The Fairtax plan will benefit the economy and the majority of Americans (a)

Once the few misconceptions you have regarding the fairtax are cleared up, perhaps your opinion will be improved. 1. I urge the readers to disregard this point, at least for now, because it is an unsubstantiated claim that my opponent has offered no evidence for. The only reason given (later in his argument) is that there would be non-compliance which would result in a much higher necessary tax rate. However, my opponent has not provided any references to back up this claim, and it will be refuted later in this post. 2. My opponent claims that there are many loopholes in the fairtax system that would make it impossible to enforce, resulting in low compliance and ultimately a higher fairtax rate being needed. Again, he does not substantiate these claims here, but provides evidence later in his post. For now I will just say that even if tax evasion increased in certain sectors of the economy, the decrease in revenue would be outweighed by the increase from the realization of taxes from the current black market, under-reporting of legal income, and from economic expansion resulting in a larger tax base. 3. It is true that immediately after implementation, retirees would be adversely affected as well as the middle class. During the transition phase, double taxation will be an issue for a lot of people who spent their lives saving after-tax dollars. However, this is not a valid reason to denounce the fairtax, as the long-term economic health of the nation is more important than a short-lived inconvenience. If this is the main setback for the fairtax, some sort of phase-in mechanism may be necessary to smooth over the transition. Table 11 of Beacon Hill 2007 shows that one decade after implementation, nearly every income level has seen increased utility from the fairtax. Two decades after implementation, every income level has benefited. The reason every income level can benefit with the fairtax is because real GDP is expected to increase, it is only when GDP is static that someone must lose for another to win. . http://www.beaconhill.org... From the Beacon Hill study of 2006: "The first is the major capital gain that the federal government stands to accrue if, as seems likely, the Federal Reserve fully accommodates the introduction of the FairTax and permits consumer prices to rise by roughly 30 percent. That would reduce the real value of nominal U. S. government debt in the hands of the public (many of whom are foreigners) by about $1 trillion. " . http://www.fairtax.org... What they are saying is that if the government expands the money supply to accommodate the fairtax, consumer prices would rise by approximately the same rate as the fairtax. However, an econometric analysis of fairtax implementation found that real prices would fall by slightly more than the fairtax rate. By accommodating the fairtax after increasing the money supply, the government could realize a substantial reduction (about $1 trillion) in the national debt, which may be seen as an added benefit of the fairtax. My opponent now introduces some examples of what he feels are non-taxable items, this seems to be the crux of his argument which he has alluded to several times throughout his post. Used Goods: This argument is only significant during the transition phase of the fairtax, once the economy has adjusted the price of used goods would reflect the price of the new good with the tax. Thus, if a car loses 12.5% of its value each year as suggested by my opponents example, the price of a used car 1 year after purchase for a $52,000 car would be $45,500, so there would still be incentive to buy new. However, during the transition phase, supply and demand should correct the problem on its own. If the demand for used goods were to suddenly increase, the price would also increase accordingly as the supply of used goods is fixed. In fact, sellers of used goods would likely increase their prices immediately after passage of the fairtax knowing full well that the demand will quickly exhaust their supply if they don't. Sellers of used homes would increase their price in response to increased demand as well. Purchases Abroad The price difference is not as substantial as my opponent seems to think. If prices are allowed to increase 30% by increasing the money supply (income also increases due to the elimination of income taxes and unchanged gross pay), the value of the dollar on the world market would have to go down, discouraging Americans from spending abroad . Furthermore, most countries have income taxes and/or sales taxes of their own that directly or indirectly increase the price of their goods. Thus, the monetary incentive to make foreign purchases would be diminished. My opponent seems to think that an American billionaire seeks to avoid paying American taxes at all costs, but has no problem paying French taxes. (France has their own value added taxes which amount to much more than the proposed fairtax) Business Expenses This argument is based entirely on a misconception of the fairtax. All final, new goods and services would be subject to the tax, even if they're being used by a business. The only time a business does not have to pay tax on something is if they show that it is a component for making something else. I don't think I need to refute the specific examples, but the plane, the yachts, the ranch, and the luxury vacation homes would all be subject to the tax and there would be no way to escape. .. unlike the current system, where billionaires can and do write-off planes and vacation homes as business expenses that they don't have to pay tax on. It would not be easy to avoid paying the fairtax, and there is certainly no legal means of doing so. My opponent seems to think that America is a 3rd world nation incapable of enforcing its laws, but I can assure that there would still be federal agents enforcing the fairtax. No business that engages in marketing to the public would be able to escape the fairtax. The IRS currently checks tax returns of some 200 million tax filers, a similar agency should have no problem enforcing the tax for 20 million businesses. .. especially considering its simplicity. Also from Beacon Hill 2006: But the fact that we have not explicitly considered tax evasion does not mean that we have ignored it. On the contrary, we have implicitly incorporated a significant degree of tax evasion in our calculations simply by using NIPA-based projections of household consumption expenditures in forming the FairTax tax base (Easton, 2001). The projections used to predict consumption under the fairtax is already understated because it does not incorporate black market income. There is a substantial amount of money circulating through the black market, but these people still purchase legitimate goods as well. The fairtax would effectively tax legitimate purchases made by members of the underground economy, who currently pay no taxes at all. Furthermore, spending projections do not take into account the expansion of the economy, after the fairtax is implemented, due primarily to the removal of all taxes on savings and the subsequent spike in net investment. My opponent asserts that "whole industries would be wiped out," but this statement seems to be a result of his misconception regarding the fairtax as it pertains to businesses. He failed to realize that the fairtax is applicable to all final goods even if they are bought by a business, and this seems to have been the backbone of his argument. I am a little disappointed that my opponent decided to ignore all of my initial arguments and only address his own points, but I digress