Doug Ross @ Journal

Book Review: The FairTax Book

The idea of a federal consumption -- sales -- tax has been around for decades. That Congressman John Linder and radio host Neal Boortz have created a bestseller on -- of all topics -- taxes is indicative of how flawed the current system is... and the power of the book's tenets. A quick, easy (and fun!) read, the book describes the fundamental flaws of our current tax system, which has simply grown into an insidious leviathan of complexity.

Two of the book's fundamental concepts are exceedingly easy to grasp:

- Embedded taxes: under the current system, we pay the tax costs (payroll, attorneys, preparation, etc.) of every business that comes into contact with a good or service we purchase. That extra cost is estimated at 21% or higher of the final consumer cost, depending upon the study (Harvard puts it at 22%, I believe).

- Increased federal tax revenue: under our current system, black-market operators pay no taxes. With a consumption tax, even a drug-dealer contributes to the federal tax coffers.

The net-net is that a variety of simulations by dozens of economists show that prices won't significantly change even with the sales tax! That's because the embedded costs of our current tax system will be forced out of the cost equation for competitive reasons. A simple example: a tire that might cost $100 today could cost $80 in the future (no embedded tax costs for the businesses upstream of the consumer!). A 30% sales tax would take the total price to $104. Now imagine that sort of price differential while paying no withholding, no federal taxes of any kind, other than sales tax...

Our current, achingly complex tax system is a devastating anchor on the economy. It pulls businesses and consumers into ever darker sinkholes of preparation, attorneys' fees, and avoidance schemes. The IRS estimates that nearly 40% of the public is out of compliance with the current system. And that doesn't even include illegal income sources, estimated at $1 trillion of uncaptured federal revenue.

Buy the book and share it with a friend. You'll be amazed at what simplicity could do for us -- the citizens -- and the federal government. You'll also be startled at what it means for the elderly on fixed incomes as well as folks living below the poverty line. In a nutshell, it's a huge improvement for everyone. That's why members of both parties are strongly advocating the FairTax plan.