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Mountain River

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(Fair Tax vs. Income Tax): Which is better?

We are already taxed heavily based on consumption. Somehow, the idea of a fair tax of 25% is still terrifying to many of us. Why? The unknown is scary! Also, we already have a working system. We know that the economy can thrive under the current tax system when it isn't tampered with.

The idea behind the fair tax is to erase the possibility of the tampering occurring. I admit, I'm quite frightened by the 23-25% trade tax it requires, but the model has promise.

Perhaps there is a fear that it wouldn't provide as much revenue for the government as the combined Income tax & trade tax, and put the nail in the coffin on our economy. I think it is a good idea. It just seems like the intuitively better choice to give the people their full income & tax on spending.

I'm sure there must be some economics literate people here that know statistics. I have a hunch that the GDP could be used to provide an accurate estimate of how much revenue the "fair tax" could produce. That's without figuring in the revenue raised by higher incomes...

What are your thoughts TED?

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    Oct 3 2011: If I understand the following component of the flat tax - one is taxed on purchases of new items, not second hand - so one could buy second hand if an item's price and its tax are too high.

    It might improve our collective critical/creative contemplations of our needs.
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    Oct 6 2011: Commercial culture is locked into the goal of ever increasing growth. Government bodies for some time have thought of themselves as being similar to commercial bodies, so set themselves goals of growth and consumer manipulation rather than delivery of the necessary services. This has given us an ever increasing tax burden to support an ever increasing bureaucracy.

    A simple tax system would do away with a significant amount of bureaucracy. It would also do away with a lot of jobs related to collecting tax, managing tax collecting bodies, and advising ordinary people on how to pay the right tax rather than too much tax.. So there is a lot of people with a vested interest in keeping taxation complicated. The issues are much less to do with tax logic than the will to do away with the power and jobs which a complex tax system has created.
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    Oct 3 2011: consumption tax is cool, but today's ridiculously high taxes cannot be practically collected with a single tax form. in hungary for example, if you want to maintain the size of the central budget, you would have to set a 50-60% VAT. considering the current culture of tax evasion, it would lead to massive black markets and diminishing collected tax.

    consumption only tax at rate of 10-15% is very desirable, but it means an order of magnitude smaller central budget. something most people would not approve.
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      Oct 3 2011: All true, but a consumption of 25% could theoretically end the recession. There's no way to avoid it. Not only would it eliminate the "how much should we tax the rich" problem, but it would eliminate fraud as well.

      Everyone at any given moment, would have to pay taxes no matter what. Legal or alien... everyone. Sure, it would mean a radical change in the markets, but it could potentially solve all our problems!

      There is one looming problem though... such a high tax rate could hurt businesses that purchase products in mass. At the same time, the business owners wouldn't be taxed thousands at the end of every year. Another kind of tax break could potentially level things out there I imagine.
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    Oct 3 2011: Fair Tax, flat Tax, Income Tax, etc. Let people pay for what they want when they want it. I have seen taxes do nothing but go up in my life time over and over again and the governments just spend like there is an unlimited pool of money. If the people in an area want a new freeway let them give the government the money for that project and that project only. Make contractors charge only what the bid for the job and no more. No ups and extras, no changes to the job once it is started from either side of the project. Finally, no taxes to support those who can work but refuse to do so. Let the churches, charities, and others get the money some way besides the government taking it from hard working people.