Not today, but if you eliminated withholding (or made it voluntary) it would.
...nor does it touch the underground economy...
And neither does the FairTax.
As for "policing" pay your taxes or go to jail. If one is going to engage in illegal behavior, they deserve to be punished.
While I would agree that eliminating withholding would be politically difficult, if done gradually, it's far from impossible.
...it is still far better than the present system or any other so far proposed...
Well, you are entitled to your opinion, and I to mine. I happen to disagree with your assessment. I believe, for many reasons hashed over and over again in this forum, that the FairTax will be an economic disaster (academic simulation notwithstanding.) I believe the advertised rate is artificially low, that the incentive and opportunity for evasion are far greater than advertised, that the predicted long term economic benefits will not be achieved (largely because of the short term problems the the simulations ignore) and that the worst thing we could do for entitlement reform is bury the funding in a general tax. There are more, but you get the idea.
There are still many hidden taxes embedded in the system other than the income tax.
And most of them are not eliminated by the FairTax. Only income, profit and payroll are SHIFTED to the FairTax. The rest stay hidden and are more likely to expand.
While the FairTax may make you feel good, it doesn't get at the heart of the beast: spending/entitlement reform.
Under the current system, the underground economy is taxed (remember all those hidden taxes) everytime a retail purchase is made. If the underground economy expands to evade the high FairTax rate, perhaps even less tax will be collected from black market activity.
For citizens and legal residents who derive their income from the underground economy, well, they'll be entitled to the prebate just like the rest of us.
Consumption Est. 2007
SpendingEst. 2007
FairTaxPurchase of New Homes Improvements to Single-Family Homes Brokers Commissions on Housing Taxable Home Mortgage Interest Taxable Personal Interest Final consumption expenditures (non-wage)
of non-profit institutions - Religious and welfare activitiesCapital Spending by Non-Profits (net of capital) State and Local Government Consumption Spending Federal Government Government Consumption Spending
Note the $38 billion FairTax on mortgage interest and $36 billion FairTax on brokers commissions (so much for tax-free home purchases). Also note the $36 billion total FairTax on non-profits (I guess that ends that debate - pigdog loses another one).
Actually, no tax makes me feel good but the FT would hurt me. Under the present system I get an undeserved "earned income tax credit." Under the FT I would have to pay.
Our differences over methods obscures the fact that the problem with taxes and spending/entitlements is politicians. Entitlements are such only because they are declared to be, declared to be by the politicians who want them to be. The very word "entitlement" corrupts the nature of our country as founded and is a distortion of the free enterprise concept. So is the income tax.
However, our chances of reforming the tax system, as slim as they may be, pale in comparison to the chore of reforming human nature. Yet, human nature is what makes free enterprise work while socialism/communism run contrary to human nature and, as a result, end in misery. Our present tax system, the income tax, is socialist and was recommended by Karl Marx as a way to undermine free enterprise. The FT is harmonious with free enterprise as it leaves the money and choices of how to spend it up to the individual.
...nor does it touch the underground economy...
And neither does the FairTax.
No tax system will eliminate cheaters but when the non-taxpayers under the present system buy their bling, fancy cars, fur coats, houses, and many other things they pay federal taxes they ordinarily would not pay.
I believe, for many reasons hashed over and over again in this forum, that the FairTax will be an economic disaster (academic simulation notwithstanding.)
I would assume, then, that you also don't believe that tax cuts stimulate the economy by giving the individual more of his money to spend as he chooses. History shows that it does and that tax revenues to the government increase accordingly.
I believe the advertised rate is artificially low, ...
By the term artificial I guess you mean purposely understated. The only reason for that, that I can see, is to enhance its chances of passing and that you attach a negative connotation to that. It is well understood the motives of politicians in keeping the present system and the power it gives them to pick and choose winners and losers. However, what does a politician gain by scrapping that and adopting the FT? What special interest is enriched with the FT?
... that the incentive and opportunity for evasion are far greater than advertised, ...
Wouldn't it be easier to keep up with the sellers who are just a small fraction of the income earners than monitoring the millions of earners? Sellers are earners, too, and are already being monitored and are already collecting a remitting taxes to the government. Seems far easier to me to keep tabs on them than on each of us individually.
... that the predicted long term economic benefits will not be achieved (largely because of the short term problems the the simulations ignore)
Back to the tax cut analogy as well as noting that simulations compare a static model rather than the dynamic model of real life.
... and that the worst thing we could do for entitlement reform is bury the funding in a general tax.
It is already buried so what is the difference? Entitlements provide a slush fund for politicians to spend on pork. So, getting rid of them will be very difficult.
Entitlements are the life blood of liberal politicians. They create and support victim groups, the liberal base. They always need more funding, thus supplying the slush funds with cash and further increasing the influence of the government and the politicians.
Entitlements are an entirely different problem from the tax system even though ithey are inextricably connected. No matter the system they will have to be dealt with separately.
You will notice I have made no mention of the nuts and bolts of either system, just the philosophical differences. Those are the most important to me and to the country.