Why do both Barack Obama and Fred Silva of the St. Augustine Record hate the FairTax? I actually like the idea of a real low, real simple flat tax that removes corporate and other anti-growth taxes. I love the idea of getting rid of the IRS. I love the idea removing loopholes from the wealthy. In a debate between FairTax and the flat tax, the only losers are high priced tax lawyers and backroom dealing lobbyists and politicians. The American tax payer wins either way.
Taxation is a horribly complicated political football. The simplist and most honest summary of our current tax system is that it cripples us. I’ve read several books on taxation, no one, not one single person anywhere argues that the current system is good. Most people, like Barack Obama, agree it’s a mess and then offer really obnoxious Band-Aids like raising the top marginal income rate about 5%. Others think we need a flat income tax, others a flat sales tax, others the FairTax. I think the FairTax is best. In this post, I’ll focus on just the specific attacks leveled against it by Mr. Fred Silva.
* We’ll have a black market like other Third World countries, probably new business opportunities for drug dealers.
Drug dealers already have an entire black market. But when they take their money out of the black market and go to WalMart or KFC or BMW to spend their drug money, through the FairTax (which is a consumption tax) they will be taxed their fair share.
* It’s regressive.
Absolutely not. The Payroll taxes are regressive. Sales tax is regressive. Loopholes, tax lawyers, tax shelters, off-shore bank accounts and lobbyists are regressive. The FairTax (with prebate) is the most progressive thing around.
* We are in a depression and it will discourage purchases.
It will encourage employment and savings. It will remove disincentives to investment and entrepreneurship. It will put more money in the hands of everyone, and then it will pull us out of the recession.
* It’s great for super rich, more money to spend overseas on vacation. Why would they buy anything here?
Firstly, prices will not go up as high as you imagine they will. By removing all corporate, dividend , capital gains, and property taxes, US companies will be able to compete better and drop their prices. Second, the super-rich already spend vacations overseas.
Should help Canada and Mexico. Everything should be cheaper there.
Actually, it’ll hurt them because our products will be more competitive than theirs because they’re companies pay higher taxes and have to charge more to cover those taxes. Our exports will go through the roof.
* Why would anyone vacation here? It will kill Florida tourism.
Why would anyone stop? But for every vacation dollar we lose, we’ll get back 10 times that in money from people who work here illegally and fail to pay any income or payroll taxes at present.
* Foreign workers can send more money to South America, the Mideast or wherever, tax free.
They already do. Only now, illegal immigrant/foreign workers will pay their fair share of taxes before that money leaves the country.
“I get to pay tax again if I spend my savings I already paid tax on. That sounds like double taxing to me. Great for the retired.”
This is the only charge that is somewhat legitimate. I don’t know how this will be handled. With all the extra time the IRS will have on their hands, I’m sure an accounting method can be discovered to handle this temporary and one-time problem. But don’t let the “double taxing” thing scare you, we are already double, and triple taxed or more.
The big question to consider is, do we tax income or consumption. A Flat Tax (which would be vastly superior to our current system) punishes people for working. The FairTax punishes people for spending. That’s the big difference. Now yes, on the surface, if everyone stopped spending it’d be bad, but really, think that one through. Will everyone stop buying stuff? That’s ridiculous. Even when people are out of work they buy stuff. It is absolutely silly to think people will stop buying stuff. Moreover, any decrease in the desire to spend will be remedied by the increase in take-home money.
I’ll make a simple ending point, if you are a fiscal conservative, if you think Reagan saved our economy, if you agree with the Laffer Curve, then you have to agree that a tax rate must be as low as possible and as broad as possible. A consumption tax is the broadest tax base possible, thus it can be the lowest one possible. That is Supply-Side economics.
Read the original article here.