This is a good analysis, as far as it goes. But there are other effects of going to the fair tax. One of which is that over 80% of corporations, worldwide, would build there next facility in the U.S.. Because of the reduced labor and production costs. 20% would relocate their headquarters here. Also employment cost for US employees would go way down. $500,000,000.00 a year in income tax compliance expenses would disappear as well. That would increase the profits of US corporations as well. They could then distribute those profits to their owners, or use them to increase productivity or even hire new employees. All these things above wold be good.
BWS >>The proposed Fair Tax would be constitutional, unlike the income tax, and the >>constitutionalists among us should support it for that reason. However, it >>does have some flaws, which should be pointed out. First, it is only on tangible trade objects, not on services, and this is now mostly a service economy. That is one of the main arguments for the income tax, that it reaches to services, which would not be justly or feasibly taxed. The personal income tax is unconstitutional precisely because it is a tax on labor, the fruits of which are a natural right. The estimates of 30% are only valid if services are not included. A better way to frame an alternative tax is not as a sales tax, but as a purchase tax. In other words, not a tax on the vendor, for what he sells, but on the purchaser, for what he purchases, which could include services. Thus, while it would be unconstitutional to tax a laborer for his labor, it would not be unconstitutional to tax an employer on the wages he pays. This may seem like a dubious distinction, but as a matter of constitutional theory, it makes all the difference. If this were done, the rate for an equivalent to the personal and corporate income taxes would be in the order of 17%, in part because much of the black or gray economy that now escapes taxation would be taxed. Conceived as a purchase tax, it makes no sense to have tax-exempt entities seek a rebate or refund, which only makes sense if it can be applied as a credit on other taxes. That is why tax-exempt entities now present credentials to that effect and don't get the tax added to their purchases at the checkout counter. The same system would work for a purchase tax, imposed on the purchaser, but collected by the vendor. There is, however, a constitutional problem with compelling vendors to collect a purchase tax on the purchase, because there is no power delegated to compel anyone to do that. Only to pay taxes imposed on them. One workaround could be to impose a higher purchase tax on purchasers that don't collect purchase taxes on the things they sell. Then the taxes on what was sold would be credits on this tax. A practical effect of this would be to provide employers an incentive to hire workers, by effectively reducing the cost of labor for them, because they would get full credit on the taxes on labor purchased from the taxes collected on their sales, rather than just deductions on their net revenue. As has been pointed out, the net prices of most goods and services would probably wind up being about the same, after eliminating personal and corporate income taxes. The major change would be a reduction in the overhead of tax accounting and collection, and the costs and risks to employers of hiring workers. The result would likely be a net gain in employment rates and compensation for wage workers, offset by reduced demand for the overhead work that would no longer be needed. So I support proposals like this as a way to move us forward. Obviously, libertarians would prefer not just to make taxation constitutional, but to reduce the revenues diverted to the government, and spent by it. A Fair Tax, or a purchase tax, would make people much more conscious of how much tax they are paying, and thus build a constituency for reducing them. That is perhaps its greatest value for the ultimate libertarian goal of smaller government, and constitutional government, which happen to coincide. -- Jon<< ------------------------ Yahoo! Groups Sponsor --------------------~--> Fair play? Video games influencing politics. Click and talk back! http://us.click.yahoo.com/VpgUKB/pzNLAA/cUmLAA/KlSolB/TM --------------------------------------------------------------------~-> ForumWebSiteAt http://groups.yahoo.com/group/Libertarian Yahoo! Groups Links <*> To visit your group on the web, go to: http://groups.yahoo.com/group/Libertarian/ <*> To unsubscribe from this group, send an email to: [EMAIL PROTECTED] <*> Your use of Yahoo! Groups is subject to: http://docs.yahoo.com/info/terms/
