Over on
one of the Yahoo! Groups I frequent, a poster
wrote the following:
There is an old saying that says that the perfect is the enemy of the better. The fair tax while not perfect is clearly much better.
Below, I extend and revise my reply, which I figure is both detailed and succinct enough to make a good blog post/capsule argument (since I've been alluding to the "Fair" Tax now and again, but haven't actually taken it head on). I've also linked some of my claims to supporting source material:
Only if by "clearly much better" you mean it:
- Results in the theft by government of just as much money as the income tax (the "Fair" Taxers boast that their proposal is "revenue neutral");
- Results in the same amount of, or perhaps more, redistribution of wealth than the income tax (the "Fair" Taxers boast that their proposal is at least as "progressive" as the income tax);
- Puts every American on the dole so that they're recipients of monthly government welfare checks which the majority will likely fight tooth and nail to keep coming in perpetuity (the "prebate"); and
- The "Fair" Taxers' arguments about eliminating the IRS aside, will require a bureaucracy to administer (both to collect and to send out the welfare checks).
The "Fair Tax" is at least as bad as the income tax in every way, and worse in some ways. It's not a tax cut. It's not a tax elimination. It's just a strengthening of the tax system by linking it to a welfare program -- just like Social Security, which has been a "third rail" issue in American politics for half a century precisely because millions of Americans have a vested interest in keeping the checks coming.
It may not be politically possible to get the income tax straight-out eliminated right now, but it is politically possible to get it CUT, which would be a far superior alternative to the "Fair" Tax.
The Boston Tea Party's program calls for universal, bottom-up tax cuts as follows:
The Boston Tea Party calls for legislation adopting an annual, regularized increase in the personal exemption to the federal income tax of $1,000 or more, and the additional application of said personal exemption to all FICA/Social Security taxes paid by employees and employers.
Members of Congress (mostly Democrats) routinely propose and vote for increases to the personal exemption, so it's politically doable.
Increases to the personal exemption give EVERYONE who pays taxes a tax cut, from the janitor at the local factory to Bill Gates.
Increases to the personal exemption remove people from the tax rolls and withholding treadmill entirely (every time the exemption goes up, more people's income falls below the taxable amount).
Applying the personal exemption to Social Security payments would address the extreme regressivity of the Social Security system. The poorest people pay proportionately the most in Social Security taxes (since the requirement to pay is capped at a certain income level in, I believe, the $60K range), and they receive the fewest benefits (due to shorter lifespan).
Eliminating the income tax is the best option. Failing that, cutting it is. Replacing it with a tax that doesn't cut taxes, doesn't remedy redistribution problems, doesn't eliminate (or probably even reduce) the associated bureaucratic and administrative costs, and puts every American on government welfare is just a scam if the goal is to reduce or eliminate taxation.
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You missed one
There is one other significant point that you missed RE: the fair tax.
People that are wealthy spend a much smaller portion of thier income, as a matter of course. In time, this tax would become massively regressive as an individual that is earning 10 million dollars a year might spend (retail) somewhere in the neighborhood of 100K, whereas an individual making 20K per year is spending 8 or 10K in the same year.
I understand the rebates are supposed to account for this -- but in fact, there is no way for any rebate or deduction system to address the exhorbitantly rich.
Alternatives? How about a 100% estate tax and nothing else? The government can have every penny when I die, as long as my funeral is acounted for. After all, the American Ideal is for each person to find thier own way and achieve thier own successes. So how about eliminating the entire class of trust fund losers?
Or, conversely, let employers pay ALL taxes, based upon salaries, but set up a schedule that encourages wages in the middlin range as opposed to either low or high. This would, in effect, replace the need for minimum wages, and it would probably also encourage benefit packages, as those would be outside the scope of the tax.
But let's not kid ourselves, our government will never embrace TRUE reform -- there's just too many people with too much invested in the status quo -- and too many pansy ass politicians that don't want to rock the boat.
tp
Fair Tax is voluntary and more ethical.
A cut in the income tax, even if it would stick, is
NOT better than the Fair Tax. The Fair Tax is
VOLUNTARY! You can't beat that with any income tax!
The Fair Tax is also more ethical. No matter how low
your income tax is, it can never be more right to tax
income (hard/smart work) than consumption.
The Fair Tax is more sensible. In a nation that
over-consumes (we're even literally dying of obesity),
how could it possibly be smarter to tax work than
consumption???
A sales tax would even be better for NH than the
property tax!!! Who do you want to attract - heavy
consumers or hard working property owners?!!!
The sales tax is closer to a user fee than any other
tax, including property taxes, estate taxes, and even
your "LOWER" income tax.
Fair Tax
When I first read the report about the Fair Tax proposal, I was impressed, except for the Prebate. The prebate requires that the Government keep records of every citizen, at least residence, in order to send the check. Not a comforting thought for the Libertarian in me. Also, the paperwork could be damaging for the small business man, my good friend, for example. He runs a small lawn care business. So far, so good, but occasionally he has to buy things for his customers, fertilizer, or lawn seed for example. I can see the fair tax paperwork costing him more than his profits on these items, plus what he may be able to deduct for expenses (gas, oil, trimmer string, etc.)
I can imagine it would be similar in any small business.