FairTax Act-Is it a viable solution?

The FairTax Act has been proposed as a possible solution to making the distribution of taxes more equal and taxes more simplistic in the United States. Do you believe that the FairTax is a viable replacement to the income tax system and can you defend your response through moral reasoning if you have one? What do you think?

 

It's not viable, and it's just a plan to shift the tax burden even further off the rich and onto working people.

 

If it is not a viable soultion, what do you suggest would be a better solution to distribute the tax burden equally across all sectors of society?

 

Adam Smith's solution would be better:

"The expense of government to the individuals of a great nation is like the expense of management to the joint tenants of a great estate, who are all obliged to contribute in proportion to their respective interests in the estate. In the observation or neglect of this maxim consists what is called the equality or inequality of taxation." -- The Wealth of Nations

People's ownership interest in the nation -- the total value of the land titles and other government-provided privileges they own -- measures the benefit they get from government spending, and thus their rightful equal share of the tax burden.

 

As viable as the Georgist nonsense!

A fair tax must include the interaction of tax and benefit systems. If it doesn't it will assuredly create unemployment and poverty traps. Rather unfair and inefficient!

 

How, specifically?

 

As income increases, benefit falls and tax rises. Bleedin obvious

 

Obvious?

More disconnected than the current progressive taxation, where those that get benefits don't pay for them, and those that pay for benefits don't need them? With FairTax, even the ~50% that don't currently pay Federal income taxes, will pay some taxes.


My last reading of FairTax eliminated all taxes to business except for consumables like office supplies. US made goods are cheaper before tax, the same price after tax. Imported products more expensive after tax.

Outsourcing is less attractive, more manufacturing is done in country.

It makes much more sense to move profits into the US, more money to invest for R&D, plant expansion, etc.

More employment.

So, explain how FairTax obviously results in "it will assuredly create unemployment and poverty traps"?

 

Yep. Effective marginal rates of tax is an obvious point (even understood by the likes of Friedman and his negative income tax proposal)

This isn't difficult. A tax system that doesn't integrate tax and benefit systems will certainly create severe non-linearities (often corner solutions) in the labour supply schedule. All more obvious than the non-supported outsourcing whinge

 

I ask for explanation, you repeat opinion.

Not Amused.

 

A clearly bogus response. Without integration of tax and benefit systems both equity and efficiency aren't available. The 'effective' marginal rate of tax is paramount for both.

Now we could question the validity of the orthodox labour supply approach. I'd question the validity of assuming, for example, work is neutral (i.e. merely a means to exchange leisure for consumption). However, that questioning cannot be used to dismiss the importance of non-linearities created through the interaction of tax and benefit payments

 

No, that's just your usual anti-justice, anti-truth, anti-economic, anti-liberty, anti-prosperity, anti-honesty nonsense. Everyone who is not comprehensively ignorant of economics is aware of the fact that taxing a factor in fixed supply does not harm the economy, while taxing production and consumption does harm the economy. You are therefore either comprehensively ignorant of economics, or you are just lying.

Land rent recovery certainly does that, as it simply recovers a government-provided benefit instead of giving it away to landowners in return for nothing.

That is the imperfection in Henry George's 19th century version of land rent recovery, his proposed single tax on land value: it does not restore the individual right to liberty, and thus consigns the least productive to land where they will lack access to opportunity. This problem is solved in modern rent recovery proposals by extending a universal individual land tax exemption analogous to the universal individual income tax exemption, ensuring that everyone has free, secure access to enough good land of their choice to live on.

That indisputably describes all tax systems that do not recover the full publicly created rent of land for public purposes and benefit.

 

While such provisions are obviously necessary to prevent income taxation from completely destroying the economy, unfortunately they merely make an inherently unfair and harmful tax and benefit system somewhat less unfair and harmful. Recovery of publicly created land rent for public purposes and benefit, by contrast, is inherently fair and efficient. In fact, it is more fair and efficient than no tax at all, because it removes the unfair and inefficient welfare subsidy giveaway to landowners.

 

If you are imagining that land rent recovery could do that, please explain how (hint: it indisputably can't).

 

I'm not interested in the Georgist irrelevancy and your "you're lying" routine. Its clear that in modern tax systems, without integration with benefit systems, severe distortions are created.

 

The fair tax would work.

Liberals are all for redistributing the wealth so why do they hate redistributing the taxes? Oh yeah, because they want 40% of Americans to continue not paying taxes and tax the rich more. I thought America was based on equality for all so why are lower income people not being taxed while richer income people are being tax a high amount.

 

Because liberals believe in equality of outcome, not equality of opportunity.

And, a FairTax would work, providing the rate was set right, limited the maximum, and drop rates when some surplus was reached (yeah - I chuckled at that thought too).

But, the problem isn't an income problem, it is a spending problem - something 1 person in 3 gets benefits, retirement, or a paycheck, from government.

 

I do not think a Fair Tax is viable.

I believe it would invite massive tax evasion - especially since the 30% tax (which is what it really is) seems to only be on new items. If they made it on all items - new and used - it might be much more difficult (imo) to evade paying the tax.


My alternative is just make the same tax rate for all incomes above the poverty line - both income and capital gains.
And have charitable contributions as the only deduction allowed.

 

I have refuted you and you have no answers. Simple.

Yes, if by "modern" tax systems you mean the inherently unfair and inefficient taxation of income, production, exchange, consumption, capital, value added, etc., that burden labor, capital investment and production, not the incomparably and indisputably superior, fair and efficient land taxation system that recovers publicly created value for public purposes and benefit, imposing no burden on labor, capital investment or production.

 

I would much rather see a tax on what I consume rather then what I produce!

 

No, you've given your script. The single tax spawned by long dead George has no relevance. Given that, we have internet Georgist wannabes adopting dishonest techniques as they hide from the practicalities of tax

With modern tax analysis, we're left with a realisation that we cannot ascertain any notion of equity or efficiency without reference to how taxes and benefits interact. In terms of equity we could just use the notion of the 'social wage'. However, to appreciate the efficiency costs from unemployment and poverty traps, reference to effective marginal rates of tax is required.

 

Being tax policy is set by, and for the benefit of, politicians, that is a useless exercize.

Even if we were to remove political motivation to manipulate tax rates, setting tax rates based on the need for benefits, ignores that the "need for benefits" is set by, and for the benefit of, politicians and those employed to distribute benefits.

 

That's a false dichotomy fallacy.

Production (earned income) and consumption (retail sales) are just two sides of the same economic coin. You can't tax one without taxing the other, except to the extent that production is exported and consumption imported.

A tax on the unimproved value of land, by contrast, does not tax production OR consumption. It simply recovers publicly created value for public purposes and benefit, leaving all economic activity -- production, exchange and consumption -- untouched. Maybe you should ask yourself why Reiver is screaming that you are not allowed to think about land value taxation. Why doesn't he want anyone to think about a tax that many of the smartest people who have ever lived, including several Nobel laureates in economics, have shown is the fairest and most economically beneficial?

 

I believe that a FAIR Tax with no exemptions, and no exceptions, and one rate is the way to create federal tax fairness.

 

Golly gosh, didn't predict the dishonest tactics! I've referred to the irrelevance of George's single tax. Despite that irrelevance you tacitly imply it continues to be relevant for modern tax policy. As you ignore the practicalities of tax you also ignore the consequences of failing to integrate tax and benefit systems. You therefore support both inequity and inefficiency