasury Department. The tank would then cost the federal government $300,000 more than it does today, but its tax collection will also be $300,000 higher.
This legerdemain is done solely to make revenues under the FairTax seem larger than they really are, so that its supporters can claim that it is revenue-neutral. But for the government to afford to purchase the same goods and services, it would have to raise spending by the amount of the tax it pays to itself. The FairTax rate, however, is not high enough to finance the higher spending it imposes. Therefore the proposal only works if federal purchases are cut by 30%, close to $300 billion--the increased cost imposed by the FairTax
uh no. The dishonesty is impressive even coming from Chambliss, but he is assuming that federal spending would be cut by 23% not 30% that is to 77% of the current level not 70% of the current level 70%*1.3 = 91% not 100%. This is exactly the point that 1/1.3 is not equal to 0.7 but rather, roughly, 0.77 which Bartlett made immediately above then immediately forgot.
Bartlett is, of course, one of the more serious conservative commentators on fiscal policy. I dred to think what less serious commentators would write about the difficult concepts of addition subtraction and division.
Update: The prebate depends only on family size not income so the FairTaxers do not need to measure income ever, let alone monthly. I should have guessed that Bartlett was confused and should have checked. See comments (really one comment but that is way above average for my posts).