A major objection to a Fair Tax system (consumption/sales tax) is that those with lower-income will pay proportionately more than upper-income groups. Essentially, this has been the principle comment to the article, The Regrettable Omission in the Candidates’ Tax Reform Plans. They say, “There is nothing fair about taking from the poor and giving it to the rich. Such a tax system would put an undue burden on the poor and middle class because they spend a much larger percentage of their income on taxable consumer items than the rich and super rich.” This will only increase the disparity between rich and poor by taking from the poor and giving to the rich.
No question about it, there is an unacceptable income disparity between rich and poor. And, there is nothing that is fair in a tax system that places a greater tax burden on the poor than on the wealthy; on the other hand, there is nothing fair in placing a greater tax burden on the wealthy than on the poor, either. The problem is systems that inherently create such a disparity to occur in the first place. Those systems are American capitalism and taxation: capitalism because the pursuit of wealth is its driving force and taxation because of a tax code that favors wealth.
But, fairness is really not the issue. For rich or poor, there is no system of taxation that is fair; a consumption tax is just fairest among them. If anyone wants to buy a new car or new television, they will pay the tax. Food, clothing, medical care and other life necessities would not be taxed. The poorest among us don’t buy new cars or new televisions; their greatest cost burdens are day-to-day living expenses and healthcare. Under Fair Tax, the cost of necessary living expenses and healthcare would be pre-bated (a rebate). The folks who profligate are wealthy not poor, and they are the folks who will feel the brunt of a consumption tax.
Additionally, they say, “Granted the poor and the lower half of the middle class could avoid paying taxes by not buying new merchandise and only buying used items, but this would mean they would have to be replacing those items far more frequently than they would if they bought new merchandise.” However, under Fair Tax, replacing used items far more frequently than they would if they were bought new is not necessarily true. Very often, folks who don’t have a money problem will buy that new car every one or two years. I have purchased used cars that I have driven for many years and have put on 200,000 or so miles before I purchased another.
The Fair Tax/consumption tax is fairest because every American will have a choice to pay the sales tax or not. Rich or poor, if the choice is to buy something new, rather than to buy something that is being resold/used, it will be solely your choice.
Unfortunately, our greatest concern should be the inability of Congress, no matter which party is in control, to accomplish any tax reform and to control spending. Without the latter, we just might end up with another payroll tax and a consumption tax to boot.