Well, I'm done with the book and this is my initial review. I may come back for a second round but this is the start. As a reminder, I'm a conservative so go ahead and factor that bias in as well.
Overall, I think the plan has merit. I would love to see it implemented. My criticisms are less about the plan than about the book. With that being said:
- The book is presented at a kindergarten level that I found offensive. The tone is extremely patronizing. Liberals and liberal programs frequently take the tone that Americans are too dumb to know what's good for them and that some one else should make decisions for them. Unfortunately, this book has that tone. The book is presented below the intellectual level of just about everyone I know, including a recovering meth head. On the plus side, if you don't understand the plan after reading it, check yourself into rehab.
- The gotcha's with tax are always around the definitions and the book glosses over some the definitions. As an example:
The person who pay's tax under the FairTax plan is the final purchaser of NEW goods. Ok, I can think of two quick scenarios,
- New Car Dealer buys a truck from GM to sell to the public. Truck doesn't sell. New Car Dealer needs a truck for parts delivery so they take the truck, already in the dealer's name, and stop offering it for sale, but use it for deliveries. The Final Purchaser point is a little fuzzy. The dealer should pay tax when they decide to use it for their own use but in the real world, this won't happen alot. Think about demonstrator models and things like that, when does a new car become used without a sale?
- We'll pick on car dealers again. New Car Dealer is sharp to the point of fraudulent. New Car Dealer owns New Car Dealership and Used Car Dealership. New Car Dealership buys car from Ford for $10k and sells to Used Car Dealership for $1. Sales Tax is paid on the $1. New Car Dealership takes a loss, Used Car Dealership sells the car for $20k as a "barely used" vehicle and makes a profit. The owner makes the same amount of profit, gains a competative advantage (no sales tax). Nobody catches the transaction because it flowed through income between related parties. (no income tax to report anymore.) Depending on how Final Purchaser is defined, this transactions could even be perfectly legal.
- These are simple scenarios but they highlight the importance of definitions. I would love to see a deep, technical book for accountants and finance types on the FairTax plan. Take away this Twinkie and give us a steak. I think a large group of CPA's endorsing the plan would help build a groundswell for it. People still look to their CPA's for advice about financial and tax matters and even post Enron, CPA's have a better reputation than the IRS!
- The problems I've highlighted can be overcome but they need to be resolved BEFORE a law is passed. We pass waaay to many bad laws with the intent of fixing them later.
Finally, read the book. Give the book to your 8 year old, they'll understand it. Use your paystub as a bookmark when reading it. It's helps you get past the patronizing tone.