FairTax Smackdown

Writing in yesterday's Wall Street Journal, Bruce Bartlett lowered the boom on the Fair Tax proposal, an idea that, until now at least, had intrigued me. I'll quote a bit of his piece below, in bullet format.

- The FairTax rate is not 23% as advertised.

"If a product costs $1 at retail, the FairTax adds 30%, for a total of $1.30. Since the 30-cent tax is 23% of $1.30, FairTax supporters say the rate is 23% rather than 30%."

- FairTax by design will drive up health care costs.

"State sales taxes have long exempted all but a few services because of the enormous difficulty in taxing intangibles. But the FairTax would apply to 100% of services, including medical care, thus increasing their cost by 30%. No state comes close to taxing services so broadly."

- Your home? Yep, that too will cost more

"Consumers would also find themselves taxed on newly constructed homes. Imagine paying 30% to the federal government on top of the purchase price of your next house."

There's much more at the link, but I have to say that those three alone are enough to give me pause.

UPDATE: Ramesh noted Bartlett's piece as well, and FairTax.org is objecting to that first point.