Joined: Fri 01-24-2003 7:13PM Posts: 1652 Location: down the hill
Source: Fulton Hall
All taxes are taxes on consumers. If you tax a business, it must pass on the cost of the tax to its consumers. So it makes no sense to tax a little here, a little there, etc. - that just increases the number of people/entities who have to hire tax preparers, and the number of government bureaucrats who must be paid to administer the taxes and write rules, etc. That just increases the burden on the economy.
Moving to a single point of taxation (retail sale) would mean that no individual has to hire a tax professional - saving you a few bucks. Making the tax extremely simple (ie a straight 25% on every transaction made) would mean that businesses probably wouldn't have to hire tax professionals either. That cuts out a lot of cost for businesses - which means lower prices for everyone. Also, because each person is not paying 30% of his or her salary as tax, if they worked for the same take-home pay then the businesses costs are lower - lowering prices even more for everyone. In other words, even if everyone takes home exactly the same amount of money, they have more purchasing power because prices will be lowered more than increased by the tax.
Because everybody has more money to spend, they will be willing to spend more money - so more businesses can open or expand, which means more hiring, which means more jobs.
In addition to that, a lot of the government's cost in administering taxes will decrease - there's no huge tangle of tax law that requires a whole team of lawyers to figure out, and secretaries and bureaucrats to keep track of. That means more of the tax money can go to build roads/pay teachers/etc. and less gets used up by soulless bureaucrats.
The tax is more fair because the rich will have to pay their fair share - there's no complicated tax laws for rich folks to slip though loopholes. No amount of tax attorneys can weasel the rich out of paying taxes. When they buy something, they pay taxes. It also taxes the underground economy - drug dealers who make money will have to pay taxes when they spend their money.
The downsides are that a lot of tax lawyers and government bureaucrats will be out of jobs. I'm sure everybody is really upset about that. We could just kill all of them to keep them from being unemployed.
There might be a slight increase in the black market. There's not much of a black market now, even with sales taxes in some places over 10%. Increasing that to 25% might make a little bit of a black market, but most purchases will still be at stores.
_________________ heretic^ stars as Samuel Jackson in the summer's newest thriller: Owls on a Forum!
Ha. I agree with what you say. Some of my opinions for it: 1) As you said, simply the tax system in Missouri. It would put a lot of CPAs out of work, but their entire job is to know and manipulate the ridiculously complex tax code anyways. Why do the citizens of our country have to hire someone to understand our own laws? 2) Fair distribution of tax. You will only pay taxes on the money you SPEND, not the money you EARN. If you are careless with your money or have more money to spend.. and do, then you will pay more in taxes. 3) Everyone would HAVE to pay their taxes. The dead beats, illegals, welfare, drug dealers, criminals, etc who don't have legitimate jobs or taxable income would be FORCED to pay tax. It would be nearly impossible (minus an increased black market or people leaving the state to buy commodities) to avoid paying the tax. 4) The law that has already passed the State Senate (HJR 36) specifies a 5.11% sales tax, nothing too horrible to supplement the loss of the income tax.
I would personally love to see the fair tax act pass nationally, but I don't see it happening any time soon.
Check out wikipedia:
The Fair Tax Act is designed to replace all federal income taxes (including the alternative minimum tax, corporate income taxes, and capital gains taxes), payroll taxes (including Social Security and Medicare taxes), gift taxes, and estate taxes with a national retail sales tax. The legislation would remove the Internal Revenue Service (after three years), and establish an Excise Tax Bureau and a Sales Tax Bureau in the Department of the Treasury.
But bad news:
President Barack Obama does not support the bill, arguing for more progressive changes to the income and payroll tax systems.
Rep John Linder holding the 133 page Fair Tax Act in contrast to the current U.S. tax code.
Most "Fair Tax " proposals are pretty seriously flawed, you can read about some of the problems in the following links. One of the biggest problems is the massive incentive for fraud/black markets. A fair tax system would also likely hurt the middle class the most. Also, as for simplification: not likely. All sort of special exemptions will have to be made, and the people who bitch about low income people not paying enough taxes? The system of prebates will not change that. So this fair tax system really offers little value to conservatives, liberals, and most everyone else too. Keep in mind that the IRS or any other revenue collection agency will not really be done away with, or even reduced in size/power. The tax code, whether Federal or State, whether income based or consumption based requires enforcement. Our current system may have its flaws, but the fair tax just shifts those problems around instead of addressing them head-on. Taxing consumption as opposed to production is just "the other side of the same coin". I'd rather stick with the devil that we know and work to make it as palatable as we can. http://articles.moneycentral.msn.com/Taxes/Advice/IsHuckabeesFairTaxReallyFair.aspx?page=2 http://mises.org/daily/1975