Classic Robert Gauntlet Tournament: The current tax system should be replaced by the fair tax.

Many thanks, once more, to Wylted for this debate. It's surely been interesting. In this round, I'm going to respond both to his constructive arguments and to his third round rebuttals. In Response to PRO's case: "Against the IRS" PRO's argument begins with a criticism of the IRS, and a poll to demonstrate that point. But, that people are dissatisfied with the IRS doesn't mean that FT (a specific kind of tax reform) should be adopted. Maybe the tax code does need to be changed. Maybe it doesn't. My burden here is only to show that whether the tax code is flawed or not, FT shouldn't replace the code we've got now. "A Simpler Code" As I've shown in the previous round, PRO's argument that FT simplifies things is without merit, but let's explore that point in more detail. FT is a simplification only to the extent that the burden it places on individuals when they file their taxes is comparably less than the status quo. When considering the impact that FT will have on the economy, wages, inflation and prices the magnitude of that burden is shown to be far more than PRO's made it seem. As I've stated in the previous round, at best the middle class is financially exactly as well off as they are now under FT, but even that's not accounting for the massive transition costs and similarly assuming 100% compliance. (1) Moreover, in positing that FT is simpler, PRO fails to account for the transition costs that necessarily follow from the status quo to the FT's implementation as much as he ignores the logistical problems of collection. As Bartlett (2007) explains, "massive evasion is inevitable with [FT] because all revenue would be collected at just one point in the entire economic system... final sales." (1) The impact, then, is that the "well developed reporting requirements for income that has been in place for many years and withholding of taxes to ensure compliance" is abandoned, and replaced under FT with a system which "makes the tax collection process very fragile" because it eases the extent to which tax evasion is possible and reduces the enforcement power for collecting taxes generally. (1, 4) It cannot be, then, that FT is "the best known available solution to the current system" as PRO argues because by collecting taxes only at the point of final sale, as FT proposes, FT is collecting taxes at the retail level which is empirically the level of "greatest evasion." (1) "More fairness, less loopholes" PRO contends that politicians "don't like [FT] because they can't reward their friends, [etc.]..." in considerable error because, once more quoting Bartlett (2007), there is no possibility that the FT or it's rebate "would be free of future political manipulation, as politicians decide that some groups deserve something extra and others deserve punishment - just as is the case with the tax code today." (1) And moreover, as Sullivan (1995) articulates "there is nothing in the history of the federal tax legislative process to suggest that a federal consumption tax would be untainted by special interest provisions." (5) "Revenue Neutral" I'm not really sure why PRO's arguing that revenue neutrality is a reason to adopt the FT, because even if it were true, if the tax system is revenue neutral than taxes are not lowered (which is bad if you're a Republican and lowering taxes is something you want) and also not raised (which is equally bad if you're in the business of making the wealthy pay their 'fair share -whatever that may be). But, what PRO doesn't realize is that FT is only revenue neutral if it achieves (a) 100% compliance for all those kinds of new taxes on things that weren't previously taxed like new houses, labor services, food (in some states), medical care and supplies, government transactions and the like and (b) people spend 100% of their annual incomes -which, as I explained in the previous round, just doesn't happen in all cases because as income rates go up, percentage of consumed income drops -and would probably drop even more because taxes on final sales would disincentivize consumption. (1, 4) And it's a but myopic to assume, for reasons mentioned above, that there could even feasibly be total compliance and even if there was, the burden of taxing all goods and services at the point of final sale would almost necessitate economic recession, barring some kind of intervention by the Fed which, even if it did happen -would make no one better off in PRO's world vs. the status quo. "23% Tax Burden" This is just not true. As Bartlett, quoting Linder and Chamberliss (here writing in the WSJ, 2007) explains, "In reality, [FT] is not 23%." This figure is arrived at "by calculating the tax as if it were already incorporated into the price of goods and services... think of it this way: if a product costs $1 at retail, [FT] adds 30%, for a total of $1.30 Since the 30-cent tax is 23% of $1.30, [FT] supporters say the rate is 23% rather than 30%." But even still, the impact to young adults who are in the process of establishing themselves is staggering, in that it unfairly penalizes "those who may need to borrow and consume heavily... by buying their first cars, first homes and all the furnishings that go with them, and possibly pay for the costs of child rearing as well." (1) Likewise, implementing FT would effectively leverage an insidious form of double taxation on those who saved their income at a time when income was taxed. (1) "Corporations are leaving" There is no evidence that even if corporations are shifting out of the United States, that the cause of their leaving could be remediated by implementing FT. PRO hasn't substantiated that point, because the evidence he offers only shows a marginal impact of what corporate taxes under the status quo. He's not offered anything that could lead us to believe that (a) those corporations which have left would come back, (b) that more corporations wouldn't leave for other reasons due to unanticipated costs under his plan, (c) that the aggregate economic costs of implementing/transitioning to FT wouldn't make the United States a more hostile environment to economic activity generally, or (d) that by requiring retail corporations to act as tax collectors, that their operations wouldn't be catastrophically be cut back, that consumer prices wouldn't increase or that consumption generally wouldn't be harmed because of the increased cost of doing business -any one of which would result in a harm much greater than the fractional benefit of individuals not having to file a 1040. "Banks" Ostensibly, passing taxes on consumption might have the effect of 'taxing' activity of the rich that was previously not taxed. But, if the super rich (those who have enough cash to hide it in Swiss Bank Accounts) have the kind of means to hide their money off shore, it's also probably the case that they have the means to buy (especially expensive luxury) products and high-cost services outside of the United States. FT would create a compelling incentive for them to do precisely that, because the super rich would save money by not buying goods and services in the United States. But moreover, there's no reason to think that not only the rich -but everyone- would collectively consume fewer goods and services if a 30% increase was to be leveraged on all goods and services in the US. Rather, there are a whole lot of reasons to assume that economic activity, when consumption is taxed, is going to stagnate whether there's a prebate or not -which is a harm that far outweighs any achievable good PRO's suggested might follow. (1, 2, 4) So, PRO's point about banking holds no water. Brief Response to PRO's most erroneous rebuttals to my case: PRO never actually countered Bartlett (2007)'s explanation that "there is essentially no relationship between the rebate and the cost of living or raising children." (1) He just explained why the rebate would exist under FT, but does not account for divergent costs of living in, say, New York versus Texas. Under FT, both New Yorker and Texan taxpayers get the same proportion of tax rebates paid to them every month -which both does not account for the difference in cost of living between NY and TX and amounts to a universal welfare policy insofar as it grants a literal stipend of cash to everyone without regard to whether they have income of their own or not. Calling welfare a prebate doesn't make it not welfare even if taxes are to be taken out of that check at the point of sale and the stipend is intended to offset those taxes. There's also a real difference between what I've said an what PRO refuted on this point.. I said: "Even still, FT's revenue neutrality rests on the erroneous assumption that "no matter how large a family's income, 100% of it is consumed every year," which is not the case. In reality, the percentage of a person's income being consumed by expenses falls as income rates rise." But he responds by saying "The FT revenue neutrality uses no such assumption. The plan exempts used goods from being taxed. Which is a key indicator that it isn't assuming 100% of income is taxed." I didn't say that 100% of income is taxed under FT, I said that FT is revenue neutral only if 100% of income "is consumed" meaning 100% is spent on taxable goods and services. As I've said before, that's just not the case. (1) (PRO's continues to make a lot of assumptions about FT that just hold no weight when their logical implications are explicated in various impact areas. I'll connect the dots in the next round, but now I'm out of character space. Even still, most of what he's said has been ruled out by implication of what I've said in this and the previous round.) Many thanks to PRO for this debate and all judges. I'm out of character space now... lol Another Source: (5) "Flat Taxes and Consumption Taxes: A Guide to the Debate." Martin Sullivan. American Institute of Certified Accountants. (1995)