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

I'm sorry that my opponent ran out of time for this round because he seems very knowledgeable and was making very good points. But now I can take the opportunity to respond to some of his earlier arguments. PREBATE The prebate will not be enough to pay for the FairTax on the "necessities of life." According to FairTax.org, the annual prebate for a family of four will be around $5600. http://www.fairtax.org... How far would that go? Well, the average annual health insurance premiums for a family of four is $12,000. At a 30% tax-exclusive rate, the FairTax will add $3,600 to the cost of health insurance (excluding co-pays, dental, unreimbursed expenses, etc.) That's over half of the annual prebate. If that family rents an apartment for $1000 per month (which would be low for most cities), the FairTax on their rent payments would be another $3,600 per year. So, the FairTax on just health insurance and rent would total $7,2000 per year, much more than they would receive under prebate. And, of course, the family would still need to pay for food, clothing, utilities, transportation, etc., etc. The prebate is a gimmic. At most, it would raise the required tax rate (because now the FairTax would need to be high enough to pay for the prebate in addition to normal government spending.) Or, to put it another way, if the prebate averages $5000 per family, that means the average family would see its tax obligations raised by an average of $5000 per year just to pay for the prebate. In other words, the government is taking money out of our right pockets in order to give us money back for our left pockets. Overall it's a wash. There's no such thing as "free money" from the government. We need to pay for it one way or the other. Even if the prebate were increased (which would further increase the required tax rate), it still would not make the FairTax "progressive," for the simple fact that people with higher incomes tend to spend a smaller percentage of their incomes than do the poor and the middle class. (Think Warren Buffet.) So, even if the FairTax "untaxed the poor" via the prebate, it would just push more of the tax burden onto the backs of the middle class and retirees. COMPLIANCE COSTS While I certainly agree that our current tax system is entirely too complex, the Tax Foundation's estimate of $194 billion in annual compliance costs is totally bogus. http://www.taxfoundation.org... Essentially, the Tax Foundation estimates the number of hours each person spends in preparing and filing tax returns, then allocates an estimated "cost" for that time the taxpayer spent in preparing/filing the return, at a rate of $30 per hour. So, it's not real money -- it is imputed costs. We could play the same game with the FairTax, since taxpayers will be required to keep records of each purchase they make in order to document that they paid the FairTax on those purchases, if every taxpayer spent just 5 minutes a day keeping, filing and organizing his receipts, that would be over 30 hours per taxpayer. At $30 per hour, that's $900 per taxpayer. Since under the FairTax, taxpayers will include all 300 million of us, that translates to "annual compliance costs" under the FairTax of $270 billion dollars, or $100 billion more than our current system. Now, let's get real for a minute. For the vast majority of Americans, the compliance costs of our current income tax system is negligible. It takes 5 minutes to fill out a 1040 EZ form, and maybe an hour to complete a 1040A. The income tax only gets complicated for individuals when they have complicated investments, rental properties or small businesses. It would be the same thing with the FairTax. For most people, other than keeping receipts, the compliance hassle under the FairTax would be minimal. But for people that have rental properties or small businesses, the record keeping requirements would be extremely burdensome (just as the are now.) For example, if you use your car for both business and personal use, you would need to allocate the purchase price of the car between (taxable) personal use and (non-taxable) business use, and prorate your taxes. If, during the the next year your personal use increased, you would then need to pay additional taxes on the car. You would also need to allocate taxes for each and every purchase associated with that car -- from insurance, gasoline and car repairs, and be able to evidence the percentage of time you used the car for business use versus non-business use. To get an idea of how extensive this record-keeping would be, take a look the FairTax bill, particularly section 2 and 5. http://www.fairtax.org... The point is: there's no free lunch here. Having said all that, I agree with one thing about the FairTax. It abolishes the corporate income tax, which I believe is expensive, wastefull, counter-productive, inefficient, etc. But we could abolish the corporate income tax without replacing it with the FairTax. We could simply tax capital gains and dividends as ordinary income. COST PER TAXPAYER AND ECONOMIC GROWTH You argue that the cost to the average taxpayer would be lower under the FairTax and that economic growth would increase. But all the studies that support thess arguments assume that the FairTax rate would be only 23% (tax inclusive) and that there would be full compliance. As I've shown in my previous posts, the tax rate would be far, far higher than 23% and there would be substantial opportunities for non-compliance. So the cost to the average middle class taxpayer would go up under the FairTax and economic growth would probably decline. EVASION As I've explained, non-compliance would come in three forms. 1. Legal avoidance by shifting purchases to used goods, business expenses, etc. 2. Illegal evasion through the black-market transactions, misuse of business certificates, underreporting of sales and purchases. 3. Overall reduction of consumption due to increased prices. You simply could not force people to buy taxable stuff. WHO LOSES? You argue that the cost of the FairTax will be borne by illegal aliens and the underground economy. It's a common argument, but if you actually run the numbers you'll find that's not so. Illegal aliens tend to make low wages, don't spend much (certainly not on new homes, cars and health insurance), and send much of their money home. What little they spend on new goods and services would generate less than 1% of required tax revenue. And since most illegal immigrants work at legitimate jobs where they are subject to withholding taxes, they probably pay as much or more in federal taxes under our existing system as they would under the FairTax. The idea that the "one trillion dollar underground economy" would make up for revenue lost under the FairTax is equally misplaced. In the first place, if that entire amount were suddenly spent on taxable goods and services, at a 23% rate it would generate only $230 billion, or around 6% of required revenue. But it wouldn't all be spent on taxable goods and services. Most of it would stay underground -- buying drugs, stolen goods, prostitution and spent in cash transactions that would not be taxed. Even when a drug dealer blows $100,000 on a new Corvette, it wouldn't generate any more revenue than under our current system. Under the FairTax, the car dealer would be required to remit 23% of the sale to the government for taxes. But under our current system the car dealer and manufacturer would pay income taxes on the sale, the salesperson would pay income and payroll taxes on his commission, etc. That's what the so-called "embedded taxes" are, and they allegedly add up to 22% of the cost of the Corvette. Thus, the Corvette sale would generate $23,000 under the FairTax versus $22,000 under our current system. Plus, the drug dealer would get the prebate under the FairTax!