Redstate

A few points from a Devil's advocate:

• An online poll such as this means very little.  The sample is far from random and willing participants are surely disproportionately likely to favor a fair tax.  Of course, calling it a "fair tax" injects bias into the question to begin with.
• I have not seen the answer to the two main criticisms of such a system on this site, mainly that:

1. Black markets will explode.  Indian tribes won't have to settle for gambling and cigarettes, they'll get a killer competitive advantage on all goods.  People will go to great lengths to buy things outside the country where there is no such tax.  There is also the possibility that higher prices will cause a plunge in spending simply because people see higher prices (even if their net income is higher).
   
2. The poorest people would save very little by eliminating the payroll & income taxes , but need basic necessities as much as anyone else.  Exempting these things would complicate things and cut into revenue.  Students, who are already poor, would suddenly find everything more expensive.

I find the overall idea interesting but think the risks of sending the economy into recession are extremely high.

Black markets will explode. Indian tribes won't have to settle for gambling and cigarettes, they'll get a killer competitive advantage on all goods.  People will go to great lengths to buy things outside the country where there is no such tax.  There is also the possibility that higher prices will cause a plunge in spending simply because people see higher prices (even if their net income is higher).

As I recall, I think the folks at Heritage make the same point, and I wouldn't be one to dismiss their fears.

Still, I wonder if perhaps these fears are overblown. For one thing, large providers of goods and services aren't going to be able to evade the tax. Indeed, I suspect its overall simplicity will provider fewer -- not more -- opportunities for tax evasion in the corporate world.

Moreover, why exactly does being taxed on a transaction create a greate incentive for tax evasion than being taxed on wages or earnings? Either way money is going to the government. I mean, under current rules, doesn't, say, a small landscaping firm have some incentive to allow you to pay under the table, because it will lower its tax burden (by decreasing its profits)?

I have a feeling that, had we many years ago decided on a national sales tax, and were only now considering a switch to taxing income, people would be warning about the great possibilities for tax evasion cocomittant with income tax.

As for higher prices, I would expect there to be some initial dampening of consumption, which is the same thing as an increase in savings. And that wouldn't be a bad thing. Moreover, the FairTax's advocates argue, rather concincingly I'd say, that effective price increases are likely to be minimal or non-existent because of the effects of the Grand Switch (from income to consumption taxation) on the overall economy (more savings, better productivity, more growth, more overall prosperity, heightened competion, higher wages, etc).

The poorest people would save very little by eliminating the payroll & income taxes , but need basic necessities as much as anyone else.  Exempting these things would complicate things and cut into revenue.  Students, who are already poor, would suddenly find everything more expensive.

The Fair Tax employs a simple an elegant solution to this, in the form of a universal rebate tilted in favor of the poor. As for the contention that they'd save "very little", well, that's better than zero savings, which is something plenty of poor people have now. Indeed, savings are vital for the poor more than anybody, because they cannot rely on high wages. A radical swich to a taxation system that rewards savings and thrift would be a boon to the poor more than anybody (because, let's face it, the well-to-do already have it pretty good under the status quo). I would agree that exempting particular goods and services (life's necessities) is the wrong way to go, and the Fair Tax eschews this method, in favor of the aforementioned universal rebate. And remember, the Fair Tax gets rid of not only income taxes, but the absurdly regressive FICA tax (as well as other payroll taxes). This really would be a boon to the poor.

As I've stated on this site before, I reckon that a Steve Forbes-style flat income tax would be a vast improvement over what we have now. But I believe the improvements to be enjoyed by getting rid of income tax altogether are ever vaster.

At the time of the election I said it was the single most overlooked, and most promising, thing he said during the campaign. Alas, I was right only on the first part!

Come on Mr. President. Propose the idea. Let's start the debate. Better yet, send the idea to Capitol Hill for legislation.

You would go down in history as America's greatest President.

There's still time!

It is much more than just a consumption tax.

Once you see all of its provisions and effects all backed up by solid economic research and minds, I believe you will see that this comprehensively thought out Legislative package is truly fair.

Leapfrog I appreciate your comments and will do my best to answer your concerns.

1. Your are absolutely right about the CNBC Online poll it is not random and should be only taken as a sentiment of some predisposed viewers of the Kudlow & Comapny.
   
2.  Blackmarket Sales not Taxed ? or Tax Cheaters.

    - In any tax system there still will be tax cheats. Under the current tax system a recent article estimated over $350 Billion in unpaid or underpaid Tax revenue annualy to the IRS. That alone will balance the budget or fund a lot of important programs. IRS estimates that 40% of the public is out of compliance with the current system mainly due to the complexity of the tax code.

   The Fair Tax is more visible and simpler to administer, therefor for the law abiding public, compliance and tax collection will be more accurate and in line.

Wholesalers will simply be required to show who they sold products to without collecting the tax, and the wholesaler must have a federal sales tax certificate on file for that business.  If they sell to the Indian Reservation than the wholesaler will have to collect the tax because he is the final point of sale within the US. ( Exports to foreign markets- no tax)

Enforcement is easier because the number of sales tax returns instead of income tax returns will be reduced by 90%. Only businesses selling products and services will be monitored, not individual tax returns. A Sales tax audit will be much simpler.  Inventory purchases and production numbers matched to sales volume and dollars to confirm correct amount of a flat Sales tax with no loopholes or special complicated provisions.

Much easier for American business both Big and Small.

Most of the volume of Sales will be done by the Big retailers, Wal-Mart, Sears, Target, Home Depot, Lowes, Starbucks, McDonalds, Burger King, Ace hardware, etc.  They all track and pay a vast variety of State and local Sales taxes already.

Their Stock holders and CEO certainly do not want to lose business by becoming tax cheats.

On net we will still have some cheating but because the Fair Tax is easier to comply with and more fair in that it treats everyone the same - net compliance and collection rates will be better than the current system.

"people will go outside the country..."

The Fair Tax is not an add on to current Prices !

Because of the elimination of embedded taxes prices for Goods and services will drop and estimated 22 to 25%; once you add back in the Fair Tax, consumers will only be paying 1 to 2% more than they pay now.  Its not worth the Gas to drive to Canada to buy and come back.

2. Prices are not that much higher and spending will not be reduced for 2 additional reasons;
   
1. Prebate to every family  to cover the sales tax portion of all spending up to the poverty line
   

 Every family of 4 will receive $479/ m to cover(Prebate) the sales tax they will spend up to $24,900 in spending.  No exemptions, no loopholes

2. Families now take home 100% of their paycheck with no federal withdrawal for income or payroll tax. For most families that will be a 30 to 50 % increase in take home pay.

The Prebate system is what helps to make the overall plan FAIR and Progressive.

Maid or a Millionaire a family of 4 gets that $479 to cover all poverty line spending up to $24,900. Every family is treated the same.

The Result after subtracting the Prebate from Federal sales tax paid (on new purchases of goods and services) is a progressive net rate for different income levels.(Fairness)

The working poor at the povertyline are a true 0%  net tax rate with no payroll taxes or income taxes. Taking home 100% of their paychecks.

Those at twice the poverty line about 11.2% after the prebate.

Those at 4 times the poverty line about 17.5%

Those at 10 times the povertyline(Rich?) about 21%

With no tax loopholes or provisions for tax accountants that only the Rich can afford.

Wouldn't you agree that this is a FAIR Tax Reform system?

No Recession but an Economic Boom.  You see Exports to foreign markets do not pay the tax.  Those products will be 22% cheaper on average for sale overseas.  This allows us to compete with low wage countries like Mexico and Chinia with a lower tax structure not lower wages.

Hope this help answer your concerns.

President's Tax reform panel will report at the end of September.

We can only hope that the FairTax gets a big thumbs up.

My Blog is titled "Tax Reform Fair to All"  That comes from

But like the public screaming for Border security in the South West we need the public to Call their Legislators and tell them you like this Fair Tax. Only when the public acts will politicians move.

If Neil Boortz Book is any indication, we may be well on our way.

#1 NY Time Best Seller List- "The FairTax Book"

President's Tax reform panel will report at the end of September.

We can only hope that the FairTax gets a big thumbs up.

My Blog is titled "Tax Reform Fair to All"  That comes from the President's State of the Union where he called for real reform not tinkering around the edges.

http://fairtaxreform.blogspot.com/

But like the public screaming for Border security in the South West we need the public to Call their Legislators and tell them you like this Fair Tax. Only when the public acts will politicians move.

If Neil Boortz Book is any indication, we may be well on our way.

#1 NY Time Best Seller List- "The FairTax Book"