Senate Debate at GPTV held Oct 26, 2014
Michelle Nunn has finally commented on the FairTax. One week before election day, she’s decided she’s against it. Her arguments are the same tired clichés of those who have protected the status quo for years. Here is what she said:
“I do differ with David and Amanda about the FairTax. The FairTax would mean 30%+ tax on things like groceries, milk, everything. It would mean that 50% of Georgians would end up paying $4,000 more in taxes. Now people at the very top, top 1%, would be paying less, $200,000 estimated less. But I just don’t think that’s the right way to go; I think that we need revenue neutral tax reform but I think that the so-called FairTax is actually just not fair to the majority of Georgians.”
Both David Perdue, her Republican opponent, and Amanda Swafford, her Libertarian opponent, are strong advocates of the FairTax. But Nunn is against the FairTax.
It is always disappointing when the nominees of major political parties use the bully pulpit provided them by the voters to attack the most viable alternative to our current horribly dysfunctional tax system with misleading and half-true information. Nunn tells half the story and hopes an uninformed public won’t notice. She criticizes the national sales tax component of the FairTax plan, but fails to mention the other taxes and drags on the economy that are eliminated by the FairTax. Income taxes (both personal and corporate) would go away; Social Security (FICA), Medicare, estate, and gift taxes would go away. The intrusive, scandal-ridden IRS would go away. The hidden taxes built into everything we buy, that few American consumers are aware of, would go away. More than $250 billion that Americans spend (throw away) every year complying with the income tax code would go away. And the countless hours they spend preparing their tax returns would go away under the FairTax. All gone!
Ms. Nunn’s first misstatement is saying that Georgians would end up paying 30+% more for everything. But the prebate component of the FairTax plan, which would provide a check – in advance – to all legal households, would offset all sales taxes paid up to the poverty level. So, any taxpayer consuming at the poverty level would be a net zero taxpayer. Even those spending at twice the poverty level would pay an effective tax rate that would be half of the nominal rate – 11.5%. The only taxpayers whose effective tax rate would approach the nominal rate of 23% would be those at the very upper end of the consumption spectrum.
The claim that 50% of Georgians would pay $4,000 more in taxes under the FairTax is apparently an attempt by our opposition to scare the public. Let’s look very briefly at the numbers. If a married couple with two children spend at twice the poverty level, they would spend $62,040 per year and their consumption tax would be $14,270. But that amount needs to be reduced by their prebate ($7,135) and the Social Security and Medicare taxes they wouldn’t have to pay ($4,578) under the FairTax, leaving a net amount of $2,557. However, that amount would then have to be reduced by any income tax that family would have to pay under the current tax code, since there would be no income tax under the FairTax! The assertion that 50% of Georgia taxpayers would pay $4,000 more in taxes under the FairTax doesn’t pass simple arithmetic.
Nunn uses the worn-out contention that the FairTax would unfairly benefit the wealthy. But the wealthy manipulate the current system to their advantage, often to their extreme advantage. That’s one reason the tax code is so complicated. Besides that, if the tax system gets too burdensome, the wealthy will simply leave the country, taking their money and the jobs they create with them. Empirical data not generated by FairTax advocates strongly indicate that economic growth benefits all economic strata, but lower income Americans benefit disproportionately. We will be happy to provide that data to any interested parties.
The statistics that Ms. Nunn stated in the debate are apparently provided by critics of the FairTax. Whenever critics of the FairTax evaluate the FairTax to see if it would work to replace the current tax system, they first change the structure of the FairTax, making assumptions and changing parameters that are not in the actual bill. Then they score the supposed FairTax and announce that it won’t work or that the tax rate would be extraordinarily high. But they aren’t scoring the FairTax bill, they are scoring their own heavily modified version of the FairTax bill! So, of course it won’t work. If the FairTax were scored honestly, the FairTax would beat all other tax collection systems, hands down! The authors of these modified plans don’t support them and neither do we. The FairTax bill has more co-sponsors than all of the other tax collection systems combined.
Concerned about jobs being exported? Instead of blaming those who respond predictably to the policies implemented by the federal government, it’s time we addressed the root cause of the problem. Our tax system is one of the worst in the world from a global competitiveness standpoint. The Tax Foundation recently ranked it #32 out of 34 OECD nations and it is highly debatable that it should have been ranked above the tax systems of #33 and #34 (Portugal and France).
Economic studies have shown that the FairTax would rebalance the mix between consumption and savings/investment. With one of the lowest savings rates in the world, and much lower than our historical average, this would help alleviate our dependency on foreign sources of capital. The FairTax would level the playing field with foreign competitors, our exports would increase, and our imports would shrink. This would mean jobs, MANY more jobs for US workers.
Nunn says that she favors “revenue neutral tax reform.” That’s fine, but it’s the same statement we’ve heard from almost every politician while real reform is ignored. In fact, another famous federal government official from the state of Georgia had this to say many years ago:
“Our tax system is a disgrace; loopholes must be plugged!”
For America’s Third Century, Why Not the Best?
Presidential Campaign brochure, Jimmy Carter (1976)
In spite of virtually unanimous agreement among our elected members of Congress that we need tax simplification, year after year, do we get it? Of course not! We also do not get a tax system that is globally competitive and is not a huge drag on our economy. We have been trying to define “taxable income” for 101 years and the net result is what former Treasury Secretary Paul O’Neill referred to as “a disgrace to an advanced nation.”
Georgians For Fair Taxation attempted on two different occasions to meet with Ms. Nunn during the course of this campaign to make sure that she had good information with which to form her position on this vitally important issue. We have yet to even get the courtesy of a response. It is obvious that Ms. Nunn is getting information on the FairTax from one side. However, she refuses to hear our side. This does not speak well for a candidate who claims that she is running to try to bridge the partisan divide and intends to work with all sides in solving problems for the people of Georgia.
Ms. Nunn is, in effect, defending a tax system that is almost universally hated by the American people. If she believes that our job-killing current tax system is the best that we can do, she should be honest enough to communicate that to the voting public.