New Mexico governor misses the easy answer...

Gary Johnson was interviewed on POTUS Radio yesterday, when the host asked him about the Fairtax. He was asked what would happen when the price of an item went from $100 to $123 overnight from day before Fairtax to day of Fairtax.  A couple of blunders that Johnson made were quite glaring, especially in light of what would be the next caller's objections to the Fairtax.

One, Johnson didn't correct the host's price increase. We must be honest in that the price in the host's estimation should have been corrected to $130, with the tax inclusive rate of 23%.

Next, Johnson mentioned the immediate prebate as the main balancing agent to those price increases. Instead, Johnson could easily have mentioned that the bill excludes all retail inventory values on the day before the Fairtax is implemented from Fairtax collections. This stabilizes the price of inventory which has imbedded taxes still priced into them from suppliers. This means that the price on Fairtax day should be the same as the day before. Furthermore, as supplier prices drop with competitive pressures, so then will retail prices until the price with the Fairtax included will be similar to the price before implementation. So, Johnson could have refuted the argument that prices even go up at all, and then he could have piled on by mentioning that we also get a prebate check...

Had Johnson brought up the inventory exclusion, the next caller would have lost all thunder. The caller complained that prices of American goods would be higher than that of imports because of the tax, missing the point that all goods sold in the US, regardless of where they were made, would be subject to the sales tax at the retail counter. With the retail inventory exclusion, American companies from day one would enjoy a competitive advantage over foreign companies who still have to pay corporate income taxes, meaning that those foreign companies still would have to price the cost of those taxes into their products, making them more expensive than their American counterparts.

I applaud Johnson for supporting the Fairtax, but he must be better prepared before facing a talk show host with skeptical questions.