I agree on this tax. But, I'd be careful about making this argument. Conservative opponents of the FairTax are already making this claim in regards to the NRST. A month ago, Ramesh Ponnuru wrote a piece in the National Review in essence saying that the NRST is TOO efficient and painless, making it easier to raise taxes. He further states that a flat tax would exact enough pain on the taxpayer to prevent further tax hikes.
I love the NRST, but I've been thinking lately about an idea and I've mentioned it to you before: apportioning the tax bill among the states. You replied to my idea that that the Articles of Confederation had such a setup, and it was a failure. But that's not true. Under the Articles of Confederation, the Federal Government had NO authority to tax states and basically had to ASK for money.
So here's my proposal:
Funding for all non-defense spending will be apportioned among the states. Funding for Defense, Homeland Security, and border patrol will come from a tiny National Retail Sales Tax. Based on the 2003 budget and a 23% National Retail Sales Tax if the ENTIRE budget was funded by an NRST, The Defense/Homeland/Border NRST would only be 4 - 5%.
States will be able to collect their share of the tax bill whichever way they want, whether that be through sales taxes, income taxes, capital gains taxes, property taxes, or some ingenious method we haven't even thought of. Over time, states will demand that those federal programs the state can provide itself be eliminated. And there you have it: A hybrid, NeoFederalist Tax policy that shrinks the size of the Federal Government.
Under the Articles of Confederation, the Federal Government had NO authority to tax states and basically had to ASK for money.
Not quite true, Continental Congress had the authority to lay tax directly on states and demand payment by a date certain:
"All charges of war, and all other expenses that shall be incurred for the common defense or general welfare, and allowed by the United States in Congress assembled, shall be defrayed out of a common treasury, which shall be supplied by the several States in proportion to the value of all land within each State, granted or surveyed for any person, as such land and the buildings and improvements thereon shall be estimated according to such mode as the United States in Congress assembled, shall from time to time direct and appoint.
The taxes for paying that proportion shall be laid and levied by the authority and direction of the legislatures of the several States within the time agreed upon by the United States in Congress assembled."
The federal government just had no effective means beyond civil war to enforce a tax on the state that is adament about not paying, as a point of fact neither does the Constitution for that matter. That is the primary reason why authority was granted to Congress under the Constitution to lay a taxes with respect to the individual bypassing the Articles' direct taxation of the states based on the assessed value of property in the state.
refer: Federalist #21:
refer: Federalist #45:
States will be able to collect their share of the tax bill whichever way they want, whether that be through sales taxes, income taxes, capital gains taxes, property taxes, or some ingenious method we haven't even thought of. Over time, states will demand that those federal programs the state can provide itself be eliminated.
Actually there is no requirement for Congress to allow the states to collect the tax in any manner of their choosing under the Constitution, though the direct taxes laid by Congress under the Constitution usually did do it that way, should the state fail to meet payment the National Government made provision to collect the tax from the individual property owners itself.
Refer:
United States Statutes at Large
Thirteenth Congress Session. I. Ch. 16. 1813
Chapter XVI. An Act for the assesment and collection of direct taxes and internal duties.(a)
"States will be able to collect their share of the tax bill whichever way they want, whether that be through sales taxes, income taxes, capital gains taxes, property taxes, or some ingenious method we haven't even thought of."
That is an interesting perspective. As a practical matter, though, it is unlikely that any individual state would attempt to continue taxing income if the federal government dropped its income tax. Reproducing an Internal Revenue Code would be a daunting task for any state.
Having said that, I do think that it is healthy that we keep an open mind about tax reform proposals. A friend of mine who is an avid FairTax supporter and a tax reform veteran told me that he was a flat taxer when it first came out because it was the best alternative to our horrid system (of course, it's a lot worse now than it was then).Then Billy Tauzin introduced his initial sales tax proposal and my friend switched his allegiance, since he considered it better. Then the FairTax proposal was introduced and he supported it because he considered it superior to the other two. He told me that if someone comes out with a better plan tomorrow, then he will support it.
My reservations about this plan are
(1) as other posters have pointed out, it would be largely hidden from taxpayers' view. As we all have learned, the consumers or customers at the end of the supply chain are the ultimate taxpayer, regardless of where in the supply chain the checks are written,
(2) this doesn't eliminate the bias in our current system against savings and investment, nor the bias against US producers,
(3) I don't see how the tiny rate proposed would be revenue neutral. In the family example given, it appears that the family's tax burden would drop dramatically (if you don't count cascaded taxes). Even if you do count them, it would seem that they would still decrease markedly. Don't get me wrong, I am certainly not opposed to tax relief for American families. However, if average families get a huge decrease in taxes paid, that revenue must be made up somewhere or the deficit explodes. I did not see the term "revenue neutral" used in the article, so that makes me suspicious as well.
Having said all that, I am willing to keep an open mind at least until I see some reputable economic studies on this proposal. There is no such thing as a perfect tax system. However, without economic studies, any FTR proposal is a huge gamble. Even with economic studies, there is a certain element of risk. However, the defenders of the status quo fail to acknowledge the enormous risk of sticking with the current system until it implodes of its own enormous weight.
One other point. I have seen the same resistence to change on this thread that has become all too common on other tax threads. The comment about this proposal being like throwing sand in the gears of the economy is one example. At the rate proposed, I doubt that would happen at all. As I mentioned above, I have reservations about the proposed rate, but that is a separate issue. At the rate proposed, or even 2 or 3 times that rate, I doubt that this tax would generate the kind of avoidance that some of the other posters on this thread envision.
The enemy is the current system. If we commissioned a panel of leading experts to come up with the most inefficient and economically destructive tax system possible, they would be hard pressed to top the current one. Anyone who disagrees with that clearly doesn't understand the issue very well IMHO.
Sorry for the length of this post, but I had to get this off my chest.