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.

[expatpat]

Here we go again!

[Eagle of Liberty]

For some reason they believe achievers should be the keepers of others. I do not understand or tolerate this mentality in the least.

I am in total agreement.

[Eagle of Liberty]

already with the "exemptions/rebates! how long before the politicians errode those "reimbursements" into nothingness?

And your grand solution to tax reform is?

[phil_will1]

"All consumption taxes, including sales taxes, discourage consumption."

And all income taxes discourage production. Given that economists are virtually unanimous in their concern that our rate of savings and investment is too low, how would you propose addressing that without affecting consumption?

[Eagle of Liberty]

If you're paying 23% sales tax for a widget, and you earn $30,000 per year, the sales tax is taking a bigger bite out of your income than if you earn $100,000 per year. That's regressive.

You haven't read the whole plan.

What is your solution?

[elbucko]

I don't care if they tax all of my consumption if I get all of my income.

If that is the case, then you will have less gross income then you net now, and the government will also have less gross revenue. That's the real world effect of an NRST.

[numberonepal]

already with the "exemptions/rebates! how long before the politicians errode those "reimbursements" into nothingness?

How long before some government employee tells me that I have to pay a higher percentage than those that earn less than me or they'll come after me with a gun?
How long before they drain my bank account because they think I haven't paid enough?
How long before I have to sit in jail because some government employee thought that my production would better serve someone I don't know?
How long before some government worker decides that the money I have somehow been able to keep away from them will serve someone else (not of my choosing) after I die?

[Ditto]

It's obvious you didn't read the article.

[phil_will1]

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

Hey, Willie, how is your proposal to replace corporate income taxes with import tariffs coming along? How many supporters do you have for it so far?

[camle]

count all income as income. tax everybody at the same rate. simple and really fair. more like Steve Forbe's flat tax.

[Eagle of Liberty]

I've also suggested lowering the tax rate instead of offering rebates. (Rebates are taxpayers money the government shouldn't have taken to begin with.)

I do like this alternative, but I agree that gub'mint does like to make some people eternally dependent. Unfortunately, you will always have those in society who have absolutely no drive whatsoever. What is the proper way to handle them?

[elbucko]

And all income taxes discourage production.

No they don't!

There is a paradox involving taxing income vs taxing consumption.

[numberonepal]

That's the same thread I liked to above in post 26 where Willie Green and I had an in depth discussion. It was a great thread and a must read for everyone concerned with taxation.

[numberonepal]

If you're paying 23% sales tax for a widget, and you earn $30,000 per year, the sales tax is taking a bigger bite out of your income than if you earn $100,000 per year. That's regressive.

Boo frickin' hoo.

[Principled]

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

The tax code and it's method of collection minimize the pain of paying taxes.

Eliminating withholding would help control spending IMO.

This nrst does that.

[phil_will1]

"Still launching personal attacks...."

"..all you NRST shills..."

Does anyone else beside me see the irony in this?

[camle]

why not tax everybody at the same rate - AND count all income the same (cap gains, dividends, etc.)

[EternalVigilance]

I cast my vote for the FairTax!

[numberonepal]

Hey, Willie, how is your proposal to replace corporate income taxes with import tariffs coming along?

Snicker. You're just mean, man. Mean I say.

[EternalVigilance]

Income taxes, flat or otherwise, are fundamentally flawed from their inception...one of the key planks of the Communist Manifesto.

If you go out into the pasture, find a cowpie, and flatten it, IT IS STILL A COWPIE!