No, if the government gets the same amount of revenue under two different tax schemes, they are REVENUE NEUTRAL.
For a given set of conditions if both systems return the equivalent revenues, they will do so in a dynamic sense as well.
Tax system 1:
0% rate on income $0-80,000
50% rate on income in excess of $80,000 Income = $100,000
Tax Revenue = $10,000
Tax system 2:
10% flat rate on income
Income = $100,000
Tax Revenue = $10,000
These two systems are revenue neutral in that they raise the same amount of revenue. But they are not economically equivalent. The worker under tax system 2 has more incentive to keep working because his next dollar of income is taxed at 10%. Under tax system 1, he would be taxed at 50%. They are revenue neutral but the dyanmics are different.
Do you see the difference between "revenue neutral" and "economically equivalent"?
A sales tax and a flat income tax (at the same rate with the same deductions) are "economically equivalent".
"one tax law as it would under another tax law" = "under two different tax schemes"
I see you like to play word games.
A sales tax and a flat income tax (at the same rate with the same deductions) are "economically equivalent".
Only problem is no-one is proposing a flat income tax with the same taxbase as a retail sales tax replacing both income and payroll taxes.
No if you want to compare apples with apples and real proposals out there, I am interested in doing so. However, what I am not interested in is perpetuating the income tax in any form, whether it be flat or otherwise. We have already been there and done than and a century of experience tells us what a flat income tax becomes.
"A hand from Washington will be stretched out and placed upon every man's business; the eye of the federal inspector will be in every man's counting house....The law will of necessity have inquisical features, it will provide penalties, it will create complicated machinery. Under it men will be hauled into courts distant from their homes. Heavy fines imposed by distant and unfamiliar tribunals will constantly menace the tax payer. An army of federal inspectors, spies, and detectives will descend upon the state."
-- Virginian House Speaker Richard E. Byrd, 1910, predicting the consequences of an income tax.
"A sales tax and a flat income tax (at the same rate with the same deductions) are 'economically equivalent'."
That is one of the more misleading postings that I have seen on FR recently. Here's why.
First, a sales tax and a flat income tax are forms of taxation, not specific proposals. You cannot measure the impact on the economy of a taxation form, except in the most general conceptual way. Once you define the specific proposals, then you can compare their impact on the economy.
Secondly, although sales tax supporters have generally coalesced around the FairTax proposal (HR & S 25), the same cannot be said for flat taxers. In fact, if you ask many flat taxers what version of the flat tax they support, many cannot answer because they aren't familiar enough with the subject to understand the differences between the various flat tax proposals. The leading flat tax proposal in the house, for example, is the Burgess bill, which I believe is what Steve Forbes advocates. The Burgess bill does not replace a single line of the current mess we have now; it simply superimposes a flat tax option on top of that mess (for individuals only, I believe). I don't know how you could estimate the economic impact of that proposal, since no one knows how many people would elect the flat tax option. Even if you could, there is no way that proposal would duplicate the economic impact of the FairTax. Even Rep. Burgess, when testifying before the budget committee a year ago, said that he didn't know if his bill was revenue neutral or not.
In addition, some of the FairTax's main economic benefits are certainly not matched by any of the flat tax proposals that are out there. For example, by eliminating payroll and corporate income taxes, the FairTax would create price shifts which would make US produced goods more in demand both here in the USA, as well as overseas in foreign markets. No flat tax proposal I am familiar with eliminates those imbedded taxes and therefore would not shift consumer preferences to the degree the FairTax would. Also, because of the migration of SS and Medicare taxes from a payroll base to a broad general tax on the entire economy, the FairTax would address the biggest problem with those programs, which is the demographic time bomb. If we double the size of the US economy over the next 15 years (as Tom Delay has proposed as a goal with tax reform being a cornerstone of that), then we double the base from which we draw SS and Medicare taxes. There is no way that happens with a payroll based system.
Those are just two of several ways that the FairTax is clearly not economically equivalent to any of the flat tax proposals which are out there now.