[SolidSupplySide]

And ignoring the massive evasion an income/payroll tax system north of 40% does create. Once again you fail to compare apples with apples and oranges with oranges

One of the benefits of income taxes is the cross-reporting which reduces evasion to a great degree. There is no cross-reporting in a sales tax. That's why they turn into VATs.

[ancient_geezer]

There is also plenty of evidence from every single continent on what a sales tax becomes when its rate gets too high: A VAT!

And what do you say of a tax system that its authors note is a VAT with income tax from its very design?

 

http://waysandmeans.house.gov/fullcomm/106cong/4-11-00/4-11kotl.htm

"Robert Hall, one of the originators of the proposal(Flat Tax), who describes his Flat Tax as, effectively, a Value Added Tax. A value added tax taxes output less investment (because firms get to deduct their investment.)"

"The Flat Tax differs from a VAT in only two respects. First, it asks workers, rather than firm managers, to mail in the check for the tax payment on that portion of output paid to them as wages. Second, it provides a subsidy to workers with low wages."

 

The Flat Tax; Chapter 3, by Robert Hall and Alvin Rabushka

• Here is the logic of our system, stripped to basics: We want to tax consumption. The public does one of two things with its income—spends it or invests it. We can measure consumption as income minus investment. A really simple tax would just have each firm pay tax on the total amount of income generated by the firm less that firm’s investment in plant and equipment. The value-added tax works just that way. But a value-added tax is unfair because it is not progressive. That’s why we break the tax in two. The firm pays tax on all the income generated at the firm except the income paid to its workers. The workers pay tax on what they earn, and the tax they pay is progressive.

• To measure the total amount of income generated at a business, the best approach is to take the total receipts of the firm over the year and subtract the payments the firm has made to its workers and suppliers. This approach guarantees a comprehensive tax base. The successful value-added taxes in Europe work this way.

• The other piece is the wage tax. Each family pays 19 percent of its wage, salary, and pension income over a family allowance (the allowance makes the system progressive). The base for the compensation tax is total wages, salaries, and retirement benefits less the total amount of family allowances.

[Conservative Goddess]

"One of the benefits of income taxes is the cross-reporting which reduces evasion to a great degree."

It is also a system that penalizes hard work and investment, eviscerates the 4th Amendment, results in lien and levy of private property for failure to pay, results in countless hours of lost productivity, instills fear and loathing into otherwise perfectly rational adults. The Founding Fathers are spinning in their graves. Why do you defend the indefensible?

[Kellis91789]

"One of the benefits of income taxes is the cross-reporting which reduces evasion to a great degree."

Really ? One shudders to think how bad it would be if not for all those 4th-Amendment-violating cross-checks. The current IRS "tax gap" is $350B -- more than 40%. And that doesn't even count criminal activity.

On the other hand, 85% of retail purchases are made through 15% of businesses. These are the Wal-Marts, etc. which are not going to assist consumers in evasion of a Sales Tax. They have too much to lose. So even if the other 15% of purchases all evaded the FairTax, it would be much less than under the current income & payroll taxes.

Keep in mind, the current tax system requires only a single person to fail to evade it -- they just don't report it. That would be the self-employed in any number of businesses. Under the FairTax, it requires at least two people -- the seller and the buyer.