Some of the reasons I believe the FairTax is better than the Flat Tax:
1 - Under our current system, as well as under the Flat Tax, the taxes are levied at the production level, and increases the costs of our goods before they go to market. This happens throughout the entire production tree resulting in American made products having a cost burden of all the corporate, income, and SS taxes paid through production. This effectively puts a tax on our exports, and although it is not treated as an export tarrif (which are expressly forbidden by the Constitution) it accomplishes the same thing, and makes our own exports less competitive than if we taxed at the point of consumption rather than during production.
In fact, taxing income is WORSE than taxing exports, because it not only accomplishes the same effective tarrif for exports, it effectivly puts that tarrif on ALL American made goods, even if sold domestically. Other countries (China being a big one) are able to insert their products in American markets without being burdened by Federal taxes. That is the exact oposite of protectionism. Both the current system and the Flat Tax are effectively protectionist measures for everyone else at America's expense. The FairTax shifts the point of collection from production to consumption. This allows our products to be exported without the burden of federal taxation (consistent with the Constitutional prohibition on export tarrifs). ALSO, it taxes imported goods at the same rate as domesticly produced goods.
2 - Because the FairTax is collected at the retail level instead of the production level, non-retail business will experience an immediate gain by eliminating their federal tax burden, which should have the effect of lowering costs throughout the entire economy.
3 - Forbes tried to sell America on the FlatTax in 2000 and arguably failed. The FairTax, is much more salable. It has been my experience that everyone, without exception, with whom I have discussed the FairTax face to face, were initially sceptical and offered objections, but were quickly and easily won over and persuaded to be stongly in favor of the FairTax... Even several liberal democrats. That is simply not going to happen with the FlatTax.
4 - The FairTax broadens the tax base relative to the Flat Tax. The FairTax would collect tax from foreign (legal or otherwise) visitor's consumption, who are imune from taxation now. Criminals and others who do not report thier income would be taxed on their consumption. This dynamic would shift some of the Federal tax burden off of American's an onto those who are benefitting from being here but not taxed under our current system or the FlatTax.
5 - The FlatTax leaves the system in place that began as a simple system, open to further manipulations that resulted in the mess we have now. The FairTax repeals large amounts of code, and seeks to repeal the 16th ammendment, making it once again, unconstitutional to have a Marxist income tax.
Believe me, I'm seeing the differences.
I thank you and others for your patience in explaining those differences to me.
Interesting points. Thanks.
"In fact, taxing income is WORSE than taxing exports, because it not only accomplishes the same effective tarrif for exports, it effectivly puts that tarrif on ALL American made goods, even if sold domestically. Other countries (China being a big one) are able to insert their products in American markets without being burdened by Federal taxes. That is the exact oposite of protectionism. Both the current system and the Flat Tax are effectively protectionist measures for everyone else at America's expense. The FairTax shifts the point of collection from production to consumption. This allows our products to be exported without the burden of federal taxation (consistent with the Constitutional prohibition on export tarrifs). ALSO, it taxes imported goods at the same rate as domesticly produced goods."
Great post, OHelix. That is one of the most cogent and comprehensive explanations of the benefits as far as international trade is concerned that I have seen.
Here is a litle exerpt from Saturday's Atlanta Journal Constitution "S.C. county's port plan runs into stormy seas"
"At stake is a proposed $350 million container port to handle the explosion of international trade, mainly from China.......... East coast container traffic is predicted to double over the next 15 years."
Our trade deficit is now at an all-time high and continuing to grow. Our tax system is a major contributing factor to that situation. Of course, neither the WTO nor any of our trading partners could raise a legitimate objection if we addressed this issue by passing the FairTax, since we could point out that we would be taxing our own produced goods the exact same way that we would be taxing theirs.
Globalization is THE economic megatrend of the first part of the 21st century. It is absurd in this environment to continue to operate with a tax system that penalizes our own producers in this way.