Your Opinion: Fair Tax #2

Dear Editor:

Terry Smith's response to my last letter about the Fair Tax made it clear to me that we are talking about different things.

The Fair Tax is a federal tax reform which removes all personal and corporate federal taxes and replaces them with a consumption tax on all new retail goods. It includes a prebate which is part of the legislation.

A couple of years ago a Missouri version of the Fair Tax was introduced and called the Missouri Fair Tax. The name of the bill was soon changed to the Missouri Jobs and Prosperity Act to avoid confusion between it and the federal Fair Tax bill.

When Mr. Smith referred to the Fair Tax I assumed he was referring to the federal tax reform because the Missouri Jobs and Prosperity act is no longer called the Fair Tax. This explains why he finds my numbers so amazing because they referred to federal income tax which, unlike Missouri income tax, is not capped at 6 percent.

I did not give a source for those numbers because I assumed everyone would know the source was the 1040 tax form. There are numerous sites online where anyone who wishes can put the numbers in and see for themselves.

I think Mr. Smith may have misunderstood my point about the efficiency of a consumption tax. I was not claiming that the majority of the economists would support changing to a consumption tax, just that they recognize the benefits a consumption tax could bring. Clearly some economists think there are negative effects from a consumption tax which would outweigh these benefits.

Since Mr. Smith asked for some quoted sources here is one from the former head of the Fed Alan Greenspan "As you know, many economists believe that a consumption tax would be best from the perspective of promoting economic growth - particularly if one were designing a tax system from scratch - because a consumption tax is likely to encourage saving and capital formation," Greenspan said. (http://www.foxnews.com/story/0,2933,149298,00.html.)

A second quote is from Pat Regnier, a writer at Money magazine. "Many mainstream economists and tax experts like the idea of some kind of consumption tax - in fact, the superiority of consumption taxes is almost conventional wisdom these days." (http://money.cnn.com/2005/09/06/pf/taxes/consumptiontax_0510/)

As far as sources supporting the federal Fair Tax, millions of dollars has been spent on studies researching the issue, much of which can be found at www.FairTax.org. It includes an open letter to the president signed by over 60 economists urging passage of the Fair Tax and giving an outline of the benefits which would ensue.