(Remember: These facts refer to America, not other countries)
1. Deflation-with the current income tax system, items are taxed at every level of production. This means that at each level, the company has to see the product for higher prices to offset the cost of the taxes. Thus, by the time the product reaches the consumer, the product is significantly more expensive than it has to be. With the fairtax, these taxes will not occur and thus, the companies will have no need to offset the taxes and the price of the product decreases. Thus, the item is only taxed ONCE and the tax is paid on the product at the end of production, so the consumer is the only one who pays the taxes.
2. Increased home and used item sales-with fair tax, only new items will be taxed. Thus, all preowned home, cars, and other items will be tax free unlike with the current system. With this information, a person can conclude that it will then be easier to purchase a preowned car or home. Also, thrift stores will prosper.
3. Increased Revenue-according to fairtax.org , revenue in the United States will increase by 352 Billion dollars in the first year of enactment and this number will increase as time progresses. This is because everyone, including drug dealers, prostitutes, and illegals, will pay taxes even though they do not right now.
4. Most people will pay less in taxes-according to fairtax.org , people in ALL walks of life will pay less, in total, to the government by the end of their lives.
5. Elimination of the IRS-The IRS is known for its aggressive tax collection methods. Let us not forget the IRS scandal earlier this year where the IRS targeted conservative organizations. Adopt Fairtax, this organization dies as well as all the money the government puts in it(decrease in expenses)(two birds, one stone).
6. Simplicity-Fairtax will only require ONE simple form, the prebate form, to be completed as opposed to the dozens of complicated forms that must be completed with the current income tax system. This simplicity will increase revenue simply because there is a lower likelihood of mistakes and fraud.
7. People have control-with the current system, people get punished with being put into a higher tax bracket for working harder and getting more money. Fairtax ensures that you only pay taxes when you buy goods and services. Thus, the people have control.
8. Less government competition in the economy-The Fairtax Book by Neal Boortz does a wonderful job of describing this problem. Here is what the government can do now-the government can offer a service, one that is already offered by a private company mind you, tax that private company, and use those tax dollars to fund the government service. Thus, the government puts the private sector under, this is due to how the income tax system is set up. With Fairtax, both companies pay taxes which makes the competition more fair and reduces the profitability of the "service" for the government.
9. "The best poverty fighting tool devised in this country since the concept of hard work"-The poor get an immediate 25 to 35% increase in their take home pay. Furthermore, there is the factor of deflation which makes the products cheaper.
10 industry returns!!!!-With the removal of the corporate tax rate, the same thing that causes inflation, American based companies can be more profitable which will bring industry back which will 1. lower unemployment and 2. create a demand for jobs which will increase wages(The Fairtax Book)
Well... this is just a few of the benefits and I will happily bring up more next round if I need to but I think this successfully shows:
1. The flaws of the current system
2. The benefits of the Fairtax system on our economy
Return To Top | Posted:
2013-11-13 03:27:22 | Speak Roundadmin (CON)
I thank my opponent for opening their case.
The fair tax posits that an equal tax paid by all is fair. It's one step away from a flat tax, except that it mandates a little government charity via prebates, which is spending as opposed to income. Behind this facade, the entire actual "tax" part is a flat tax.
I'm going to structure my rebuttal thematically, but it should be obvious I haven't missed anything. I think most of pro's claims are just based on misunderstandings of high school economics.
Pro's claim is that with the fair tax, you spend less and the government gets more. This is a violation of the law of diminishing returns and is economically impossible. Pro needs to explain which alternative it is - will the government get more or the people give less?
Inflation comes in two forms: demand pull (more money, less stuff, ie Great Depression - cf J. Keynes) and cost push (lack of alternative competition, ie 1970s oil shocks - cf M. Friedman). Inflation causes price increases over time. It's not caused by the corporate or any other tax rate, as these do not nominally increase over time. A one off drop in prices due to governments taking less taxes from suppliers is not deflation, it's a reduction in the costs of production. Companies are free not to pass on those savings to consumers, and even if they did it would not be a trend but an event. The offset cost must be less than the cost of the sales taxes. This disadvantages small business who currently enjoy tax subsidies by forcing them to offer their goods at a higher price, and advantages big monopolists as their corporate tax rate is currently higher than the FairTax's sales tax. So basically more poor people go to McDonalds to eat and less to the organic local food market.
Earning more does not mean working more. Proof of this concept is in the fact residual income exists. Even if it did, the assumption that everyone has equal opportunity to work does not hold. Taxes should reflect ability to pay and contribute to society, as opposed to consumption which is inherently regressive (poor people being able to save less).
Just because government competition is monopolistic doesn't mean its bad. The private sector isn't inherently better than the public sector.
Drug dealers aren't going to declare sales taxes on illegal drugs. Doing so would be telling the government that they are dealers, and giving up a part of their money that they don't have to. Literally nowhere in the world that has sales taxes has ever caught all of their drug dealers via tax records, and there's no reason to think American dealers would be that stupid.
I'm sure the current system can be simplified and the IRS pacified. That's no reason to change the tax system, just the particular implementation of that system.
Demand for jobs already exists, just ask 99% of unemployed people if they'd like a job. When employment is high, people have more money, creating demand pull inflation. Conversely if inflation is low, unemployment is high. There are a few very specific exceptions to this, but in the short run this relationship always holds true. Pro needs to decide if the immediate impact of the FairTax will be massive inflation or massive layoffs.
Middle Class Pay More
Americans have a struggling middle class. This is the crux of the entire debate.
I argue that tax should be most borne by those most able to pay. The reason for that is that tax is basically a way for society to meet its burdens, but by contributing more than one is able, one becomes more of a burden. Thus, regressive taxes (those that hurt the rich more than the poor) are counterintuitive.
To give an example, assume that there is a flat tax rate of 50% on all consumption. A poor family who spend $10,000 a year now have to spend $15,000 a year. This is problematic because they might only earn $12,500 each year, thus having less but spending more. A wealthy family might earn $1,000,000 a year but only spend $100,000. They still spend 10 times more than the poor family, but do it with only a tenth of their total income. So if they all of a sudden have to spend $150,000 a year, they're not going to care about it all that much.
So a flat tax is regressive. It hurts those more who are at the lower end of the scale.
This is where the prebates come in. Let's assume, for argument's sake, that the prebate system works absolutely, and that no checks and balances are required (because the FairTax doesn't have any on who gets prebates). In that case, the poor have this spending offset. So they'd still be able to afford stuff. The tax might be slightly regressive on them, and strongly regressive on the rich, but the harms would be minimised. That's perhaps the strongest point of the fairtax. Rather than taxing people according to their ability to pay (the sensible option), it redistributes money towards those unable to pay to make them able to pay, and then takes that money away again in the form of taxes.
But no such protections exist for the middle class. Those who aren't ultra rich, or ultra poor, but are still struggling, hardworking families looking to improve their lot. And for them, the FairTax has nothing. Sure they keep more of their income, but they have to spend more on all their goods and services. And the flat nature of that relative to their richer friends makes them relatively poorer.
The abolition of import taxes, duties and tarriffs would undoubtedly send the price of Chinese goods through the floor, undermining local businesses who are already relatively more expensive in most markets.
Incentive to Borrow/Spend
Without capital gains, income taxes, business taxes and such, there is a strong incentive to consume more now and sell it off later as a tax-free, used good at a higher price. This creates incentives on banks and the like to offer cheap credit due to high demand, which creates financial bubbles. You could undermine any new competition when you resell simply by exploiting the tax system. The worst place this can happen is land, a market which can destabilize very easily.
The worst part is that since the government makes money when people buy stuff from their country, they have perverse incentives to do things like expropriation of the type that took place in the former Soviet Union. It gives an incentive for enforced global hegemony, like invading Germany to stop their auto manufacturing business. Or arming terrorists to boost weapons sales, in exchange for them not striking the US. When the tax structure of a country itself creates perverse incentives on that government, a country is truly lost.
Most types of immediate consumption right now - the type that the FairTax encourages - are not sustainable. Sure you can produce more beef by factory farming all cows, but the cows will last for only half a generation. This is problematic because the assumption in tax models is that people will keep buying stuff at similar rates - but what if the tax itself causes people to buy more? The government may earn more in the short term, but in the long term it's a recipe for disaster as businesses adapt their practices to meet this demand.
The FairTax is a reflection of the American ideal of consumption. It encourages rich people to buy more and more, to the destruction of the financial environment, while the poor are kept in poverty with high taxes supplemented by handouts, and the middle class are broken by a flat, regressive system that targets them.
That's not security for the people of America. The FairTax is a problem I'm proud to oppose.
The resolution is negated.
Return To Top | Posted:
2013-11-16 01:22:11 | Speak Round