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.

[elbucko]

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

Will result in the deepest economic depression that this country has ever seen. An NST will make the 1930's seem like the .com '90's.

[Melpomene]

WSJ is a subscription paper. You have to pay for it.

[Willie Green]

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

It's a straightforward examination of how their oversimplified, snake-oil panacea actually works.

All consumption taxes, including sales taxes, discourage consumption.
And the burden of taxation will fall most heavily on those on the lower rungs of the economic ladder because they must devote a larger proportion of their earnings to purchasing "necessities" (food, clothing, shelter, medicines). The so-called "fair tax" falsely promises to remedy this inherent burden by entrapping them in cradle-to-grave "tax rebates" from the Social Security Administration.

[Bigun]

Fundamental tax reform is long overdue. Consumption taxation is the way to go. The FairTax is a reform every Democrat who cares about equity should love. And it's a reform every Republican who cares about efficiency, transparency and growth should champion.

This bears repeating at EVERY opportunity!

[Diamond]

The NRST would discourage individual "consumption" of real property.

Well, at least real property consisting of new homes. All you would have to do to fix the inequity is exempt new homes from the NRST.

Cordially,

[numberonepal]

Now, now. You and I have gone over this at length. That wasn't a personal attack. I was a philosophical attack. For those interested see this thread to see where this same argument started.

[Atlas Sneezed]

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

---

Unless you are using a Democrat dictionary, "regressive" means that poor pay more than the rich. I don't know many poor folks who buy more stuff than rich folks.

[kellynla]

says who? you? LOL
gotta come up with some better documentation than your word!

[numberonepal]

I should read "It".

[Diamond]

...the burden of taxation will fall most heavily on those on the lower rungs of the economic ladder because they must devote a larger proportion of their earnings to purchasing "necessities" (food, clothing, shelter, medicines).

Ok. Exempt foods, medicines and clothing, too. Is there still a problem?

Cordially,

[groanup]

Will result in the deepest economic depression that this country has ever seen. An NST will make the 1930's seem like the .com '90's.

You're joking, right?

[beekay]

seems to me the politicos are just looking for a way to tax the savings of the boomers an second time. the paid tax when they earned the savings and now they will pay a tax when they spend it. sounds like double taxation.

[Judith Anne]

Bump for the NRST NOW!!!!

[Willie Green]

Unless you are using a Democrat dictionary, "regressive" means that poor pay more than the rich. I don't know many poor folks who buy more stuff than rich folks.

Regressive means that they must spend a larger proportion of their resources simply to acquire necessities: food, clothing, shelter, medicines. Therefor, placing a tax on these items is much more burdensome to lower incomes citizens than it is to those who are more affluent and have greater discretion and choice over the utilization of their resources.

[OB1kNOb]

Fair Tax = Oxy Moron

[Eagle of Liberty]

the burden of taxation will fall most heavily on those on the lower rungs of the economic ladder because they must devote a larger proportion of their earnings to purchasing "necessities" (food, clothing, shelter, medicines).

Um....everyone is reimbursed on necessity expenses up to the poverty level under the NRST.

[alnick]

Tenants pay NRST

Based on what? I don't think rental property would be taxable under NSRT.

[elbucko]

Is a sales tax the best way to tax consumption? Notwithstanding some enforcement concerns, my answer is yes.

Oh really? Analyze this:

"The Omnibus Budget Reconciliation Act of 1990. Controversy arises from ambiguities in the determination of tax liabilities for the automobile, boat, aircraft, jewelry, and fur industries."

Portions of, and finally all of this "consumption tax, had to be repealed because it was a job killer. Companies that made boats and private aircraft had to lay off skilled craftsmen. Whole companies had to declare bankruptcy. If you people think that the NST is the road to tax payer nirvana, you need a new Guru.

[Willie Green]

Ok. Exempt foods, medicines and clothing, too. Is there still a problem?

The only problem is that the NRST shills will flame you because they can't raise enough revenue without taxing those items.

[Wolfie]

Doesn't have anything to do with how much you buy. Its what percentage of your income you're taxed on.