Saturday, February 8, 2014

The Fair Tax

Here are some great reasons why we should have a fair tax (nationwide consumption tax):

What it is:

-It is a nationwide consumption tax (23%) on new retail goods. There is a monthly rebate paid out eligible families in order to offset the increased tax burden poor people would face. 

Economic reasons:

-Replaces corporate taxes, income taxes, capital gains taxes, payroll taxes, etc. The OECD has found consumption taxes to be the among the least harmful taxes on economic growth (corporate and personal income taxes being most harmful).

-Savings aren't taxed! Savings are the source of long run growth as they promote investment in capital goods which ultimately boost productivity and raise the standard of living for everyone!

-The Beacon Hill Institute estimated that within five years real GDP would increase 10.7% over the current system, domestic investment by 86.3%, capital stock by 9.3%, employment by 9.9%, real wages by 10.2%, and consumption by 1.8%. (1)

- Economists Laurence Kotlikoff and Sabine Jokisch reported the incentive to work and save would increase; by 2030, the economy's capital stock would increase by 43.7% over the current system, output by 9.4%, and real wages by 11.5% (2)

- Economist John Golob estimates a consumption tax, like the FairTax, would bring long-term interest rates down by 25–35% (as more money is saved, the cost of money (interest rate) declines, promoting investment which is actually supported by savings). (3)

-An analysis in 2008 by the Baker Institute For Public Policy indicated that the plan would generate significant overall macroeconomic improvement in both the short and long-term (4).

-The Beacon Hill Institute concluded that the FairTax would save $346.51 billion in administrative costs and would be a much more efficient taxation system (5)

-Princeton University Econometrics surveyed 500 European and Asian companies regarding the effect on their business decisions if the United States enacted the FairTax. 400 of those companies stated they would build their next plant in the United States, and 100 companies said they would move their corporate headquarters to the United States (6).

-Studies by Kotlikoff and Daivd Rapson state that the FairTax would significantly reduce marginal taxes on work and saving, lowering overall average remaining lifetime tax burdens on current and future workers.[9][54] A study by Kotlikoff and Sabine Jokisch concluded that the long term effects of the FairTax would reward low-income households with 26.3% more purchasing power, middle-income households with 12.4% more purchasing power, and high-income households with 5% more purchasing power (8)

Environmental effects:

-Proponents believe environmental benefits would result from the FairTax through environmental economics and the re-use and re-sale of used goods (used goods aren't taxed)

- Former Senator Mike Gravel states the significant reduction of paperwork for IRS compliance and tax forms is estimated to save about 300,000 trees each year (7)

Illegal immigration:

-Illegal immigrants will now pay taxes and have and incentive to become American citizens in order to receive the tax rebate.










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