TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Tuesday, September 18, 2007

Bartlett: Fred Thompson Channels L. Ron Hubbard: Dianetics, the Tax Plan

I previously blogged Bruce Bartlett's criticism of the FairTax (Bartlett Slams FairTax in WSJ (8/27/07)) in a Wall Street Journal op-ed (FairTax, Flawed Tax), including his discussion of the origins of the FairTax in the Church of Scientology.   Bartlett expands on this theme in The New Republic:  Fred Thompson Channels L. Ron Hubbard: Dianetics, the Tax Plan:

The basic theological tenets of the Church of Scientology are well known: a fanatical hatred for psychiatry coupled with a creation myth that involves an evil alien ruler named Xenu and his sundry galactic allies. The basic tenets of its tax policy are somewhat less familiar. But Scientologists promulgated and, at one point, heavily promoted a proposal that would replace all federal income taxes with a national retail sales tax (NRST). And the theology and tax policy aren't entirely unrelated: Xenu used phony tax inspections as a guise for destroying his enemies.

In a strange confluence, the Scientologist proposal happens to be nearly identical to one of the trendiest conservative tax proposals of the year, the so-called FairTax, which has been endorsed by John McCain and Fred Thompson, as well as second-tier presidential candidates Mike Huckabee, Tom Tancredo, Duncan Hunter, and Democrat Mike Gravel. Georgians John Lindner and Saxby Chambliss have introduced FairTax legislation in the House and Senate that would establish a 23% national sales tax.

But, when you mention any hint of the nexus between Scientology and the nrst--as I did briefly in a recent Wall Street Journal op-ed--you'll be denounced by FairTax supporters as a smear artist. This retort, however, is simply evidence that these FairTax supporters don't know the history of their own proposal. That's too bad. Perhaps if they understood its origins in Scientology, they might have a greater appreciation for its inherent flaws.

(Hat Tip: Neil Buchanan.)

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Precisely, what part of the following aspects of the FairTax plan, does Mr. Bartlett NOT like?

As currently structured, the FairTax plan is:

• SIMPLE, easy to understand
• EFFICIENT, inexpensive to comply with and doesn't cause less-than-optimal business decisions for tax minimization purposes
• FAIR, loophole free and everyone pays their share
• LOW TAX RATE, achieved by broad base with no exclusions
• PREDICTABLE, doesn't change, so financial planning is possible
• UNINTRUSIVE, doesn't intrude into our personal affairs or limit our liberty
• VISIBLE, not hidden from the public in tax-inflated prices or otherwise
• PRODUCTIVE, rewards, rather than penalizes, work and productivity

Its benefits are as follows:

• No more tax on income - make as much as you wish
• You receive your full paycheck - no more deductions
• You pay the tax when you buy "at retail" - not "used"
• No more double taxation (e.g. like on current Capital Gains)
• Reduction of "pre-FairTaxed" retail prices by 20%-30%
• Adding back 29.9% FairTax maintains current price levels
• FairTax would constitute 23% portion of new prices
• Every household receives a monthly check, or "pre-bate"
• "Prebate" is "advance payback" on taxes for monthly consumption to poverty level
• FairTax's "prebate" ensures progressivity, poverty protection
• Finally, citizens are knowledgeable of what their tax IS
• Elimination of "parasitic" Income Tax industry
• Those possessing illicit forms of income will ALSO pay the FairTax
• Households have more disposable income to purchase goods
• Savings is bolstered with reduction of interest rates

• Corporate income and payroll taxes revoked under FairTax
• Business compensated for collecting tax at "cash register"
• No more tax-related lawyers, lobbyists on company payrolls
• No more embedded (hidden) income/payroll taxes in prices
• Reduced costs. Competition - not tax policy - drives prices
• Off-shore "tax haven" headquarters can now return to U.S
• No more "favors" from politicians at expense of taxpayers
• Resources go to R&D and study of competition - not taxes
• Marketplace distortions eliminated for fair competition
• US exports increase their share of foreign markets

For the COUNTRY:
• 7% - 13% economic growth projected in the first year of the FairTax
• Jobs return to the U.S.
• Foreign corporations "set up shop" in the U.S.
• Tax system trends are corrected to "enlarge the pie"
• Larger economic "pie," means thinner tax rate "slices"
• Initial 23% portion of price is pressured downward as "pie"
• No more "closed door" tax deals by politicians and business
• FairTax sets new global standard. Other countries will follow

The plan has been exhaustively reviewed, demagoged, and rebutted as evidenced here: (.pdf) (.pdf)

Professionals, and academics, in support are evidenced here: (.pdf)

The urgent requirement for dramatic, effective tax reform can be better understood after reviewinng the following:
(summary and audio interview)

Posted by: Ian | Sep 18, 2007 2:43:54 PM

It would be difficult to top Ian's response. I'm sure that a large number of individuals tried to convince the founders of this country not to 'rock the boat'. Had the less informed won, we would still be subjects of England. Change, as difficult as it can be, is often the answer. We can not survive under the current system. The process of our demise into socialism is slow and most people have not noticed. I am not a fanatic, just a realist. Our government has taken on the role of Robin Hood. When the rich run out of funds, we will all be poor because we didn't look to the source of funds...productivity.

Posted by: Dee Richards | Sep 19, 2007 10:34:57 AM

Or you are denounced by FairTax supporters because you do not know what you are talkinga about.

Posted by: James A. Hodges | Sep 20, 2007 11:50:51 AM

Using Bartlett Logic, since he is more than happy with the current progressive income tax, then he must be a Communist.

Posted by: Doug | Sep 21, 2007 7:05:04 AM

Each session of Congress produces an estimated 300 to 400 changes to the tax code. With each change there are winners and losers. The Fair Tax plan would add stablity to the market place by eliminating the micro management of the tax code. And, would free up a tremendous amount of productive time now being wasted trying to comply with the current tax code. These aspects alone would be reason to implement the Fair Tax. There are many more.

Posted by: Keith | Dec 22, 2007 11:23:57 AM