Jackson MacIntosh Strong I listened to some Fair Tax advocates talk last night and it made a lot of sense. Anybody with a counter argument/thought on "The Fair Tax" system?
Steven Hollenkamp
I think the fair tax has its place for a society in a particular context. The US in the early 2000s would fit that context. But moving towards abolishing the IRS doesnt really have a high priority for me in the present junkpile. Nor do I think increasing savings and investments, while decreasing consumption (which is what the fair tax would accomplish), is a good idea in the short term. The fair tax is touted to increase productivity by getting rid of income taxes and therefore increasing earning power. But all research that I have seen has shown that income elasticities are very low at the middle and high end of income earners and I would imagine people would not work harder on any income level in light of decreased income taxes. Instead they might work harder cause consumption is down so they must work harder to maintain.
But more importantly, I think the fair tax works well for a country who needs to start saving and stop spending. And in the long term, 15 years down the road, the US might find itself in that context again. But willingly decreasing consumption by charging 30% on every item sold doesnt seem to be in short term interests. It would bring in foreign companies doing business here, but that would take time to show its benefits. I also think a fair tax would have far more tax evasion in nominal terms than we presently have, even though the current systems inefficacies cant possibly seem to get any worse. Consumption taxes are an even easier system for the rich to worm through, and in the eyes of the poor: intuitively simpler and feasible.
But more importantly, I think the fair tax works well for a country who needs to start saving and stop spending. And in the long term, 15 years down the road, the US might find itself in that context again. But willingly decreasing consumption by charging 30% on every item sold doesnt seem to be in short term interests. It would bring in foreign companies doing business here, but that would take time to show its benefits. I also think a fair tax would have far more tax evasion in nominal terms than we presently have, even though the current systems inefficacies cant possibly seem to get any worse. Consumption taxes are an even easier system for the rich to worm through, and in the eyes of the poor: intuitively simpler and feasible.
Jackson MacIntosh Strong
good points bro...I we're told that we need consumption to "get out of this recession," isn't it consumption that got us IN to this recession? We need savings to drive small business startups and reboot our economy man
Steven Hollenkamp
it was not consumerism that got us into this... but it could be argued that it was superfluous consumerism. nothing is wise in excess. but to see the faults of excessive consumerism as justification for an abolishment of it, does not seem wise either. everything is good in balance. im not sure what is the best way to drive small businesses, but i dont think it is increased savings from decreased spending. And i doubt a switch over to the fair tax would reboot the economy; reboot in the immediate sense. the argument for the fair tax and other libertarian ideology (if this is even libertarian, it doesnt sound like it) should never the lure of a quick fix; or the shiny flash of willful optimism. It must only be one of tough love and delayed gratification. and that is what the fair tax seems to be, short term heart aches guaranteed, with maybe, theoretically, long run prosperity. but thats the argument to make and there is an argument to be made for it. but these ideas of short term difficulties for long term success (which i think the fair tax bears), bring to mind many disadvantages in the never ending short run surrounded by an ever expanding competitive globalized world.
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