Scientology's Fair Tax Plot

The New Republic: Plan Backed By Fred Thompson, Other Candidates, Has Roots With L. Ron Hubbard

(The New Republic)  This column was written by Bruce Bartlett.

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The basic theological tenets of the Church of Scientology are well known: a fanatical hatred for psychiatry coupled with a creation myth that involves an evil alien ruler named Xenu and his sundry galactic allies. The basic tenets of its tax policy are somewhat less familiar. But Scientologists promulgated and, at one point, heavily promoted a proposal that would replace all federal income taxes with a national retail sales tax (NRST). And the theology and tax policy aren't entirely unrelated: Xenu used phony tax inspections as a guise for destroying his enemies.

In a strange confluence, the Scientologist proposal happens to be nearly identical to one of the trendiest conservative tax proposals of the year, the so-called FairTax, which has been endorsed by John McCain and Fred Thompson, as well as second-tier presidential candidates Mike Huckabee, Tom Tancredo, Duncan Hunter, and Democrat Mike Gravel. Georgians John Lindner and Saxby Chambliss have introduced FairTax legislation in the House and Senate that would establish a 23 percent national sales tax.

But, when you mention any hint of the nexus between Scientology and the NRST - as I did briefly in a recent Wall Street Journal op-ed - you'll be denounced by FairTax supporters as a smear artist. This retort, however, is simply evidence that these FairTax supporters don't know the history of their own proposal. That's too bad. Perhaps if they understood its origins in Scientology, they might have a greater appreciation for its inherent flaws.

The story of the FairTax's provenance is one that I can tell with some firsthand knowledge. In 1993, fresh from a stint at the Treasury Department, I spent a few months at the Cato Institute. I was filling in for Steve Moore - now an editorial writer at The Wall Street Journal - who took a brief leave from his job as director of the think tank's fiscal studies program to advise former Texas Representative Dick Armey. It was there that I was visited by a man named Steven L. Hayes, the founder of group called Citizens for an Alternative Tax System (CATS) that promoted the NRST, and who was, as Moore pointed out to me, a prominent Scientologist.

It wasn't hard to figure out the Scientologists' motives for hawking the NRST. The IRS had refused to recognize Scientology as a legitimate church - a fact that seemed to enshrine their popular reputation as a "cult." To remedy this situation, Scientologists waged war against the IRS. At various points, the Church attempted to infiltrate the tax authority and even hired private investigators to examine the private lives of IRS officials. And the same impulse behind these measures led them to devise the NRST. One church spokesman told National Journal's Paul Starobin, "We thought, If this [discrimination] is happening to us, there must be a lot of people to whom this is happening.' ... How could some positive changes be made?" Since nearly every state has a sales tax, it would be a simple matter to get them to collect a federal NRST, rendering the IRS instantly superfluous, a ripe target for abolition.

As Starobin told the story, CATS wooed the Texas political elite, including Robert A. Mosbacher Jr., the son of George H.W. Bush's secretary of Commerce. Mosbacher urged Hayes to reach out to Jack T. Trotter, an attorney close to Texas Representative Bill Archer, the ranking Republican on the tax-writing House Ways and Means Committee. Although Trotter and Hayes held several meetings, nothing came of it. According to Starobin, Trotter feared that the Scientology connection would turn off too many potential supporters. (Hayes, for his part, has always denied that the church played any role in his group after helping found it.) But Trotter was hooked by the sales tax idea and wanted it expanded to include the payroll tax as well. He formed Americans for Fair Taxation (AFT) in 1995 to promote the CATS proposal, but without the taint of Scientologist involvement. AFT promoted the FairTax for a decade, elevating the plan to its current popularity.

By the time that Trotter had shunted the Scientologists aside, the church was losing interest in tax reform. In 1993, the IRS finally recognized Scientology as a legitimate religion, ending the rationale for a vendetta against the tax collectors. CATS basically withered. Its last tax return, filed in 2005, showed contributions totaling $1,725. A year later, the group appeared to be completely defunct. (Interestingly, in 2003, the group's tax returns listed my old colleague Steve Moore as a director.)

A brief digression: A few years after I encountered Hayes, he gained notoriety by suing an anti-Scientologist organization called the Cult Awareness Network (CAN). When CAN declared bankruptcy in the wake of this suit, Hayes purchased the organization's assets and name at auction. Overnight, CAN ceased to be a thorn in Scientology's side.

The reason I brought up the Scientology connection in the first place was not to create guilt by association. Rather, it was to explain that CATS had one very specific goal: the abolition of the Internal Revenue Service. Anything else that the NRST might accomplish was entirely secondary. And, in the rush to rid the world of the IRS, the plan's authors neglected some important details, not to mention some key facts.

For starters, the FairTax is deceptively calculated. When you think of a 23 percent sales tax, you think of paying an extra 23 cents on the dollar. That's how every sales tax in the world works. The FairTax, on the other hand, doesn't represent 23 percent of the pre-tax value of the item you bought, but the post-tax value of the item. So, under FairTax, you wouldn't pay $1.23 for a $1 widget - but $1.30, since the 30-cent tax is 23 percent of $1.30. How straightforward!

The legerdemain doesn't end there. Unlike every other sales tax in the world, the FairTax actually applies to everything - every pencil, every tank - the government buys. Unfortunately, the FairTax proposal doesn't take into account this increase in government spending. Thus, it will either provoke a massive cut in federal spending or a massive increase in taxes.

And what about the poor who bear the brunt of this highly regressive tax? The FairTax would track every household's monthly income and then cut checks to minimize the pain, a logistical challenge that will ultimately resemble some welfare state nightmare. What's more, this would cost gobs of money, forcing further cuts in spending.

For these and other reasons, every reputable tax expert who has ever looked at the FairTax has concluded that the true tax rate would have to be much, much higher than 23 percent (or even 30 percent) to work - and, even at that unrealistically low rate, the plan would inspire massive tax evasion. In short, the FairTax is a crackpot scheme from beginning to end. That would be true even if the Scientologists hadn't authored it.

EDITOR'S NOTE: The New Republic has printed a response to this article from Leo Linbeck, Chairman and CEO, Americans for Fair Taxation. You can read it here.

[kwh12]

Errors: The prebate is not by income but family size. The idea was developed using 22 million of research from economists (unlike Mr. Bartlett)not Scientology. It is not regressive at all because it eliminates all federal taxes for those below the poverty line. It only makes embedded taxes apparent and retail prices on new homes and everything else will fall once the hidden taxes are eliminated. Bartlett probably knows all of this but smears anyway because his "rice bowl" as a tax expert will be broken, tax lobbyists made obsolete and the power structure he serves fade into history. "Reputable" tax experts? Does he know any?

[kwh12]

Errors: The prebate is not by income but family size. The idea was developed using 22 million of research from economists (unlike Mr. Bartlett)not Scientology. It is not regressive at all because it eliminates all federal taxes for those below the poverty line. It only makes embedded taxes apparent and retail prices on new homes and everything else will fall once the hidden taxes are eliminated. Bartlett probably knows all of this but smears anyway because his "rice bowl" as a tax expert will be broken, tax lobbyists made obsolete and the power structure he serves fade into history. "Reputable" tax experts? Does he know any?

[jacksteen1]

The failed-actor-turned candidate wants to "inherit" the Reagan mantle...I think he HAS just by virtue he is a mirror image of the Great Drooler...talentless actor, barely literate...multiple marriages...worships 2 gods...his prick and his wallet.

And now it comes out this fool cornpone-seller bases his economic recovery on $cientology guru L. Ron "BlubberLips" Hubbard''s whack theories ?

WHY NOT!? The Republiscum Party already has snake handlers, multiple-marriage expounders, and 9/11 Glory Stealers running...why not a frigging $cientologist-inspired hillrod ?

This election is TOOOOOOOOOOOOOOOOOO funny!!

"Yes Ma''am, Madame President Clinton!"

[aschwall1]

Mr. Barlett is at it again with his distaste for the FairTax.
This so called expert has attempted a vague connection with Scientology.
Perhaps he prefers the solid connection our income tax has with Marxism.
See point number 2 of the %u201C10 Planks of the Communist Manifesto%u201D found in Manifesto
of the Communist Party Karl Marx and Frederick Engels 1848 %u201CA heavy progressive or graduated income tax.%u201D Mr. Barlett might make better use of his time examining H.R. 25 the Fair Tax Act rather than worrying over the origins of the NRST.

He further distorts the 23% vs. 30% issue by ignoring the rules of algebra.
The income tax equation is: income - taxes - compliance dollars = spending
The Fair Tax equation is: income = spending + taxes compliance dollars, so here we are taxed as we spend with after tax dollars and keep the compliance costs.

So your $1.00 item AFTER the FairTax is actually 77 cents 23 cents (30%)
He conveniently ignored the removal of the tax embedded in the price.

I smell another motive here. After truly understanding the FairTax:
The only people who hate it are career politicians, lobbyists, tax lawyers, tax accountants, the non working rich, IRS agents, and illegal aliens or simply those who have a back-pocket interest in keeping the unproductive income tax. What is your motivation Mr. Barlett?

Ashford Schwall

[aschwall1]

Mr. Barlett is at it again with his distaste for the FairTax.
This so called expert has attempted a vague connection with Scientology.
Perhaps he prefers the solid connection our income tax has with Marxism.
See point number 2 of the %u201C10 Planks of the Communist Manifesto%u201D found in Manifesto
of the Communist Party Karl Marx and Frederick Engels 1848 %u201CA heavy progressive or graduated income tax.%u201D Mr. Barlett might make better use of his time examining H.R. 25 the Fair Tax Act rather than worrying over the origins of the NRST.

He further distorts the 23% vs. 30% issue by ignoring the rules of algebra.
The income tax equation is: income - taxes - compliance dollars = spending
The Fair Tax equation is: income = spending + taxes compliance dollars, so here we are taxed as we spend with after tax dollars and keep the compliance costs.

So your $1.00 item AFTER the FairTax is acutely 77 cents 23 cents (30%)
He conveniently ignored the removal of the tax embedded in the price.

I smell another motive here. After truly understanding the FairTax:
The only people who hate it are career politicians, lobbyists, tax lawyers, tax accountants, the non working rich, IRS agents, and illegal aliens or those who have a back-pocket interest in keeping the unproductive income tax. What is your motivation Mr. Barlett?

Ashford Schwall

[knyghtwolf]

IF Battlefield Earth had been written by ANYONE other than L. Ron Hubbard, it would have been a smash, and IF anyone other than Travolta would have starred in it, the movie would have been much more tolerable, I would have even settled for Steven Segal or Chuck Norris, or perhaps even Stallone as the evil alien, Segal could beat up the man animals then eat em.

[ih2005]

Rep. Linder discusses the origin of the FairTax - and The FairTax Book - on C-SPAN''s AFTERWORDS: snipurl.com/lindr

[J. Swift]

Mr. Bartlett glosses over far too many details about CoS, taxes, the IRS approval, and Operation Snow White. There is a major story here and major sources. Steven L. Hayes is hardly the final authority on this matter. Mr. Bartlett, you have only seen the tip of the iceberg. If you are interested in a blockbuster story contact me:
[e-mail]. I use the name "J. Swift" in my work as a Scientology critic and former Scientologist. .

[elz523]

Let''''s see if this makes sense to you: The gov''''t creates a massive set of complexity called the tax code, then creates a huge bureaucracy called the IRS to maintain and enforce that complexity. You and I get to deal with that complexity, to spend an inordinate of time and money just figure out what to pay the IRS, to occasionally be forced to go through an audit, and then to pay penalties if we make a mistake.
Posted by incog-nito at 03:55 AM : Sep 08, 2007

This is how it will be sold. The thinking is that people are more concerned about the time it takes to do their taxes than letting the rich off the hook for thier share of progressive taxes. You would be better off to pay a tax accountant yourself than to pay the higher taxes that come with letting the rich off the hook. Fix the current tax system. It would take much less effort to do so.

[elz523]

LawyerTom1: A simplified, progressive income tax with no capital gains tax, as you proposed, will NOT work. As I explained in a previous post, the truly rich do not make their money via earned income (salaries, wages), but via business and investments. No capital gains tax means that the rich will pay virtually NO tax at all. Now that''''s what I call highly regressive. Your system is progressive only for working people, not the rich. I''''m not saying a sales tax is necessarily the answer, compared to that it doesn''''t look so bad after all.
Posted by incog-nito at 12:51 AM : Sep 08, 2007

How about counting realized capital gains as income with a simplified, progressive income tax?

[incog-nito]

Let''s see if this makes sense to you: The gov''t creates a massive set of complexity called the tax code, then creates a huge bureaucracy called the IRS to maintain and enforce that complexity. You and I get to deal with that complexity, to spend an inordinate of time and money just figure out what to pay the IRS, to occasionally be forced to go through an audit, and then to pay penalties if we make a mistake. A whole industry of tax accountants arises to take our money to help us deal with the complexity that should never have been there in the first place.

Now, do you think that all of the above activities contribute to or take away from the Gross National Product of the U.S., or the well-being of its citizens?

[p-syrus]

The basic theological tenets of the Church of Scientology are well known: a fanatical hatred for psychiatry coupled with a creation myth that involves an evil alien ruler named Xenu and his sundry galactic allies. ---


That is complete drivel.

Whatever the popularity of outrageous discussions of scientology materials on the web, none of this material is fundamental to scientology as a subject. Nor does any of it constiture a belief or dogma of scientology.

This is a gross mistatement & complete misunderstanding of what the associated material actually is about. And indicates the gross ignorance of the author about the subject.

Might as well say that christianity is about driving spirts into swine, judaism believes in killing egyptians, or that the Buddha was a white elephant. All of which have more basis in religious textual traditions then this representation of the subject of scientology.

For a REAL understanding of the subject of scientology see the humorous yet accurate Britsh Channel 4 television program available at:

http://video.google.com/videoplay?docid=1786568759674213741

[brianbwb-2009]

The New Republic: Plan Backed By Fred Thompson, Other Candidates, Has Roots With L. Ron Hubbard

The Old Brian: Smear It, Rather than Discuss Ways To Make The Rich Pony Up Fairly.

So what if it has flaws, discussion and tweaking it can mitigate the flaws.

Archangelric also posts a good idea, but it too needs to be discussed and tweaked so that the rich cannot hide income and assets.

Dismissing an idea as not valid because of an imagined association with a pseudoreligious cult is only disingenuous obfuscation, The New Republic''s contributors should demonstrate more journalistic integrity and intelligence than that.

[incog-nito]

chwparker: Not only gov''t spending will reduce, but countless hours and money spent to fill out tax returns will be saved, not to mention the intangibles like worries and headaches. The savings in productivity are enormous. A whole cottage industry of tax accountants and paper pushers who contribute nothing to society will be eliminated, or at least reduced significantly. Maybe they can find real productive work elsewhere.

[incog-nito]

LawyerTom1: A simplified, progressive income tax with no capital gains tax, as you proposed, will NOT work. As I explained in a previous post, the truly rich do not make their money via earned income (salaries, wages), but via business and investments. No capital gains tax means that the rich will pay virtually NO tax at all. Now that''s what I call highly regressive. Your system is progressive only for working people, not the rich. I''m not saying a sales tax is necessarily the answer, compared to that it doesn''t look so bad after all.

[Bootlegguy]

Wow. It seems that whoever had the job doing the research for this article did just as much of a bad job as Bruce Bartlett did describing the Fairtax. I mean a quick 30 second look at the Fairtax''s website will reveal that this description does not even come close to the true Fairtax plan. The plan has no connection with the Church of Scientology. The founders, Leo Linbek and Rober McNair, are two business men from Houston, TX, who were basically sick of our current tax system and spent over $22 million in research for a better way, giving birth to the Fairtax. Neither are members of the church of scientology. The bill was created by congressmen John Linder, who is a Presbyterian. Also, the Fairtax IS an inclusive %23 sales tax. When you buy something that costs $1, you pay $1. The retailer passes 22 cents on to the government (%23) and keeps the rest. It eliminates all of the taxes on the production level. Goods are only taxed once, when they are new. Also, it is important to note that under the Fairtax, government spending will automatically reduce, because it will NO LONGER HAVE TO FUND THE IRS!! I don''t have time to go over all of the lies in this article, but would encourage everyone to do their own research before coming to a conclusion.

[jsilver2th]

Well Mitt Romney said L. Ron Hubbard''s flagship novel was his favoritie book- so go figure on that..

[lawyertom1]

The tax "system" is broken, but a highly regressive flat sales tax is currently not the answer.

I am not a strong fan, but some of you may recall that a flat income tax [NO capital gains, NO deductions, very high threshold for the initial tax] was championed by Milton baby in the 1960''s. [Think Friedman.] Still a little simplistic, but if you had three tiers of taxation and the top one was modest, it could make sense [not be oppressive like many EU tax schemes of decades past and some present], especially if combined with a no-nonsense Paris Hilton tax (fka Estate Tax, or as the flakes who ride elephants like to call it, the tah-dah death tax; I prefer the "no trust funds for airheads" tax. Let ''em work like everyone else).

Besides a high threshold, Milton also suggested using the tax system in lieu of welfare. If your income was below a certain level, Uncle provided what was in essence a cash welfare payment. While nice in theory, not all folks are that responsible, despite the assumptions of economic theory. Food stamps make sense so that the drug addicts and alcoholics don''t spend their kids into starvation. [Which is not to say that such a curse does not visit the middle and upper classes. A reasonable, not totalitarian, child and elderly protective services makes sense, especially if appropriate due process rights are built in to protect against over-arching bureaucrats.]

Just some ideas to mull over this fine weekend.

[incog-nito]

archangelric: Unlike other posters, your idea has merits. The sales tax idea does have its problems, but nowhere is it mentioned that it will be applied at every step of production, only the finished product, just like business expenses not being taxable right now. People are understandably averse to the idea of a flat tax, but they don''t realize the current system benefits the very poor and very rich, leaving the middle class holding the bag.

[gkc99]

If Holy Huckabee supports this, look out! He''s snake oil salesman #1.

Just look at his eyes!