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October 21, 2010

Is the fair tax getting fair treatment?

23 percent sales tax focus of 9th District advertisements

> SOUTHERN INDIANA — Depending on the politician, the fair tax is either promoted as a way of simplifying the country’s tax code or demonized as a hardship on lower and middle income families.

As proposed, the fair tax would replace all federal income and payroll based taxes. In their stead, a 23 percent national sales tax would be implemented and a prebate would be given to taxpayers up to the poverty level.

The legislation would abolish the 16th Constitutional Amendment that gives Congress the power to impose income taxes without sharing the revenue with states, and would essentially eliminate the Internal Revenue Service.

Dave Patterson, assistant Indiana state director for Americans for Fair Taxation, said the idea has been incorrectly criticized as an additional levy.

“It’s a replacement tax,” he said.

Patterson serves as director of Indiana’s 9th District for Americans For Fair Taxation, and the fair tax has been a frequent topic in the district’s U.S. House race.

Several advertising mailers and television commercials in support of incumbent Democrat Baron Hill have targeted Republican challenger Todd Young as a supporter of a 23 percent sales tax hike.

Patterson said these types of ads are misleading because they don’t mention that the fair tax abolishes all federal personal and corporate income levies.

Young denied this week campaigning on a fair tax platform. He said the legislation — which has been introduced several times in congress but hasn’t garnered enough votes for passage —  would require broad bi-partisan support from elected officials and taxpayers before it could become law.

Young said he doesn’t see that happening.

The fair tax “is open to misunderstanding. It’s also open to distortion and political gamesmanship, which is what Baron Hill has done,” Young said.

But the Hill campaign insists Young has supported the fair tax, citing YouTube videos from town hall meetings and Facebook posts where Young said he supported the measure.

One instance pointed out by Hill Communications Director Daniel Altman is a March 9 posting — about two months before the GOP primary — on Young’s Facebook page.

According to the Young post, “I support the fair tax and other variants of a national consumption tax or flat tax over our current complex, inefficient and oppressive tax code.”  

The post goes on to state that Young will sign up as a co-sponsor of the fair tax legislation pending in the U.S. House if he wins election.

Altman said the fair tax would raise levies for middle class Hoosiers while giving massive tax breaks to the wealthy.

“Additionally, Todd Young’s ‘fair tax’ would ruin the economy by forcing people to pay an extra 23 percent for things like their groceries, clothes and medicine,” he said.

But taxpayers will have more money for those goods because they’ll keep their entire paychecks and receive prebates, Patterson countered. Much of the opposition to the plan is pushed by lobbyists and politicians that have their own agendas for maintaining the current tax code, he said.

The tax is neutral and wouldn’t impact federal programs such as Social Security and Medicare, Patterson added.

Young said a better approach than the fair tax would be a system that would give options where people could choose to stay with what they’re familiar with or go for a simpler tax code.

“Whatever tax reform proposal we move towards, I have to ensure in order to get my support that it doesn’t involve raising taxes,” he said.

In a recent article, the nonpartisan organization FactCheck.org criticized Democratic Congressional Campaign Committee television ads against Republicans in other U.S. House races dealing with the fair tax as misleading.

The reason? The advertisements don’t mention the fair tax would repeal the federal income tax.

According to the article, “characterizing it as a 23 percent sales tax without also mentioning that it would replace all other federal taxes is a deception.”

Libertarian 9th District candidate Greg Knott has openly thrown his support behind the fair tax plan, touting it as a way to encourage job growth and make American products more competitive on the global market.

He said 22 percent of goods have a hidden tax embedded in their costs — levies that would be removed by the fair tax to the benefit of the American export trade.

Eliminating corporate levies as called for in the fair tax proposal helps workers and taxpayers because those expenses are no longer passed on to the consumer, Knott said at a recent debate in Jasper.

“We have to understand that corporations never pay taxes,” he said.

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