If you are honestly looking for flaws in the FairTax, they are not difficult to find. Here are two:
1) it effectively eliminates the “cap” on Social Security and Medicare taxes. Instead of these being taxes on only “wages” and thereby “stopping” punishing people at some point, the FairTax “never” stops the punishment. Somebody with a ten million dollar non-wage income that spends it all on servants, cars, yachts, etc. will pay almost a million dollars of FairTax diverted into SS/M, yet receive ZERO additional benefit from those programs as compared to what he gets today. Including the SS/M taxes in the FairTax is just a sneaky way to eliminate the cap and punish high achievers even more than the current system does.
2) suppose you are one of the top 1% of Americans who presently pay 39% of all the income taxes and you owe those taxes no matter where you live on the planet, so you mostly live and spend your money here. Now, the FairTax passes and you have a choice: spend your money in America and pay 23% in FairTax on all your spending or live outside the USA and pay a 15% VAT — still zero income tax either way. Obviously, you spend as little money in America as possible. That leaves FairTax revenues about $500B/yr short of what the FairTax projections assume. That means the extra $500B has to come from the other 99% of the people still here. It also means the FairTax rate of 23% no longer is sufficient, but actually needs to be bumped up to a higher rate of about 35%.
The FairTax is really a blatant attempt to shift the tax burden even more onto the shoulders of the high income citizens. Class warfare at its worst. It is a particularly lame attempt, though, since it is easily and legally avoided by simply moving out of the country. So it can’t possibly work. Removing the provisions that so obviously target the high income/rich, the FairTax could be restructured to a decent replacement for the income taxes — but the key is to encourage the high income crowd rather than punishing them. That means a much lower rate, no rebates, and stripping out the SS/M portion which is of no benefit to the rich.
You wrote: “If you are honestly looking for flaws in the FairTax, they are not difficult to find. Here are two:
1) it effectively eliminates the “cap” on Social Security and Medicare taxes. Instead of these being taxes on only “wages” and thereby “stopping” punishing people at some point, the FairTax “never” stops the punishment. Somebody with a ten million dollar non-wage income that spends it all on servants, cars, yachts, etc. will pay almost a million dollars of FairTax diverted into SS/M, yet receive ZERO additional benefit from those programs as compared to what he gets today. Including the SS/M taxes in the FairTax is just a sneaky way to eliminate the cap and punish high achievers even more than the current system does.
2) suppose you are one of the top 1% of Americans who presently pay 39% of all the income taxes and you owe those taxes no matter where you live on the planet, so you mostly live and spend your money here. Now, the FairTax passes and you have a choice: spend your money in America and pay 23% in FairTax on all your spending or live outside the USA and pay a 15% VAT — still zero income tax either way. Obviously, you spend as little money in America as possible. That leaves FairTax revenues about $500B/yr short of what the FairTax projections assume. That means the extra $500B has to come from the other 99% of the people still here. It also means the FairTax rate of 23% no longer is sufficient, but actually needs to be bumped up to a higher rate of about 35%.
The FairTax is really a blatant attempt to shift the tax burden even more onto the shoulders of the high income citizens. Class warfare at its worst. It is a particularly lame attempt, though, since it is easily and legally avoided by simply moving out of the country. So it can’t possibly work. Removing the provisions that so obviously target the high income/rich, the FairTax could be restructured to a decent replacement for the income taxes — but the key is to encourage the high income crowd rather than punishing them. That means a much lower rate, no rebates, and stripping out the SS/M portion which is of no benefit to the rich.”