George Phillies for President 2008

The Fair Tax: Universal Welfare is Bad for America

Worcester, Mass., April 8: Libertarian Presidential candidate George Phillies today pointed out a deep flaw in the «Fair Tax» advocated by some Republicans, including former Presidential candidate Mike Huckabee. «The so-called ‘fair’ tax has two parts, namely a sales tax on almost everything, and a monthly welfare check mailed to every household. Fair tax advocates say the welfare check is a tax rebate, but you get the check even if you paid no tax.»

Critics of sales taxes say that sales taxes are «regressive,» meaning that they tax the poor proportionately more heavily than the rich. Many states avoid having regressive sales taxes by not taxing necessities like food. The Fair Tax instead proposes a «prebate», money sent to each person each month, money intended to defray part of the sales tax each household is paying.

Phillies urged honesty. «The welfare check is no rebate. It’s not tied to paying a tax. It’s a monthly check like social security, except most people get Social Security because they paid into the system. Once the camel’s nose is under the tent, for sure that universal welfare check will go up and up and up.»

Americans have long been exposed to proposals for universal welfare–everyone gets money. The 1960’s version of universal welfare was the Negative Income Tax. The NIT replaced all other welfare payments. Its advantages were that it had minimal administrative costs and that it eliminated extremely large effective tax rates on poor people created by many welfare arrangements. The most recent Universal Welfare scheme goes under the name ‘Fair Tax.’

Citing the on-budget budget deficit of half trillion dollars a year and the costs of these «prebates,» Dr. Phillies said he finds this proposal unworkable. «Uncle Sam is already broke… Adding additional welfare payments, sure to be increased in later years, is simply unaffordable. Worse, the universal welfare system teaches a peculiar belief. Universal welfare teaches people that because you are a citizen, you are entitled to a government check. That belief in a guaranteed income, however small, is subversive of every notion of self-responsibility.

Aside: You will sometimes see a number for the budget deficit that is smaller than the on-budget budget deficit. That’s the number that treats the social security tax as current income, and spends the social security tax as received. However, those Social Security dollars have already been spent. They were spent as Social Security payments certain to be made in future years. The Social Security tax being spent now is replaced by Federal bonds, but at future date certain those bonds will be called by the Social Security administrators, creating a new claim on then-current tax incomes.

For much more on our catastrophic financial situation see the January 2007 General Accounting Office Report «Fiscal Stewardship» HTTP://WWW.GAO.GOV/CGI-BIN/GETRPT?gao-07-362sp

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George Phillies for President 2008 http://ChooseGeorge.org