Flat taxers recognize two things that sales taxers do not:
1. A sales tax and a flat tax are economically equivalent. Going forward, they will affect the economy in the same exact manner.2. A sales tax has severe negative implications at transition that may be elimanated with proper transition policies.
And as a general matter, flat tax advocates seem to have a much better grasp of economics. They tend not to simply cut-and-paste arguments that they don't understand from sales tax advocacy sites.
And as a general matter, flat tax advocates seem to have a much better grasp of economics. They tend not to simply cut-and-paste arguments that they don't understand from sales tax advocacy sites.I agree with you. Anyone who says the Flat Tax is not a consumption tax doesn't understand the economics of the situation. Most FairTax supporters don't understand the difference between a consumption tax and a sales tax. There are other (better) ways to tax consumption, namely the Flat Tax.
And as a general matter, sales tax advocates seem to have a much better grasp of history. They tend not to simply cut-and-paste arguments that they don't understand from flat tax advocacy sites.
Flat taxers recognize two things that sales taxers do not:
1. A sales tax and a flat tax are economically equivalent. Going forward, they will affect the economy in the same exact manner.
Too bad that the reality is they or only "economically equivalent" in the sense that they do not tax re-invested income and thus have a similar size taxbase. For a given static consumption level both will return the same tax revenue. The equivalency fails however in accounting for changes in consumer/investor and business behavior under a retail sales tax replacing all income & payroll taxes as opposed to a flat tax on business income with a SS/Medicare payroll tax.
Refer ==> Flat Tax as Seen by a Tax Preparer
by Vern Hoven
Unfortunately the fact is that tax related overhead cost of business are significantly higher on all businesses in the chain of production with a Flat Tax with both business income and payroll taxes in place, overhead cost not present(do to repeal of said taxes) under a retail only sales tax system administered by the states.
The primary cost burdens on business associated with a retail sales tax are those of retailers collecting and remitting retail taxes from their customes to be remitted to their state same as they do currently, though under the FairTax legislation being reimbursed by up to 20% of sales taxes collected up to the first $200 a month, and by 0.25 basis points thereafter which ever is greater.
Today business is not compensated for the acting as the tax collector for government that it is. Nor are they compensated for tax remittences under the Flat Tax.
The nasty that Flat Tax proponents totally space out is that the overhead costs to business are just as great under the Flat Tax as the income tax it replaces, and the Flat Tax does zero as regard SS/Medicare payroll taxes. Thus prices receive by producers under the Flat Tax version of equivalent "consumption tax" must of necessity be driven upward. Instead of falling as in the case of a retail sales tax system that allows the price received by the producer to decline from the savings in tax system related costs on business.
2. A sales tax has severe negative implications at transition that may be elimanated with proper transition policies.
A nice generalized statement, perhaps you would like to expand in some detail on that, as there are numerous transitional provisions in the FairTax to provide for the worst of such problems.
Among them are: