(This entry originally posted May 25, 2005 at unrepentantindividual.com. The argument is more for tax simplification and the immorality of taxing to encourage/discourage certain behaviors than the FairTax, but I thought it might be good to post anyway. It can equally be used against exempting certain items from the FairTax, in favor of using the prebate instead.)
Much was made when Bush was reelected of his desire to simplify the tax code. I’m not sure where that went, but maybe sometime by 2008 he might give another speech supporting it. And one of the most common rationales for simplifying the tax code is that it is such a maze of unintelligible, frequently contradictory, and counter-productive cut-outs to satisfy one special interest or another. Simplification reduces compliance costs that burden our economy, and reduces economic distortion caused by unproductive uses of money designed to reduce tax burden rather than improve the economy. But that’s only half of it.
It popped to mind with this:
Bar Tabs Going Up As States Tax Alcohol
More and more states are considering higher alcohol taxes after years of raising cigarette rates.
This year, Kentucky and Washington state hiked their liquor tariffs. Montana, Indiana and North Dakota rejected higher beer taxes.
Texas is still considering an increase, which would go to help pay for public schools. And Ohio lawmakers must decide what they’re going to do before the new fiscal year starts July 1.
Yep. The demonization of smokers has been so successful that fewer and fewer people smoke. You’d think that was a good thing, but now fewer and fewer people are paying cigarette taxes, leading to less revenue in government coffers. Likewise, those nasty buyers of hybrid vehicles, with their care for the environment and desire for high fuel efficiency, are forcing lawmakers to consider taxing by the mile to offset the reduction in gasoline taxes. Faced with the success of their policies, now they want to go after alcohol, or I should say, further after alcohol, because it is typically already given its own excise and “sin” taxes.
But is this the right thing to do? Is it legitimate, in the spirit of America’s founding, for the majority to decide that certain activities are “bad” or “good”, and thus should be taxed at higher or different rates than others? Is it legitimate, in a country where we supposedly have “equal protection under the law”, that some people and activities are just more “equal” than others?
I think we can look at some things, and most people will agree that some of these cutouts are a good idea. Like, for example, the mortgage interest deduction. Unless you’re a renter, of course, which probably means you can’t itemize and you get slammed. Or that mileage and car leases are deductible if you’re in sales as a business expense. Unless, of course you live in LA, an hour away from your work, but can’t deduct a dime because getting to an office is not actually a business expense, and you get slammed. Even the well-meaning exemptions and deductions are unfair to those who can’t claim them. But the little exemptions for special interest groups, that may impact 1% or less of the population, are unconscionable windfalls to them, paid for by the rest of us.
Taxes are one of those things in life that nobody likes. But it’s absolutely wrong that your tax burden should be based upon your ability to get elected officials to write special exemptions into the law for you. And it’s absolutely wrong that your tax burden should be based on whether you’re engaging in perfectly legal activities that are a “sin”, like smoking, or a “luxury”, like buying a Lexus. The tax burden should be equally painful to all.