The "FAIR"TAX

I was not arguing that there is no fiscal responsibility in society today. That responsibility, however, to invest or spend is CONDITIONAL to whatever incentives / disincentives surround someone. A tax on any behavior is the same as a price increase on it. This price change can have strong effects in people's decisions (depending on how necessary the taxed behavior is). Let's note exactly how a switch from the current structure to the fair tax system would affect people in the short run. I'll note which ones I would think are positive or negative :-) 1. People would receive larger paychecks immediately (rather than applying for tax refunds at in April. (positive) 2. People would then be taxed in higher amounts for purchasing goods. (negative) 3. Yields on all investments would immediately increase (positive) 4. Corporate profits would increase making stock yields FURTHER increase (positive) 5. Efficiency in the tax code immediately improves, universally decreasing costs for people (positive) Now, that's a lot of positives in the short term. However, most economists agree that over the long term, society adjusts to any change, so let me now acknowledge that changes that would come inevitably. 1. Stock prices increase to lower yields on investment (negative) 2. Corporate profits decrease because of the competitive responses to profit (negative) 3. Price of goods decreases because of new competition, possibly beneath the prices prior to the shift (positive) 4. Investment interest decreases because more people invest (negative) Why does this happen? New investors are created because the costs of investment decrease and ALL consumers in the US have received dramatically higher paychecks FASTER. This creates more competition in the investment industry, which eventually makes investing less profitable. In some sense, I must acknowledge that those responses undermine my point, however I assert that this is a GOOD thing for our economy. If the rich receive dramatically lower interest on the investments that they WERE going to make, than the cost of investing has actually INCREASED for them. Meanwhile, the cost of investing for the poor is still lower than it was PRIOR to the change in the tax structure. Moving on, the rich, seeing that their financial investments are not reaping the profits they once hoped for, will be forced to either invest in businesses or capital if they wanted to REMAIN rich. The rich will have to become bigger spending consumers in order to stay successful. So, in the end, we are left with the rich spending MORE in the marketplace, and the poor spending less. Even if the poor only spent a small proportion less in the marketplace than they had previously, they still reap the benefits of either lower or equal prices to before while saving more. And the rich who, today, are taxed less when they invest, will eventually be induced to spend in order to earn the same amount today. I apologize for the complexity of this argument, but the true brilliance of the FAIR tax is how the structure will shake up (for the better) the entire structure of our economy today. Today, someone has to FIGHT for their taxed income at the end of each year, and they finally receive it over a year after they earned it. If they had the money earlier, they could have invested it sooner, and that could actually have earned money to improve the lives of the poor or others who live paycheck to paycheck. Worse, if you don't earn a lot of money already, the money often appears not worth doing research to fight for. The cost of getting your own money back actually exceeds the amount you could have earned. The fair tax eliminates that issue COMPLETELY, giving the poor an increase in their income that they would not, otherwise, have had. No matter how much you simplified the CURRENT system, you still are left with a system that hinders investment by taking your money first and paying you back later.