What is the Fair Tax?
It's the politically expedient label for a consumption tax. It's also a misleading label because nothing about this tax makes it 'fairer' than other forms of taxes. However, that's not the first thing that comes to mind when you hear the term. No, the first thing you're likely to think is that you want a taxation system that is 'fair' and especially one that is fairer than what we have now.
When you look beyond the branding, what is clear is that it is a tax designed to change our economic fundamentals. It taxes consumption, but leaves labor, investment, savings, and business untaxed. This means that the tax falls heaviest on those who consume the most. Unless basics are exempted, this means it will be a heavy burden on those who just barely scrape by. This doesn't sound particularly 'fair' to me.
However, it's a good exercise to ask why we tax what we tax. Is it a historical fluke, or maybe a reasonable system that evolved by trial and error? This prompted me to think about the nature of taxation. In pre-modern times, the taxing authority would take a share of your goods, or would demand a share of your labor, or might take one of your children. In the 1800's, liquor taxes and custom taxes were the biggest share of federal taxes.
I can see certain advantages to taxing income. It is a monetary exchange, so money is changing hands anyway. That's a convenient place to exercise a tax. Work payrolls are less cyclical than consumer spending, so tax revenue will be less affected in recessions. Perhaps there are other good reasons to tax income. However, the point is that the so-called "fair tax" isn't obviously a good tax. To make a determination of whether it's a good tax, you have to look beyond the label, and see how the tax functions. You also have to compare it to the alternatives. When I do that, the 'fair tax' has a lot of problems. We need to take a good, hard look at it, not just jump on the bandwagon.
This one (and a bunch more) for the tax collector