Distribution implies that someone has all the capital and gives it away to others. Who has all the capital? The govt?

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http://www.fairtax.org

Elminate all taxes on income and replace with a national sales tax.

My opposition to Fair Tax is that it's an overly simplistic idea, that falls apart even on cursory examination.

Which is why you can't explain where the tax burden shifts with the "Fair Tax".

If someone pays less, someone pays more. Clearly the wealthy pay less under the Fair Tax than they do now, and you point out the poor pay less.
That leaves the middle to pay more, to make up for the revenue loss.

I understand that tourists will pay more, but that only increases the cost of a US vacation compared to a vacation in another country, this will reduce tourism in the US, and increase foreign vacations for both US and foreign tourists.
I understand that teenagers with minimum wage jobs will pay more tax, but won't they then get the prebate?
I understand that illegal "under the table" workers who don't pay income taxes now will pay taxes, but I don't see where this will offset the huge reduction in taxes on the wealthy, these are generally the lowest paid workers.
I see that some taxes will be collected from "Criminals", but I don't see the Fair Tax being collected on illegal drug sales, or prostitution or illegal gambling.

If I make a million dollars a year in Seattle, why wouldn't I have a home in Canada, and do my shopping there?

And this crap about embedded taxes being removed so the price of goods would fall, assumes that your boss will keep payroll tax and reduce your salary by the amount of your current income tax, to pass that on to consumers.
So which is it, does everything go up 30%, or does everybody take a cut in pay and things only go up enough to cover the huge tax savings of the wealthy?
And the 30% rate is only good if you assume no tax evasion, and no change in spending habits, a more realistic rate would be 40%.
BTW, only six countries have ever attempted to collect a sales tax over 10%, and all of them experienced such widespread tax evasion that they had to scrap their plans and go to a VAT or an income tax. Is it your theory that Americans would never cheat on a Sales tax?

__________________
“ The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state.”

Adam Smith , The Wealth of Nations 1776

"We have always known that heedless self-interest was bad morals; we know now that it is bad economics"
FDR's second Inaugural Address

Goober, you continuously state that price ratios will greatly shift. Foreign goods to domestic, the price of new goods relative to used goods and so on. The fact is that the incentives people face under the "Fair Tax" are equivalent to the incentives people face under the income tax equivalent so often quoted. There will be differences in things like tax evasion and the efficiency of the tax collection process but beyond that the differences are theoretically nonexistent. The question becomes whether a shift in the tax burden would cause these things to happen. The sale of used items would would only go up if there was a significant decline in "after tax income" due to the shifting tax burden.

Strangely enough the easiest way to look at the "Fair Tax" is to consider the income tax equivalent. First comparing the current situation to the income tax equivalent, then comparing the income tax equivalent to a sales tax equivalent.

Its not hard. Those who pay more are those who are currently paying none at all, namely those evading taxation. If you want to know how it works in detail, there is plenty of research.

http://www.fairtax.org/site/PageServ...t_research_tax

All of your criticisms have already been addressed with scientific research. How does someone avoid paying tax at McDonalds?

__________________
http://www.fairtax.org

Elminate all taxes on income and replace with a national sales tax.

Market forces will drive salary and consumer prices just as they do now. The Fairtax will create a labor shortage as businesses get in line to move here and operate tax free, so the law of supply and demand dictates wages will rise.

There is no need to assume spending habits will change. Prices will adjust to the same level they are now. Producers could theorhetically try to keep the new profits left by the gap created by the Fairtax, but history and common sense tells us this won't work.

Tax evasion under the Fairtax? Any system will inevitably invite fraud, but it will be much more difficult under the Fairtax. Now, to cheat on your taxes, it only requires fraud on the part of the individual. With a consumption tax, you'll have to enlist the cooperation of the retailer who has no incentive whatsoever to become involved.

Pretty much all Americans pay a sales tax to their state now. I'd be interested to hear about any examples of people cheating on their state sales tax. Again, its pretty much logistically impossible, especially without the cooperation of the retailer. Why would a retailer involve herself in this when she has nothing to gain?

I'm also interested in hearing more about these ten countries that implemented a system resembling the Fairtax. Did they replace all other federal tax collection systems with a consumption tax like the Fairtax would? Which countries did it and when? Links please.

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-Eric

"For whoever habitually suppresses the truth in the interests of tact will produce a deformity from the womb of his thought." -Sir Basil H. Liddel-Hart

Self-composed.com

Goober, the substance of your post (what little there was), has been addressed by me several times, by others several times, and by EAL and jviehe above. I realized from the beginning you wouldn't consider the evidence, but I was hoping I could get you to at least admit to yourself how very little liberals are actually interested in the social causes they get so worked up about.

You're not willing to help the comman man by providing him with a simplified tax code. You prefer to keep him saddled with one he neither understands, nor that he can afford to hire help in understanding so that he, too, can avoid taxes like the evil rich.

You're not concerned about regressive taxes on the poor and minorities, because you champion a system that accomplishes both.

You're not concerned about the environment because you insist on a society that's not "like Cuba".

You're not concerned with unemployment or a strong US economy. Even the FactCheck article recognizes our economy would boom, and employment and wages would go up.

In fact, the only thing you really seem concerned with is that those who make more money than you be appropriately punished. That doesn't really sound like the "party of compassion", that sounds like the party of wealth envy.

In Massachusetts we have a 5% sales and use tax.
It's a standard part of a business audit to check receipts for equipment purchased out of state, because if a business buys equipment out of state it's supposed to pay the Commonwealth 5% of the purchase price as a use tax in lieu of Sales tax. And they catch businesses cheating everyday.

Meals tax fraud by restaurants is huge.

I don't think you'd have a problem with Walmart.
But small businesses would make a serious dent in collections.
Cash businesses would avoid a bundle in taxes, they do now, and there's no reason to believe that with a 30% tax the rate of cheating wouldn't soar.
The FTRS (Fair Tax Revenue Service) would be every bit as big as the IRS, and just as intrusive.

If you seriously want to look at a state that limits taxes and spending, check out New Hampshire. They have no income tax and no sales tax and sky high property taxes. But high property taxes get collected, because everyone registers their deed, if they don't, they don't own the property and if they don't pay, the property is auctioned off, it's one of the few taxes that comes close to 100% compliance.
And it's an avoidable tax, if you want to live in a big house in a nice area, you pay big taxes. If you want to pay small taxes, you get a small house in a remote area. The government doesn't have to know anything about you or your business, all they need to know is that the tax is paid for the property.
If you rent, it's up to the landlord to collect enough rent to pay his property taxes, not the state.
The other type of tax they use up there is the specific tax. The tax on tobacco, on gasoline, on operating a business, on gambling, on alcohol, on automobiles, etc.
The big objection is to "Broad based taxes", like sales taxes and income taxes.

So if you are serious about low taxes and efficient government, why not investigate the state with the lowest taxes and most efficient government, instead of getting behind a plan that would be a total non-starter there, because it's a broad based tax.

The key to efficient tax collection is to collect it at a very few locations.
You collect federal excise tax on beer at the brewery, not from every guy who walks into a bar and orders a Bud.
You collect gasoline tax at the petroleum depot, not at the gas station.
You set up toll booths on a highway, you don't ask people to keep track of how much they use the Turnpike and send you a check.

Here's the other thing about specific taxes, they are not only easy to collect, they are highly visible, which makes it politically more desirable to limit spending than to levy additional taxes.

__________________
“ The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state.”

Adam Smith , The Wealth of Nations 1776

"We have always known that heedless self-interest was bad morals; we know now that it is bad economics"
FDR's second Inaugural Address

There is no reason to believe that changing the tax rate would cause a an increase in domestic business. Firms would face a tax burden that is similar to the burden they face now. Income tax is a tax on the wage earner by the nature of how the markets work. Wages would stay the same. People would just shift taxation from the time they received the money to the time they spent the money.

It is not history and common sense that tells us that it won't work. It is that the maximization process that firms go through will be the same before as it will after. There is no reason to expect anything to be different. Firms should be maximizing before to the same extent that they are maximizing right now. Perhaps, on second thought, it is common sense that tells us prices and wages will remain constant. History, however, plays an insignificant role.

The retailer has an incentive to evade taxes. In fact if they have a low markup they have a substantial incentive to evade taxes. Whether tax evasion would increase or decrease is up for debate.

There is really no such thing as voluntary governments. Governments, by their very nature, is unnecessary when a desirable outcome occurs naturally.

Disregarding property rights issues and contract enforcement (the natural extensions of each) and other efficiency issues, I question how you can believe that people will adhere to "natural law". I would expect that many people would disregard the welfare of others when making decisions, knowingly and willingly harming people for their own personal gain. Given that throughout history people have frequently done such things on their own accord it would be naive to think that they would do anything else.

No actually it would not. It would stay the same relative to the income tax equivalent. The income tax equivalent is probably close enough to the current tax rate that any change would be minimal. It would certainly not be 30%.

The idea is to force the govt to compete fairly with private businesses. And this doesnt change. The govt currently collects income, social security, medicare taxes from its own employees. They pay an employee $40,000, collect 20% of that, and then pay the employees out of what the budget,in essecence taxing themselves. The fair tax does the same thing. Were it not to, the govt would have more purchasing power than the citizens, and drive prices down artificially.

Prices would of course not go up 30%, as all prices gain the benefit of eliminating hidden taxes. Embeded taxes are removed, sales tax is included, and so prices are basically the same (actually a bit lower).

__________________
http://www.fairtax.org

Elminate all taxes on income and replace with a national sales tax.

What I don't understand is why a lower tax has to create more jobs.

I can see how it could but I don't think it really has to work that way at all. Where is all this growth coming from ? Who is financing it ? What demand will it satisfy, all because existing business is paying less tax - maybe they just take more profit and invest it in china ? I am sceptical.

No you don't want government to compete fairly with business. The point of government is not to be another competitor because if the market functions effectively there is no need to have government involved. If the market does not function properly then the addition of another competitor would not change it.

If you assume that taxation is done instantly beyond places where government tries to act like a business there is no difference between having the government pay sales tax and having a mechanism that exempts them from it. When the government spends money they take the dedicated to taxes from their department and put it into tax revenue. The delay may play a small factor by reducing government revenue but beyond that giving government departments tax free status would not change anything.

I also don't know that economic theory has anything obvious to say about what will happen given the change in the tax rates. Any decreases in the prices are due to greater incentives to work. I would expect that you are right though.

Lower tax means that people keep a higher portion of additional income. The marginal benefit of working increases hence the demand for labour increases. This causes employment to increase. By the same token it would hamper employment of low income individuals because they are taxed at a nonzero rate under the "Fair Tax".