Tuesday, March 16, 2010

Thoughts on the FairTax

The main complaints about the FairTax are that it is not progressive enough and that it would lead to a large black market.

People often say that the FairTax in not viable politically because the people who currently do not pay income taxes would never support it. But many Americans believe that the rich do not pay taxes and so the FairTax might appeal to these folks. Ask blue collar people if the rich pay taxes, you may be surprised. Some of the problem comes from the media who love to report that people like Ross Perot, who get most of their income from municipal bonds, pay no taxes but the municipal bonds only allow the holder to pay, through lower interest rates, taxes to local governments at a slight lower rate than they would pay to the federal government.

Here Erikson and Althaus say
On economic issues the fully informed electorate is more supportive of free-market solutions and opposed to government services. Yet the informed electorate is also more supportive of taxation. Not only would "full information" push redistributive preferences generally rightward; the biggest push would be among the poor, perhaps unexpectedly... The net result of greater awareness would not simply be a more conservative electorate economically, but also one with smaller class divisions. This is far from the vision of liberal reformers.

This would be another reason that the people might like the FairTax.

Replacing the income and SS taxes with an NST could work given…

Road taxes are already collected that way.
Most funding for fire, schools, courts and police work is from local government taxes.
Agricultural subsidies are vote buying schemes we could do without.

Seeing that the rich live much longer than the poor it would be sensible to re-work SS so that everyone gets the same amount of money. This could be done in such a way as to reduce the cost of this program. SS is already less progressive than most Democrats would want.

Medicare funding is also regressive and makes no sense since in the current formulation Gov. does not have much pricing power and since the least effective medical care spending is that spent on old people and, again, since the rich tend to live much longer than the poor, we might be able to set up a system that any American can get medical care from Gov. less that Medicare costs today.

Documentation on the living much longer than the poor:

For here in this multi-deprived inner city area, the average life expectancy of a male is just 53.9 years. In Iraq, after 10 years of sanctions, a war and a continuing conflict, suicide bombs and insurgency, the average man has a good chance of making it into his 60s; the life expectancy of a male there is 67.49. In Iran it is 69.96, in North Korea, 71.37 and in the Gaza Strip it is 70.5.

Our military budget has not yet been brought in line with the fact that the USSR is no more, it could be greatly reduced.

The black market in alcohol cigarettes and gasoline seems small and the tax rates for these are high.

Economists estimate that small business owners only pay 70% of the taxes that they are required by law to pay and farmers only pay 50%.

But the change over is very risky and may be politically unfeasible, much of the above spending cuts may not be politically feasible

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