Jack Goodman ‘gets’ FairTax

Jack Goodman is another popular candidate for the Missouri District 7 Congressional seat, so I decided to take a look at his position on the FairTax plan.

The Web site for Mr. Goodman’s candidacy, www.JackGoodman.org, does not specifically address the issue of tax reform. Nor have I seen his position on tax reform stated in any printed materials. So, I made a call to the number listed on the Web site and asked. I was told that Mr. Goodman does indeed support the FairTax plan, and that if elected he would not only support it but would work to promote it as a U.S. Congressman.

In an interview conducted by KY3 News on July 19, 2010, Mr. Goodman had this to say when asked about his view of the FairTax initiative:
“I support the FairTax with minor modification and think the economic potential is tremendous, especially if we are able to pass a federal version.  In 2009, I was the Senate handler for Missouri’s version of the FairTax. The FairTax is transparent, eliminating the hidden layers of imbedded taxation in the retail price of products.  It also forces those who currently evade taxation to pay their share, such as drug dealers, illegal aliens and those in organized crime.  The Fair Tax would also be a huge incentive to bring manufacturing jobs back to America.”

While I would have liked to see a more demonstrative statement of his support of the FairTax plan in his candidacy materials I have to conclude that Jack Goodman is certainly worthy of consideration for the Missouri District 7 seat. I’ll leave you to evaluate his position on other issues, but as for the FairTax plan I believe he, ‘gets it.’

2 thoughts on “Jack Goodman ‘gets’ FairTax”

  1. Not to pick on Goodman, but he repeats a common falacy about the FairTax. Namely, that drug dealers and other criminals will finally "pay their share." Alas, it ain’t so.

    The myth is that under the current system the drug dealer won’t pay income taxes when he sells his drugs, but under the FairTax he will have to pay pay the FairTax when he buys his Cadillac. But note that we are talking about two separate transactions: one when he sells the drugs, and one when he buys the Cadillac. Under either the FairTax or the income tax system, only one of these transactions will be taxed.

    Under the FairTax, drug dealers would be required to collect the FairTax from their customers and remit the tax to the federal government. We know they won’t do so, so the government won’t collect any taxes from that transaction. When he buys the Cadillac, though, the car dealer will collect the FairTax from the drug dealer and remit that to the government. If the Cadillac cost $100,000 including the FairTax at the "tax-inclusive rate," the government will get $23,000 from that transaction.

    Under our current income tax system, the drug dealer is supposed to report his income and pay taxes on that income. We know he doesn’t do that, so we won’t collect any taxes from that transaction. But when he buys the Cadillac, the car dealer will need to report that transaction and pay taxes on it’s income generated from the sale. The salesman will need to pay income taxes on his commission. The manufacturer will pay income taxes, as will the parts suppliers, etc., all of whom will also need to pay social security taxes and medicare taxes. These are the so-called "embedded taxes," which are supposed to equal 22% of the cost of the Cadillac.

    So, the government will get $22,000 in tax revenue from the sale of the Cadillac under our current system, just slightly less than it would get under the FairTax. But under the FairTax, the drug dealer also gets the prebate, which will be at least $5000 per year, so the government could actually get LESS money from the drug dealer under the FairTax than under our current system.

    Virtually all economists who’ve looked at the FairTax (including those who support the FairTax) have come to the same conclusion — that the FairTax will not be a source of revenue from the underground economy — but it’s one of those myths about the FairTax that are propogated by talk radio that is easily accepted by the masses because they don’t take the time to actually look at the details.

    Now, illegal aliens will not get the prebate, that much is true, but let’s stick with the American drug dealer example for now. I’ll discuss the illegal alien issue at a later time. (Alas, we wouldn’t get much tax revenue from illegal aliens under the FairTax either, but that’s for another post.)

    Comments?

    1. On the face of it your argument seems logical, but let’s take it a step further. The drug dealer buys the Cadillac for $100,000. Of that 100K the dealership remits the $23,000 FairTax to the federal government. The dealership then pays a commission to the salesman, the cost of the vehicle to the manufacturer, and all the expenses included in acquiring, maintaining and selling the vehicle. When this money is spent at the consumer level the FairTax is collected and remitted to the government. The cycle continues.

      The goal of the FairTax is to be revenue neutral, while doing away with our convoluted mess of an income tax system and replacing it with a fair and transparent consumption tax. It in itself does not determine the amount we are taxed; we determine that amount by how and how much we spend.

      The prebate is there to level the field. No one is taxed on the basic necessities.

      The biggest and primary benefit of the FairTax, besides its transparency, is that it spreads the burdens of taxation to a much wider base. Everyone who spends money, rather than just those who derive an income, in this country will be contributing to its support and defense.

Leave a Reply

Your email address will not be published. Required fields are marked *