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October 11, 2005
Fair Tax Gets the Ax
The President’s Panel on Tax Reform killed the Fair Tax at their Oct. 11 meeting. The meeting—-the last before they deliver their findings on Oct. 18-—was presented in a roundtable-type discussion forum. After mulling proposed changes to deductions for employer-sponsored health care and mortgage interest deductions, the panel turned on the Fair Tax.
Ed Lazear, the panel member heading the Fair Tax study group, started off well by listing the positive aspects of a consumption tax: encouraging savings, simplified administration, reduced tax burden, etc. Lazear also presented Treasury estimates of what the consumption tax rate would have to be to replace the government’s current income, a range of 22-26 percent.
Then he woke-up the dozing crowd. According to another set of numbers Treasury had run--figuring that Congress would eventually exempt huge swaths of the economy from taxation—-Lazear announced that the final rate would end up somewhere between 64 and 87 percent. Yes, 87 percent!
Expect to read that in the papers from this point forward.
After the bomb, panel Chairman Connie Mack (R-Fla.) went through the motions of inquiring about Fair Tax administration, but it was clear the game was over.
The President’s Panel on Tax Reform will not recommend a National Retail Sales Tax to replace the current code. While positive changes to the code may still come from the panel, an opportunity for fundamental reform has been squandered.
Posted by at October 11, 2005 04:48 PM