EDITORIAL - It would truly be refreshing if we could all discuss the FairTax based on the actual bill that has been introduced [H.R. 25] by Congressman John Linder. Instead, FairTax proponents spend so much valuable time chasing down rumors and inaccuracies created by opponents. Since late last week, for instance, FairTax officials have had to respond to the charge leveled by Wall Street Journal columnist Bruce Bartlett that the FairTax movement was begun by the Church of Scientology .. a provable untruth.

One of the most pervasive distortions about the FairTax is that is the idea that when you go out to buy something you'll have to "add 30 percent" to the price of whatever you purchase. This particular FairTax attack contains two false statements: (1) that the FairTax rate is 30 percent, not 23 percent; and, (2) when you buy something – a house for instance – the FairTax will be added to the purchase price. The truth, of course, is that the FairTax will be included in the purchase price – a part of the price that is quoted you. That's why it's referred to as an "inclusive" sales tax.

The way you most often hear this particular FairTax distortion presented is with the statement that "when you go buy a $100,000 home you will have to pay the added $30,000 FairTax. That means the $100,000 home will actually cost you $130,000."

For the sake of our argument here, I'm now going to try to once again point out that under the FairTax the embedded taxes that would be in that home today are removed, and those embedded taxes are replaced by the embedded FairTax.

Let's turn the tables on the opponents. Now remember ... this is just for the sake of argument ... but let's assume that their false position is actually true. We'll go ahead and stipulate – just to make this point – that under the FairTax you'll have to add $30,000 to the cost of a $100,000 home, bringing the total up to $130,000.

Now ... since there is no income tax under the FairTax, and since you get 100% of your paycheck, just how much do you have to earn to buy that house under this scenario? Answer: $130,000. That's $100,000 for the house and $30,000 for the tax.

But ... and this is a big "but" ... what do you have to earn to buy that same $100,000 house under our present income tax system?

The average American household pays about 33 percent of their income to the federal government in income taxes. So how much do you have to earn in order to have that $100,000 free and clear to buy that house? Well, if you earn just $100,000 you're going to have to pay about $33,000 to the government. That leaves you with $77,000. Not enough. The fact is you will have to earn $150,000 to buy that $100,000 house under our present income tax. You earn the $150,000; your tax rate is 33 percent, that takes $50,000 away from you; and you have the $100,000 you need to pay for the home.

So --- even using the FairTax opponents false claim that the tax is added TO the price of an item, in this case a home, instead of included IN that price (replacing the embedded taxes that are already there), you see that there's still an advantage to the FairTax! You don't have to be much of an economist at all to understand that it is better to have to earn $130,000 to pay for a $100,000 home than it is to have to earn $150,000.