President Obama Debunks the Myth of the Fair Tax

Obama laid waste to the flat tax myth
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One of the things that have not been reported on about Barack Obama’s visit to Buffalo, NY today was his reaction to a question about abolishing the IRS and moving to a flat tax. Obama said, “In order to have a flat tax that was revenue-neutral, that didn’t add to the deficit, it’d have to be a pretty substantial tax, but it would mean a huge tax break for Warren Buffett.”

During the Q&A portion of his visit to Industrial Support Inc., Obama was asked about the potential for abolishing the IRS and moving to a flat tax. The President explained the problems with the flat tax, “The main argument, and the last point I’ll make on this, on the fair tax, the main argument that people make against the fair tax is right now we’ve got a progressive income tax. I made a lot of money last year because my book sold a lot, and so I wrote a really big check to Uncle Sam. My rate was higher than somebody who made $40,000 a year. So we’ve got a progressive income tax, meaning that the more you make the higher your tax rate goes, up until a certain amount.”

Obama explained the limitations of the flat tax, “Now, if you have a flat tax and everybody is — let’s say everybody was — had a — was paying 10 percent. That means Warren Buffett is paying 10 percent. It means the construction worker is paying 10 percent. It means somebody who has got a minimum-wage job is paying 10 percent. And the question is does that 10 percent take a bigger bite out of the cashier at the supermarket than it does out of Warren Buffett? Because she is paying more of her income in food and rent and just basic necessities, and so does it make sense for Warren Buffett to be paying a little bit more?”

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He added that a small flat tax would not be revenue neutral, “In order to have a flat tax that was revenue-neutral, that didn’t add to the deficit, it’d have to be a pretty substantial tax, but it would mean a huge tax break for Warren Buffett. And so the question is, is there a way of achieving simplification, but still having some element of progressivity and some element of fairness in the tax system? That’s part of what makes it complicated.”

The last part of the President’s remarks is what supporters of the flat tax often ignore. A small flat tax would never, ever work. The problem is that a flat of 20% would not be enough to fund the government. The bigger problem with the so called”fair tax” is that it isn’t really all that fair. A flat tax would result in a regressive tax on the poor, middle class, and those with fixed incomes. The real reason why advocates of the flat tax push it so hard is that it is part of their small government agenda.

The point of the flat tax is not to be fair, but to reduce government spending. The problem with this concept is that mandatory spending is $2.16 trillion dollars, which leaves only $520 billion to cut. Thus the only way a flat tax would work is if Social Security was done away with or privatized, and programs like Medicare were done away with. The flat tax is about ideology not fairness, and this is something that Obama described perfectly.

9 Replies to “President Obama Debunks the Myth of the Fair Tax”

  1. Down here in Knoxville the streets were lined with Fair tax signs at the last election. I seriously doubt the people knew what the real intentions were for it. I didnt. Thanks Jason

  2. I was recently at a dinner party full of wealthy people– all of whom were very nice and charming until the subject of taxes came up. Suddenly everyone was rather angrily advocating for a flat tax, and admitting it was because they wanted to pay less. These people have houses around the world, jets, yachts, etc– and yet they don’t want to pay into the system and a certain current party platform is all for their selfishness and greed, but of course, packages it as something that the little guy should want.

    I hate seeing people duped by this stuff over and over again.

    The old Conservatives who believed in paying your own way, contributing to your country, and giving back would be rolling in their graves to see what has become of their party.

  3. Why can’t the rich pay more? Did you not read the article? Bet you didn’t or you would see! Lesson READ before Opening your mouth!

  4. @Andrew, It is not a penalty to the rich, but using your logic, a flat tax would be a gift for the rich and a penalty for everyone else. Is this also fair?

  5. When we consider that the wealthy control 90 percent of the wealth in this country,Why would we consider giving them one more penny? A flat tax reduces their already tiny burden and dumps it upon the poorest of us. And those who think that those wealthy people are in fact, newly rich, are sorely mistaken – most of the wealth in this country is INHMERITED not EARNED. yes, Bill Gates and Sergei Brim have done it, but they are the EXCEPTION not the rule!
    I also find it interesting to note that when our tax rates went to over 90 percent we created the biggest economy in the world- the conservatives gave always claimed that taxation was disincentive to investment, so how did that happen? perhaps by loopholes?!? !Now that the rate is under 40percent we’re losing jobs, and credibility in the world?
    THe biggest disaster of the past years was the Bush administration’snreduction ofntaxes upon the richest people – a 1.2 trillion dollardisaster- they did not need it! In one fell swoop, the jackass from Crawford derailed one of the most far reaching actions – consider what paying down the natiomal debt would mean- 20percent of your taxes go to service this debt Paying I’d down would mean that money would go to INVESTMENT, rebuilding our infrastructure, and perhaps icing decent health care for our people (we are still 27th in the world in healthcare-just behind Latvia)
    But lastly, we need to. Understand one thing; WE ARE ALL IN THIS TJING TOGETHER

  6. Folks. You’ve got quite a misunderstanding going on here. The flat tax and the fair tax are not the same thing. The flat tax is an income tax. Its very close to the tax rates that were passed in 1986, except the flat tax calls for only one rate.

    The fair tax is a national sales tax meant to replace the income tax, fica, and medicare taxes. http://www.fairtax.org I think somebody above said something about reading before talking.

  7. Thank You, Mark Brown.

    He is correct. The Flat Tax and Fair Tax are very different. The names cannot be interchanged. The Flat tax is still an income tax, at some specific percentage like 20%. With the FairTax, there is no income tax, only a national sales tax. If the quotes used in the article are verbatim, which I assume they are, then the President named the FairTax as a flat rate of income tax. This is completely false.
    Fairtax.org does a fantastic job of explaining the main points in their FAQ section. The FairTax Book is also a great read; neither Republican, nor Democratically biased. After finishing the Book I immediately began scanning the internet for those opinions and arguments opposed to the FairTax.
    There is always 3 Points of View; one side, the other side and the truth. But I have never found an opposition which is accurate in its explanation of the FairTax Plan.

  8. Both the author of the post and the President (if quoted correctly) have the Flat Tax and THE Fair Tax mixed up. It seems both know little to nothing about the Fair Tax, as everything in the article sounds like debate about the Flat Tax.

    The current House and Senate versions of the Fair Tax are progressive, contrary to what Mr. Easly and Mr. Obama have said. So the title “President Obama Debunks the Myth of the Fair Tax” is totally wrong.

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