I understand you are asserting various benefits from the FT proposal but that is not what I believe will be the result since I have fundamental disagreements on exactly how the income tax affects American industry. Should I adopt your understanding I might well agree with you.
I particularly disagree as to the benefit of VAT and believe them to be terrible for the cities particularly. Jane Jacob has written about this in, I believe, Cities and the Wealth of Nations.
Exports from the US have no sales taxes in them as do exports from Europe which is why taking them out is not an extra incentive to their exporters. They have the other taxes which are common to both like RE, payroll embedded.
Nor are exports affected by income taxes. When imports reach the consumer they face the same sales taxes which domestic production faces.
A VAT will not benefit us wrt to China. It cannot change the impact of the worldwide division of labor which China bases its policy on. We can never compete with China in the production of small value, low technology and low skill items our work force is too highly paid for that.
I've learned a great deal from the economist papers posted in this debate on other threads by the FiarTax supporters and the FairTax opposers. I suspect I may know some of what you refer to when you say "fundamental disagreements". Regardless, I've come to the conclusion that many economists have issues regarding understnding the dynamics because of certain "economic principles" which they consider true, and are in most models, do not lend themsleves to the dynamics involved in the FiarTax implementaion.
For example: One such principle, which I mentioned earlier, is the concept that matching payments for payroll taxes are paid for by the wage earner in the form of lower wages, not by the consumer in the form of higher prices. Certainly, in a model predicting the effect of rasing the payroll tax, that principle applies fairly acurately. However, applying that principle to predictions of how eliminating the existing tax code and replacing it with a consuption tax, will lead to a flawed conclusion. In the case of the FairTax, unless the gross wages are increased by the amount of eliminated payroll tax, you can not treat the payroll tax as being paid by the wage earner. Therefore, the traditional, and generally accepted "economic principle" for other uses does not apply to the FairTax discussion.
I could also imagine you consider embedded taxes to not be a significant issue in determining prices. However, reduced costs by the elimination of the corporate and payroll taxes, in a competitive market, would arguably result in a reduction in price directly in response to the reduction of cost. This would allow a direct reduction in the price of exports. Thus, either the FairTax CREDITS exports, or the old system TAXED them. Either way you look at it, the FairTax is a net advantage in terms of competitiveness of American manufaturers and exporters.
I particularly disagree as to the benefit of VAT and believe them to be terrible for the cities particularly. Jane Jacob has written about this in, I believe, Cities and the Wealth of Nations.
You've intrigued me. Could you possibly post some exceprts relevant to our discussion?
Exports from the US have no sales taxes in them as do exports from Europe which is why taking them out is not an extra incentive to their exporters. They have the other taxes which are common to both like RE, payroll embedded. Nor are exports affected by income taxes. When imports reach the consumer they face the same sales taxes which domestic production faces.
I think there is the potential miscommunication in that you seem to be thinking in terms of the EU and its member states equating to the US and its states. And I seem to be thinking of the US equating to each EU member state.
As I see it, France does not trade with Nebraska, France trades with the United States. The United States does not trade with the EU, the United States trades with France.
You seem to be making the assertion that since the EU does not charge a border VAT, neither should the US, and since it's the member states that apply the EU VATs, it equates to our state sales tax and cancels out. Please correct me if I misunderstand your approach. However, if I am right, I think the approach is flawed in terms of your conlcuding existing tax equity, if for no other reason, the EU VATs are significanly more that our sales taxes, especially given some of our states do not even have a sales tax.
A VAT will not benefit us wrt to China. It cannot change the impact of the worldwide division of labor which China bases its policy on. We can never compete with China in the production of small value, low technology and low skill items our work force is too highly paid for that.
I have heard and read some good arguments that suggest that the defining issue in regards to Chinese competition is not the labor rate, as it is similarly low in other parts of the world, but due to their artificially pegging their currency to ours. I may stand corrected, but I hardly think you could make the case that the FairTax would not counteract at least some of the detrimental effect of China's not floating their currency. And even if there is no net effect in terms of international competition (for the sake of argument), there would still be an advantage under the FairTax, in that domestic sales of Chinese imports would at least share in a greater part of the Federal Tax burden.