fiscal stimulus only works if it is spent so it must be targeted . Targeting should favour those with low incomes and those whose incomes have recently fallen for whom spending is most urgent.
And now Pat Regnier wants us to believe that Mike Huckabee and other Fair Tax fanatics are progressives.
Critics, including conservative commentator Bruce Bartlett, have argued that people generally think of sales taxes in terms of mark-ups - that's how state sales taxes are expressed - and that FairTaxers are just trying to come up with the lowest possible number to make their idea easier to sell. A 30% tax on food and medicine would be hard on the poor, wouldn't it? If that's all there was to the plan, yes. On its own, a national sales tax would be extremely regressive - that is, it would tax everyone who spent everything they earned (and that's a lot of us) at 23% of their income, while those who made enough money to set some aside would, in effect, pay a lower overall rate. But the sales tax plan would partly offset this effect by sending every household in America, from the family of a poor single mother to Warren Buffett, a check to cover the taxes on their spending up to the poverty level. Factor in that cash from the government, and each family's net tax burden goes down, so that the Fair Tax looks more progressive.
Bruce Bartlett and others have argued that the 30% tax would fall short of covering even current government spending even if these checks were never sent out. And yet Mr. Regnier fails to miss the massive fiscal stimulus (or was that irresponsibility) of the Fair Tax replacement plus more transfer payments. As progressive as the Fair tax crowd wish to dress this pig up, this is not a serious policy proposal.
Hat tip to Mark Thoma for his coverage of the latest from Lawrence Summers.