Jump to content
Objectivism Online Forum
Sign in to follow this  
nemethnm

Fair Tax

Rate this topic

Recommended Posts

Yes and no. certainly the level of parasitism is the same. (BTW they do it that way because they figure that reforming taxes AND cutting the size of government in the same bill-which they would like to do--is unmanageable now.)

But why do they figure that? Sure, rolling back taxes and government size to 1899 levels cannot happen overnight. So why not cut existing taxes and government expenditures equally by, say, five or ten percent each year?

But right now the income tax as it currently exists causes companies and individuals to make otherwise irrational decisions to reduce their tax load. Money is sunk into otherwise unproductive "tax shelters." The structure of our corporate taxes actually encourages multinational corporations to leave the US (a US company is taxed, by the US, on profits it makes here and abroad, and must pay the other country's taxes as well on the profits made abroad; a foreign company doing business here ONLY pays US tax here and the foreign tax there).

We certainly don’t want our businesses leaving “the land of the free” for better climates. Nor do we wish to discourage foreigners from buying our products. But who would want to come shopping in the U.S. when the sales tax soars to 20 or 30%?

A sales tax would not be paid by corporations AT ALL (though it would be collected by those who sell things in the US) and thus this country would be the largest tax haven in the world. Companies locating here and producing goods for export would pay zero, zip, nada taxes on what they export.

America would be a tax haven for all the world’s non-spenders. Come here, and as long as you never buy anything you won’t have to pay a penny in tax. (Just consume the goods you bought before the Fair Tax went into effect.)

Also the hundreds of billions of dollars spent on complying with the minutiae of the internal revenue code would vanish.

What do you mean “vanish”? Would it disappear from bank ledgers?

The tax bite out of our economy would be the same percentage, but it would be distributed in a more uniform, less arbitrary manner, making it less destructive to the economy as a whole.

I do not see why taxing purchases is any less arbitrary or destructive than taxing earnings. What is the good of not being punished for getting rich if you turn around and get punished for spending it?

Share this post


Link to post
Share on other sites
But why do they figure that? Sure, rolling back taxes and government size to 1899 levels cannot happen overnight. So why not cut existing taxes and government expenditures equally by, say, five or ten percent each year?

They figure simply reforming the tax code is hard enough. For this go around. Later we can start making cuts. And OBTW that will be easier when people can see, via the tax, exactly how much their government is costing them.

We certainly don’t want our businesses leaving “the land of the free” for better climates. Nor do we wish to discourage foreigners from buying our products. But who would want to come shopping in the U.S. when the sales tax soars to 20 or 30%?

You're missing one important point--the cost of producing the goods we buy includes a bunch of imbedded (i.e., passed-along) income taxes. Those costs would disappear and the price of things (before the sales tax) would drop. Granted probably not 23%, but quite a lot. And the costs of complying with the corporate and personal income taxes (estimated at $600 billion per year) would go away completely. The aggregate cost of goods and services across the whole economy would drop by that much, guaranteed.

The people pushing the fair tax proposal do admit they expect that most companies would cut peoples' gross pay somewhat in order to be able to lower their prices. I suspect most people would get to take home their full pay--and that means no income tax withholding AND NO SOCIAL SECURITY WITHHOLDING--but then see a 15% or so increase in prices. The employer's share of SS and the money the employer is paying to jump through IRS hoops and mandated bookeeping, could be saved by the employer, and ultimately would show up as price reductions.

OTOH, I could imagine getting hired at some other job by offering to work for less gross, but more net (since the difference between the two would become zero) than the people they are already employing, who demanded their entire gross, during the transition.

America would be a tax haven for all the world’s non-spenders. Come here, and as long as you never buy anything you won’t have to pay a penny in tax. (Just consume the goods you bought before the Fair Tax went into effect.)

...also based on the assumption that that tax would simply show up as an increase in current price levels, rather than replace hidden taxes built into our current price levels.

What do you mean “vanish”? Would it disappear from bank ledgers?

Sloppy of me. I meant that that particular utterly unproductive cost of doing business would go away. Savings would be passed on to the consumer OR re-invested.

I do not see why taxing purchases is any less arbitrary or destructive than taxing earnings. What is the good of not being punished for getting rich if you turn around and get punished for spending it?

It is the fact that the income tax has so many exemptions, exceptions and loopholes that earning money in Manner A is taxed and earning money in Manner B is not (or at two different rates), or if you spend money in one way, it's tax deductible and if its spent in another, it's not. It costs money and time to figure this out and oftentimes encourages money to be invested in ways that would otherwise be completely silly (just look, right now, at the tax subsidies for ethanol). That is what I meant by "arbitrary".

And destructive because the bookeeping involved is much more complex than for a sales tax, and the $600 billion cost of doing so is simply a parasitic drain on the economy--it does neither the businessman or the government any good.

The fair tax applies, at the same rate, to every purchase. Thus tax considerations *will not* affect where you spend your money *but* they might give you an incentive to *invest* rather than save. Investments are not taxed, not when you buy them, and not when you sell them.

(Not that it matters to us Objectivists, but the complaint that the poor would be taxed on the necessities of life would be handled, NOT by exempting the necessities (which would eventually lead to gourmet food and ski condos, really a luxury, being tax exempt), but by simply sending everyone, and I do mean everyone, a check each month which rebates the sales tax they would spend, spending money at the poverty level. This means the government would have to know how many people are in your household, but they would NOT, contrary to Bruce Bartlett's assertion (he clearly knows better and is thus a f***ing liar), need to know anything about your income or spending habits. If the poverty level for your household, given the number of people in it, is $12,000 per year, you get a check for $230 (23% of 1000) every month. Even if you are Bill Gates. It's called the "prebate." Actually most likely you'd get a debit card which would get that much deposited to it every month; cheaper that way. This would allow "the poor" to live tax free. It's not Objectivist by any means but there is no way the plan--to not tax profits and productivity!!!!--could be sold without it in today's political climate.

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

×