The "FAIR"TAX

Hey Wingnut, I understand your contention with the Fair tax. Yes, the poor spend higher proportions of their income on consumption when compared to the wealthy. The problem with using this logic as a means to argue that the fair tax is bad, let alone saying that it is worse than the unjust system today, is that a tax like this is behavior changing. Understand that a tax is a disincentive for behavior, just as a subsidy is an incentive for other behaviors. The government declares what should be taxed, and what shouldn't. ANY type of tax, in order to be fair, should be one that is universal, and have EXTREMELY rigid circumstances when exceptions might be made (like using the poverty line as a basis for non taxation). Given this, what a tax on consumption does is produce an incentive towards saving your money. This incentive is meant to reach out to all people and promote the very behavior that produces wealth. Let's compare that incentive to today's tax system. Today's tax structure, from a VERY abstract sense, charges citizens an income tax that increases both in dollars and PROPORTION of income as you earn more. Any structure that charges increasing PROPORTIONS (must stress it, sorry) of your income as you earn more will create a disincentive to work harder when a larger proportion of your check will be thrown to the government. The statement that says to citizens is that, "Doing the right thing of working hard is going to cost you". Further, it treats everyone who worked hard to become wealthy like they are the "bad guy" in the country. There is absolutely no fair, ethical basis to tell someone who works hard and earns a lot that they owe the government a larger proportion of their income than that of someone who works hard and earns less. The tax code does not simply tax regular income. It also taxes Capital gains. Capital gains are, in brief, the money you earn from investing money. Now, because interest on loans, earnings from stocks, or profits from selling a house are all income, it seems right to tax it. Economically, taxing investment reduces how much you can earn from investing, which is the equivalent to increasing the COST of investing. So, the government increases the cost of investing, and people earning lower incomes are crowded out from the ability to invest their income as a result. The general conclusion of this is: If you tax investment, only the rich will invest. These two points distort the tax structure in such a manner that punish progress and productivity DESPITE the knowledge that it is best behavior for people to make. Further, the government changes the tax code yearly, making it increasingly complicated. According to the 2006 edition of "How to pay Zero Taxes" by Jeff Schnepper, The Internal Revenue Code was 9,471 pages in 1997 and consisted of 1.3 million words. In 2006, the code was 91,824 pages and consisted of 5.75 million words. As a comparison, he noted the bible is 1,291 pages and 774,746. This immensely complicated code costs the IRS, alone, Billions of dollars to enforce, and costs the country nearly 1/5 of a Trillion in order to COMPLY with the code. These costs could be reduced immensely by changing the code to one that is universal. In Conclusion to round 1, The Fair tax reduces all distorted costs of investment, which, if nothing else, HELPS the lower income groups to save money. The Fair Tax sends the right message to the individual that saving your money and earning more does not warrant punishment by the government, which is a strong incentive for someone to work harder. Finally, the Fair tax will reduce the cost of business and individuals to comply with the tax code which becomes a common savings for the entire economy.