Bartlett begins his critique by accosting unnamed messengers (referenced by “FairTax advocates”) for supposedly suggesting that consumer, producer, and factor prices would be unaffected by the FairTax, with workers simply keeping the income and payroll taxes that would otherwise have been deducted from their paychecks.Intersesting comment coming from Kotlikoff who said:Clearly, such an outcome is inconsistent with elementary economics, and no serious student of the FairTax would assert such an outcome.
(39)AND:"Private consumers would receive lower (gross) wages under the FairTax because producer prices fall...."
"As calculated here, the effective (tax-inclusive) FairTax tax rate that would permit the federal government to maintain its real expenditures is 23.82 percent. That real revenue- and real spending-neutral rate is only slightly higher than the 23 percent rate in the FairTax legislation. Indeed, implementing the FairTax at a 23 percent rate would require a modest 2.73 percent reduction in real non-Social Security federal spending.A 0.82% inclusive increase is over 4% exclusive sales tax increase at the register.
And of course Congress would fall over themselves to go for "a modest 2.73 percent reduction in real non-Social Security federal spending.
There's more:
"Assume there is no monetary accommodation. The FairTax would cause producer prices and, therefore, the tax base for state and local governments to fall. Unless some measure is taken, state and local government revenue would fall. That would be the equivalent of state and local governments providing a tax cut to their taxpayers. We assume that state and local governments take the necessary measures to maintain the real value of their revenues, which, in this setting means raising their tax rates or expanding their state sales tax bases by conforming to the FairTax base.21 And that assumption implies that those governments will maintain the real value of their consumption purchases.One more thing he said, Diva Delmar wanted to know what the FED had to do with the Fairtax:
The extent of potential tax evasion under the FairTax and its implications to the FairTax certainly deserve careful study. However, concern about the omission of tax evasion regarding this study’s findings must be set against two other omissions that militate in the opposite direction.The first is the major capital gain that the federal government stands to accrue if, as seems likely, the Federal Reserve fully accommodates the introduction of the FairTax and permits consumer prices to rise by roughly 30 percent. That would reduce the real value of nominal U.S. government debt in the hands of the public (many of whom are foreigners) by about $1 trillion. Although that is a one-time windfall, it is a very large one and could certainly offset a significant amount of revenue loss from tax evasion,< were such losses actually to occur.
The Fed is an agent of confiscation, no different than the IRS. The Fed exists to bailout the banks and tax the people via inflation. Once you realize that, you understand the tax system exists to contract the money supply, nothing more.