A couple of weeks ago I was randomly selected to participate in a telephone town hall meeting with Congressman Roy Blunt of Missouri. Time ran out before I was able to ask my questions but I was able to leave them on voice mail following the meeting. This afternoon I received a call from Dan Wadlington, a representative of Congressman Blunt, regarding my questions and request for follow-up. Mr. Wadlington was quite aware and knowledgeable regarding the FairTax, which I took to be a positive sign.
According to Mr. Wadlington, Congressman Blunt is not and has never been against the FairTax. He does not support it, but neither is he against it. He is in favor of tax reform and would support any plan that would simplify our tax system and make it more fair. However, he does have concerns about the FairTax bill.
His primary concern, it seemed to me, was that of tax avoidance. "Why," he asks, "if the tax is placed only on new houses and new autos, would anyone build a new house or buy a new auto? If people can avoid paying a tax, they will."
I must admit that this is an argument I have no ready response to. This aspect of the FairTax plan has always left me unsatisfied as well. While I still believe a consumption tax is preferable to our current system of taxing income I think we need something better than to say, "People have and will always endeavor to avoid paying taxes. That won't change under the FairTax plan." We need to be able to, at least, show that tax avoidance or evasion will not be higher under the FairTax.
Any help with this argument would be most appreciated. I loaned out my original FairTax book and don't have it readily available for a refresher on this point. I believe this is an argument we are going to need to be able to counter effectively. Thanks.