5 Most Un-libertarian Positions of Gary Johnson

#2. Fair Tax

Governor Johnson wasn’t always a support of the consumption tax. The Fair Tax is a proposal which claims to abolish the IRS, replacing the income tax with a national sales tax on all goods and services. Johnson believes that this would reduce the burden on the American taxpayer because undocumented immigrants would be forced to pay into the system, rather than skipping out on it under the current progressive income tax withholding scheme.

The problem is that libertarians don’t want to replace the taxes they already have, they want to cut them or eliminate them entirely. Nothing would stop congress from reinstituting an income tax on top of the consumption tax, and then we’d be left with two tax schemes. Cato scholar Dan Mitchell has argued that point, which is why he much prefers the flat tax over a Fair tax system.

Also, the stated rate of 23% across the board for goods and services doesn’t add up. When it all comes down to it, the national sales tax would probably be something closer to 30%.

From Factcheck.org

First consider the way in which sales tax is normally figured. A consumer good that carries a $100 price tag might be subject to a 5 percent sales tax. That means that the final bill for the item is $105. The 5 percent figure is the amount of tax that is charged on the original purchase price. But now suppose that instead of pricing the item at $100, the shop owner simply priced the item at $105, then sent $5 directly to the state. The $105 price would be a tax-inclusive sales price. But $5 is just 4.8 percent of $105. That 4.8 percent number, however, is relatively meaningless. You are still paying exactly the same 5 percent tax on the item.

The 23 percent number in H.R. 25 is the equivalent of the 4.8 percent in the previous example. To calculate the real rate of the sales tax, we have to determine the original purchase price of an item. We can begin with the same $100 item, keeping in mind that a price tag that reads $100 has sales tax already built in. If our tax rate is 23 percent of the tax-inclusive sales price, then of the $100 final price, $23 of those dollars will be for taxes, meaning that the original pre-tax price of the item is $77. To get $23 in taxes on a $77 item, one must impose a 30 percent tax. In other words, a 23 percent sales tax on the tax-inclusive sales price is equivalent to a 30 percent tax on the actual price of the item.

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