NR Condemns Fair Tax Proposal

In a move that is sure to generate feedback, National Review is urging Republican candidates not to support the Fair Tax. The editorial is somewhat disconcerting since NR should be happy that at least some Republicans are talking about free-market ideas. The same logic could be used, after all, to argue that Republicans should not support Social Security reform or advocate the elimination of the Department of Education.

I’ve always thought the flat tax is a politically better way of getting to a system that taxes economic activity only one time and at one low rate (see here for more information), so I don’t have a dog in the Fair Tax fight. But I am nonetheless disappointed that the flagship publication of the conservative movement is discouraging GOPers from bold proposals:

The tax code needs major reform to become fairer, simpler, and more efficient. The Fair Tax is one instantiation of those goals, but its political impracticality makes it fatally flawed. If conservatives force a choice between a Fair Tax and no tax reform at all, the latter is what they are likely to get.

…The great, undeniably attractive selling point of the Fair Tax is that it would allow the country to dispense with the IRS. But the sad truth is that if the federal government is going to collect as much money as it currently does — which the Fair Taxers say their system would — its methods of tax collection will inevitably be intrusive. …[E]very country that has ever tried to impose retail sales taxes this high has quickly moved to a Value Added Tax levied at every stage of production. Consumers rarely see or keep track of these taxes, and they seem to be fairly easy for governments to raise.

…A candidate who ran on the national sales tax would be able to run on nothing else. He would have to spend all of his time defending the idea. Off the top of our heads, we can think of three devastating lines of attack an opponent could use in television ads. One ad could argue that getting rid of the mortgage deduction would send home prices into free fall (something that voters are going to find especially worrisome now). Another could ask why senior citizens, having paid taxes all their lives as they made income, should have to spend their retirements paying taxes on everything they use that money to buy. A third could simply ask voters if they look forward to paying a brand new tax.
There are answers to each attack. But no Republican candidate, especially in the daunting environment of 2008, is going to want to have to make them. Republicans cannot win a national election without the tax issue. If they ran on the national sales tax, Republicans would be taking one of their natural strengths and making it into a liability.