August 18, 2004

Questions I Forgot to Ask

from - smijer

I don't want to give the wrong impression here (wrong impression = smijer is gullible), but I was impressed by Mr. X's ability to answer my challenges on the fair tax. The answers were fair-minded, if a bit vague. I certainly sympathize with the view that extra administrative costs that accompany income taxes are undesireable. I can see, in principle, why an added luxury tax is not desireable. We can collect more tax from luxury items, according to theory, if we charge the same tax as everything else, because luxury items will sell better without the tax. If they sell better, more people can be employed making luxury items. Win/win. That's kind of vague, though. I'd like to see the specific models. After all, there are only so many people who are even potentially in the market for some types of luxury item.

Anyway, I forgot to ask a few challenging questions. So I'll ask them now, even though I know there is no chance that Mr. X is reading this, and it isn't reasonable to expect the answers from him. If I have a fair-tax advocate out there reading, it's time for you to step up to the plate:

  • A tax on consumption punishes ... consumption. How do we avoid the negative impact on the economy as consumers become more conservative in their buying habits?
  • State and local sales, property, and usage taxes are very regressive. One reason the income tax system must be so progressive to begin with is to offset the effect of state and local taxes. Is there a provision in the "Fair Tax" proposal to take away the right of the state and local governments to collect sales and usage taxes? If not, is there a provision in the "Fair Tax" to compensate for the regressivity of such taxes?
  • Aren't many forms of savings double-taxed? Should seniors, who no longer have a taxable income be put back on the tax rolls at the same rate as everyone else?

    I have a sneaking suspicion that at least some of these answers wouldn't be satisfactory. I wish I had known what the subject of conversation was going to be before last night's dinner.

    ::

    Posted by smijer at August 18, 2004 05:33 PM
  • Comments

    This guy claims that for the current proposal to work government spending has to decrease by 480 billion dollars. I don't see that happening. You can take a look at his full article if you download the pdf. There are 32 pages of his facts and figures guaranteed to keep you and your Fair Tax friends in a lively debate until after the elections and this can die back down.

    univar.jpg Posted by Buck on August 18, 2004 09:36 PM
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