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Unfair Criticism

His "natural habitat" threatened by the growing popularity of the FairTax, Bruce Bartlett rather sadly resorts to the most damning fiction he can create in order to malign this thoroughly researched proposal ("Dianetics, the Tax Plan," September 10). Misdirection is, of course, a valuable skill for pickpockets and stage magicians but in the case of public policy, it is a coarse path that reflects poorly on the performer and ill-serves honest debate.

The FairTax was developed, independently of any other proposal, over the course of several years by noted economists after extensive market research was conducted into what the public desired in the way of a national tax system. It was originally developed and has gained popular support precisely because the current income tax system has so damaged the nation and so bedevils individual taxpayers. Its origins, therefore, can be found in the sincere desire of citizens, economists, and public policy experts to see fairness, simplicity, and transparency replace the mind-numbing complexity of the tax system which so well serves self-styled experts like Mr. Bartlett.

Although not an economist, Mr. Bartlett's impressive knowledge of 65,000 pages of tax regulations and arcane minutia of the income tax system would--overnight--of course, be rendered obsolete with the paradigm-shifting simplicity of the FairTax. At the same time, foreign manufacturers would no longer see a price advantage over the "Made in America" label; taxpayers would be freed from the embarrassing and wasted $265 billion dollars annually it costs to merely comply with the income tax system; and American earnings, investment, and productivity would no longer be subject to Congressional power struggles, the profit motives of tax lobbyists, and yes, the intellect of individuals such as Mr. Bartlett.

A federal tax policy that serves the public interest instead of personal and political ambitions is an idea that is now powerfully resonating with the public. Distortions such as Mr. Bartlett's are increasingly being seen by the public as self-serving attempts to maintain the broken and destructive income tax system. Mr. Bartlett's statement, for example, that the FairTax prebate is based on individual income calculations is being met with widespread laughter from a public that understands much better than Mr. Bartlett the actual design elements of the FairTax. The existence of "embedded" income taxes, the logic of applying the FairTax to government spending, the difference between "inclusive" and "exclusive" calculations of both income taxes and FairTax rates, and the more than $20 million of FairTax research are permeating the public consciousness and rendering ineffective the increasingly obvious sleights-of-hand by defenders of the tax code.

Our FairTax campaign now verges on becoming a powerful national movement because the public desperately desires a better way to collect federal taxes for the common good and recognizes the current system as both inherently flawed and then further corrupted by inside-the-Beltway machinations. It is understood by those who are joining our effort that overcoming the self-interest of the increasingly disdained Congress and the army of income tax system defenders is no small task. Distortions such as Mr. Bartlett's, however, just fuel the growing grassroots wildfire to drive public policy right over the broken income tax system and all its camp followers.

Leo Linbeck
Chairman and CEO, Americans for Fair Taxation

First Principles

Joshua Rosner's screed denouncing rating agencies and accusing them of somehow bearing responsibility for the recent travails of the sub-prime market is filled with dubious assertions but in the area with which I am especially familiar it is simply ignorant ("Subprime Offender", September 10). Rosner expresses incredulity that "prevailing legal precedent" provides First Amendment protection for rating agencies as if they were journalists. "Ridiculous," says Rosner.

I have represented Standard %amp% Poor's in a number of the cases in which judges have concluded that rating agencies are indeed entitled to First Amendment protection and (as I am sure those judges agree) those rulings are anything but ridiculous.

Rating agencies offer opinions, nothing more or less, as to the likelihood that debt securities will be repaid. The expression of opinions by all including but not limited to journalists and rating agencies--even including Mr. Rosner himself--are protected by the First Amendment. That rating agencies express their opinions in letter terms (a bond rated AAA is highly likely to be repaid, one rated CCC far less likely to do so) does not affect the level of their legal protection. Nor does the fact that rating agencies are paid by the entities they rate. The New Republic, to pick one example, has nothing to fear from the visage of losing its First Amendment rights because it may write about an advertiser. The law provides the same protection to those who offer ratings as it would to The Wall Street Journal when it offers a view as to the economic health of a corporation.

It should thus come as no surprise that courts have consistently concluded that rating agencies receive the highest level of legal protection. Not only is that protection rooted in First Amendment principles but long-standing policy concerns. As federal Judge Melinda Harmon observed earlier this year in dismissing claims against rating agencies based on their ratings of Enron bonds, "[c]redit rating agencies' gathering of information about issuers and securities, their expertise in evaluation and independent analysis of that information about matters of public concern, and their dissemination of it to the public, without any personal interest on their part, constitute an invaluable service to the economy and to investors and lenders as a whole."

Floyd Abrams
William J. Brennan Jr. Visiting Professor of First Amendment Issues
Columbia University School of Journalism