The FairTax, a proposal to scrap federal income and payroll taxes in favor of a 23% sales tax, has a strong Georgia pedigree. Originally proposed by Congressman John Linder and popularized in an eponymous book by Neal Boortz, the plan was re-introduced as H.R. 25 this year by Georgia’s Seventh District Congressman Rob Woodall.
Now comes freshman Georgia Senator David Perdue, who is pushing the measure in the upper chamber. According to Ryan Lovelace in National Review, he’s not expecting the measure to win approval. Instead, Perdue hopes to use it to brand the GOP as the party of economic populism in advance of the 2016 presidential election.
Perdue couches his description of the FairTax in rhetorical terms — “levels the playing field,” “pay your fair share,” “equitable” — that could’ve come straight out of Obama’s State of the Union address, and that’s no accident. … [I]t could allow the GOP to seize the mantle of economic populism from the Democrats, and, in so doing, to “win” tax reform in the eyes of voters. That’s important, because tax-reform legislation is one of the few big, ostensibly bipartisan efforts the new Congress is expected to undertake, and the scramble to take credit for it ahead of the 2016 presidential election will be fierce.
It’s an interesting concept. There’s no doubt that the FairTax has a populist appeal; one of its main selling points is that the taxpayer, not the government, gets to decide how much of his money goes into the government’s pockets. Another point in its favor is that the flat rate, after the prebate designed to counter the regressive nature of a consumption tax, is the same for all, rich or poor.
Contrast the messaging of the FairTax proponents with what we heard on Tuesday from President Obama: a tax increase on the wealthy that will pay for free community college for the rest of us. That’s also a populist appeal, but from a completely different angle than that of the FairTax.
At least one economist points out that the economic populism of the FairTax could attract the support of Democrats, in addition to its traditional Republican / libertarian leaning base:
Laurence Kotlikoff, an economics professor at Boston University, has studied the FairTax and thinks it is a more progressive proposal than people realize. Kotlikoff says lawmakers’ lack of experience in public finance has led to a misunderstanding of the FairTax. He adds that he thinks Democratic minority leader Nancy Pelosi might even come around to the idea, if she realized that it would help some of the people she purports to care about most: workers.
Despite the fact that individual taxes as a share of GDP have consistently remained between six and nine percent (and the lower end of that range is more the result of recession than it is an altering of the tax structure), the debate over the best way to spread the tax burden around is going to continue. The left’s proposal to tax the rich to pay for the needs of the middle class and the right’s proposal to make taxes optional by taxing consumption can appear as goalposts on opposite ends of the playing field. Yet, the difference between the two could simply be a matter of appearance rather than substance.