Why Now Is Not the Time to Try the Fair Tax

Regardless of the problems with America’s current tax system, the “Fair Tax” is not the solution. Despite what its name may imply, the Fair Tax is anything but fair. In reality, the fair tax is a regressive system which will make real, legitimate social reforms nearly impossible.

First of all, the Fair Tax does not “give each individual the tools to realize the American Dream.” As I mentioned earlier, the Fair Tax is regressive. This means that it unfairly privileges the upper class, while forcing the lower class and people in poverty to stay in their underprivileged positions.

It is common knowledge that on average, the rich spend far less of their income than the poor. Purely consumption-based taxation systems such as the Fair Tax reduce the amount the rich are taxed hugely, because the majority of their income (that they don’t spend) goes completely untaxed. At the same time, lower and middle class Americans have to pay taxes on almost all of their income, because they must spend the majority of their annual income just to get by.

The Fair Tax also regresses into an even worse system than the IRS is now, because it incentivizes tax evasion and the creation of black markets. With an absurdly high sales tax, people will be induced to create underhand, unregulated markets. To counter this, the tax will have to be raised. This will lead to a cycle of higher and higher taxes, because with each raise in the sales tax, people will be more incentivized to shop at illegal markets. Economist Dean Baker has concluded that at the end of this cycle, we will have “close to [a] 50%” sales tax

Rather than giving “each individual the tools to realize the American dream”, the disparity between the rich and the poor created by the Fair Tax will be the nail in the coffin of the American Dream. Under the Fair Tax, rather than being empowered to move up the wealth ladder, Americans’ will be stuck in their current wealth class with no way out.

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