The Case for the 'FairTax'

Wall Street Journal Online ^ | March 7, 2005 | Laurence J. Kotlikoff

[n-tres-ted]

Our tax code is a mess for a reason. Special interests pay for special favors. And with 17,000 pages and counting, there's plenty of places for our politicians to hide the kickbacks. Meanwhile, all the exemptions, deductions, exceptions and special provisions reduce the tax base, which means higher tax rates and smaller incentives for individuals and companies to produce income. And whether the tax breaks are set in fine print or spelled out in bold type, they generally favor the rich, making our tax system less progressive than is generally believed.

No tax system is perfect, but ours is so awful that fundamental reform is the only option. Fundamental reform is not just a necessity; it's also an opportunity to stop taxing income and start taxing consumption. My colleagues and I have been studying income and consumption taxation via computer simulations for some time now. We've found that switching from taxing wage and capital income to taxing consumption can significantly improve economic efficiency and growth. What's more, it can make our tax system much more progressive and generationally equitable.

[n-tres-ted]

Great analysis from an economics researcher on issues related to tax reform for more than ten years. Take a look at why he prefers the Fair Tax to a flat tax; very perceptive.

[kellynla]

Eliminating the federal income tax and replace it with a national sales tax gets my vote.

[Willie Green]

Posing as "tax reform", the NRST (HR 2525) also represents a "land grab" where business interests are favored over individuals purchasing for their own use:

• A family purchasing their own new home for $200,000 pays NRST at a tax-included 23% rate. This means that of the $200,000 paid, $154,000 goes to the seller, and the Gov't receives $46,000 in tax.

• A landlord/investor can exploit the business exemption of NRST and purchase the same new single family dwelling tax free as a rental investment for only $154,000. Tenants pay NRST on rent and Landlords act as tax collectors for the government

• The $154,000 vs. $200,000 purchase price advantage that landlord/investors enjoy over individual personal homebuyers can be expressed two ways:
  • Landlord/investors enjoy a 23% discount compared to the individual personal home buyer.

  • Individual personal home buyers must pay 29.87% more than landlord/investors.

This a significant inequity between individuals trying to buy their own new homes and landord/investors looking to buy the same single family dwelling as a rental investment. This disparity has long term implications affecting the distribution of private property. The American tradition favoring individual property rights is reversed. The NRST would discourage individual "consumption" of real property.

"... legislators cannot invent too many devices for subdividing property, only taking care to let their subdivisions go hand in hand with the natural affections of the human mind. The descent of property of every kind therefore to all the children,...

But it is not too soon to provide by every possible means that as few as possible shall be without a little portion of land. The small landholders are the most precious part of a state."

-- Thomas Jefferson to James Madison, Oct. 28, 1785 -- PROPERTY AND NATURAL RIGHT

[Willie Green]

The NRST is an inherently regressive form of taxation that is truly despotic.

Long term, it would result in a two-tiered socio-economic stratification of our society.

It is not disimilar to a 21st Century eco-feudal system where the corporate aristocracy invest and expand their property holdings completely tax-free, while the serfs are overburdened with the excessive taxation on consumption and persuaded that it's supposedly "fair" because the consumption taxes are redistributed through the formal social welfare system.

[ApesForEvolution]

(((PING)))

[ApesForEvolution]

I'll second that...

[Fan_Of_Ingraham]

Could you post the entire article please?

[ApesForEvolution]

Oh, man...< br >

[ApesForEvolution]

I heard part of an hour of Laura today and she simply is aswesome...

[kellynla]

format PLEASE! my eyes! LOL

[numberonepal]

Long term, it would result in a two-tiered socio-economic stratification of our society.

Still spouting the commie line, huh Willie. Haven't you been schooled on this point already?

[numberonepal]

Get out the bump list.

[Valpal1]

It ain't the tax code, it's the spending.

Cut federal spending in half and watch the tax code wither. The purpose of the byzantine tax code is to confuse and redirect the energies of the taxed while congress snarfs and spends.

Replace it with NST and nothing will change, we will still be overtaxed and overburdened and congress will still overspend. While lobbyists promote "fine tuning" the system for their own benefit.

[Eagle of Liberty]

It is not disimilar to a 21st Century eco-feudal system where the corporate aristocracy invest and expand their property holdings completely tax-free, while the serfs are overburdened with the excessive taxation on consumption and persuaded that it's supposedly "fair" because the consumption taxes are redistributed through the formal social welfare system.

Interested in how you came to that conclusion. Please explain.

[Willie Green]

Still spouting the commie line, huh Willie. Haven't you been schooled on this point already?

Still launching personal attacks instead of addressing the issues I raise???

Well, that's all you NRST shills are good for anyway.
The sales tax proposal is so bogus, that's all you really have to fall back on, isn't it?

[kellynla]

Thank you!

[willgolfforfood]

1. When the Democrats realize that the rich cannot evade paying this tax with tax shelters and fancy tax accountants and lawyers, then they will be for it.

2. When the Republicans realize that the tax is regressive, and taxes the poor at substantially higher rates than the current tax system, then they will be for it.

3. Very soon, EVERYONE will be for it!!

[ancient_geezer]

A Taxreform bump for you all.

If you would like to be added to this ping list let me know.

John Linder in the House(HR25) & Saxby Chambliss Senate(S25), offer a comprehensive bill to kill all income and SS/Medicare payroll taxes outright, and provide a IRS free replacement in the form of a retail sales tax:

H.R.25,S.25
A bill to promote freedom, fairness, and economic opportunity by repealing the income tax and other taxes, abolishing the Internal Revenue Service, and enacting a national retail sales tax to be administered primarily by the States.

Refer for additional information:

• http://www.fairtax.org,
• http://www.salestax.org &
• http://www.geocities.com/cmcofer/ftax.html
• http://pafairtax.org/calc.php