When I first decided to write this week’s column on the Missouri Fair Tax Act, the task seemed simple enough. I was tangentially aware of the issue, and I figured doing some research for a column would be a great way to further educate myself. I was sure that once I analyzed the proposal and scoured all of the literature, I would be left with an educated opinion.
I couldn’t have been more wrong.
I quickly discovered that those who prefer solid ground beneath their feet when making a decision lack such dry land when it comes to this tax proposal. After sifting through each side’s talking points and reports, numerous articles and a few economic journals, I was only left with more questions. Unfortunately, I don't think I am alone, and therein lies my problem with this possible legislation. Although I think there are many advantages to adopting a consumption tax, the rhetoric can be complicated, and there are just too many “what ifs” that are unaddressed in this bill for it to become active legislation without further revisions and detailing.
For starters, the term “Fair Tax” should be replaced by “Consumption” if the act is to have any legitimacy. The word "fair" is a loaded term that presents immediate bias. If you aren’t for fair taxes, then you have to be for unfair taxes, naturally. Besides, there is no such thing as a completely fair tax, and there never will be. Somebody will always benefit, and somebody will always get the short end of the stick.
As Furqaan Sadiq noted in a recent analysis for the Missourian, those in the middle class earning between $40,000 and $100,000 would see an increase in their share of the tax burden, with those making less than $24,156 and more than $200,000 a year benefiting the most. Now, I personally have no problem with benefits for those below the poverty level, since they are less likely to take advantage of the savings perks that come from striking our current tax policies, and as for the rich, they will always have an advantage. Get over it.
But should the largest consumer base be hit the hardest when we are trying to bring ourselves out of an economic tailspin? Although the Library of Economics and Liberty states in its must-read reference for consumption taxes that “those who pay the most in taxes inevitably will get the greatest dollar benefit from tax reductions,” it also references the idea of “temporal neutrality” — which is different from revenue neutrality. It states: “A tax is neutral … if it does not alter spending habits or behavior patterns from what they would be in a tax-free world, and thus does not distort the allocation of resources.” Given that definition, no tax is totally neutral, but will the possible 12.5 percent consumption tax the Institute on Taxation and Economic Policy estimates will be needed on all goods and services to maintain revenue neutrality do so without drastically curtailing the spending habits of the middle class?
And that is just one of many questions the scant legislation leaves open for postulation. Will those living in Missouri's two biggest cities just cross the state line to save a little cash? Is that fair to those residing in the middle of the state when they have to pick up the slack? Since the tax is only applicable to new items, if I am extremely thrifty and purchase a used house and drive a used car, will I only be contributing to the tax pool when I buy food and on a few other rare occasions? Will there be a downturn in the purchasing of new products? What would happen to your grandmother if this amendment were passed. What if the nest egg she has saved and been taxed on all of her life now had to also cover consumption taxes on her food, rent and pharmaceuticals?
I want to believe, but something still bugs me about the possibility of a consumption tax no matter how much I read. Something feels amiss. I get this uneasy feeling that the results will be a lot like the FairTax rally this past weekend at Boone County Fairgrounds. Local organizer Colin Malaker was overly confident when he told The Columbia Daily Tribune, “For sure, we will get 10,000 to 15,000 (people).” The turnout was closer to 5,000, and even that number has seemed a little high according to other reports. Either way, the estimates were generous, and that’s OK if it is a rally and it is on FairTax.org's dime, but not if it's legislation and it’s on everybody else’s.
Andrew Del-Colle is a former Missourian reporter and a graduate student at the Missouri School of Journalism.