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Source link: http://archive.mises.org/9731/the-flat-tax-is-not-flat-and-the-fairtax-is-not-fair/

The Flat Tax Is Not Flat and the FairTax Is Not Fair

April 3, 2009 by

Two specific tax reform plans that some libertarians have fallen for are the Flat Tax and the FairTax. Both plans promise to invigorate the economy, increase employment, and raise everyone’s standard of living. Neither one is true to its name; neither one is an incremental step toward overall lower taxes. Both are fraught with problems and contradictions; both are revenue-neutral plans that would fund the federal government at the same obscene level that it is now. FULL ARTICLE

{ 138 comments }

Ron@TheWisdomJournal April 3, 2009 at 3:40 pm

Taxation is the world’s biggest bully (government) taking your hard earned lunch money.

Paco April 3, 2009 at 3:48 pm

It’s called the FairTax — that’s a “brand” name (a FAIRly clever one at that – pun intended). It’s not called the PerfectTax.

As a longtime libertarian (and often Libertarian — I voted for Roger McBride in 1976), I don’t look at the FairTax as the purest libertarian approach to tax reform. But it is an approach. An approach that, to me, has one overwhelming advantage over other approaches: elimination of the IRS. For any libertarian, getting rid of the most freedom limiting agency this side of the DEA should be enough alone to support the FairTax.

Now, about the 16th amendment. No, the FairTax bill, if passed, would not repeal the 16th amendment. However, the language of the bill provides that the FairTax would be sunsetted if the 16th amendment isn’t repealed with 5 years (maybe 7, I can’t recall).

Would that guarantee repeal of the 16th amendment? No. So? Currently, Congress can pass a national sales tax of 50% if they want and increase marginal income tax rates to 100% and put a $25 per gallon tax on gasoline and baby powder. This oppostion to the FairTax because, maybe, the 16th amendment wouldn’t be passed is a straw man.

And Matt, (another straw man argument) the prebate has nothing to do with the “government determining what we should be consuming as basic living expenses.” It is an arbitrary amount, derived from the amount of sales tax that would be paid by someone whose income is at some level of median income. Does it really matter whether that income level is $10,000 or $25,000? Bill Gates gets the prebate and Mother Theresa gets the prebate. Please try to think about these things conceptually.

Bill in StL April 3, 2009 at 3:54 pm

Dismantling the IRS is meaningless. The collection of any new tax, be it Fair or Flat, will require an executive agency. Certainly you don’t suppose the citizens will be trusted to send in their taxes on the honor system? Instead of proving your claimed income is accurate, now you’ll have to prove your claimed sales data is accurate. Coupled with the prebate, these conditions dictate an agency just as intrusive as the present-day IRS.

If you really want justice, and can’t imagine life without government protection, push for voluntary funding. Churches manage, charaties manage, and businesses survive by either selling a good or service for a fee, or by contributions.

The church comparison has the added benefit of illustrating how this model would naturally limit government actions to those the citizens felt deserved funding. Sure, politicians would have to spend time raising money for their pet projects, but they’re all a bunch of propagandists anyway, so it should be second nature.

Finally, if you think the free rider problem is sufficient to starve your favorite government projects to the point where you’d favor the reinstatement of taxation, perhaps you should ask yourself if you’re really a statist tyrant.

Paco April 3, 2009 at 4:01 pm

Since this discussion seems to be focused around how many angels can dance on the head of a pin, here is another reason why the FairTax is the perfect tax for libertarians: IT’S VOLUNTARY!

Currently, we are forced to pay taxes anytime we but anything because all products and services contain embedded taxes (corporate income tax, payroll taxes, etc.). The FairTax eliminates embedded taxes (theothretically) and only taxes goods and services once at the ultimate consumer level.

So, if you only buy used items and grow your own food (and make your own liquor/beer/wine) you would never pay any tax. Plus you would get the prebate which should more than cover those few times when you accidently incurred a tax.

Russ April 3, 2009 at 4:04 pm

Paco wrote:

…[the Fair Tax is] (a)n approach that, to me, has one overwhelming advantage over other approaches: elimination of the IRS. For any libertarian, getting rid of the most freedom limiting agency this side of the DEA should be enough alone to support the FairTax.

This argument is what a Randian would call a “package deal”. The IRS could be eliminated *without* instituting a new tax.

This oppostion to the FairTax because, maybe, the 16th amendment wouldn’t be passed [sic, repealed] is a straw man.

No, it’s not. The opposition to the Fair Tax is because, in actuality, it would almost certainly result in 5 (or 7) years of *both* personal income taxation *and* Fair Tax on top of that.

It’s the idea that “Congress can pass a national sales tax of 50% if they want and increase marginal income tax rates to 100% and put a $25 per gallon tax on gasoline and baby powder” that is a straw man.

Lou S April 3, 2009 at 4:10 pm

C. Evans:

To argue that “Crime is sporadic and attacks by foreign enemies are rare” is a justification for no government is like saying “Cancer only affects one in 1500 people so spending money on searching for a cure is a waste”. I am in total agreement with you in that the current state of the government Leviathan in the United States can be described as “dishonest insane and intolerable”, however that answer to this is not ‘NO GOVERNMENT’. It sounds as if you believe that by dissolving Washington all of mankind will suddenly evolve into Mayberry RFD… I’m not that trusting. As long as people own personal property there will be people who will covet that property and see theft as an easier alternative to reaching their means than by honest work. Similarly, in any social situation where a marketplace exists, there will be people who are willing to defraud or otherwise cheat others to forward their means. To not provide the citizens of the social situation (you apparently have issue with calling it a ‘State’) no remedy for these occurances because they occur ‘rarely’ is to invite the formation of posses, or gun-states and allow the people to take the situation into their own hands.

True, the current government has grown completely out of control, the centralization and socialization that is occurring now should be setting off alarm bells all over this country, and we would be much better served by a large-scale stripdown of the current situation as it exists today. But the answer is not ‘NO GOVERNMENT’.

The Founding Fathers of this country struggled mightily with the question of the balance between individual liberty and freedom, and how to provide those governmental services deemed necessary while keeping the growth and intrusion of the government to an absolute minimum. And as soon as the ink was dry on the Constitution, there was dissent as to how to carry it out (see Alexander Hamilton vs. Thomas Jefferson). As much as anyone would want to hit the ‘Reset’ button on this country, these questions will still be there after the dust settles – what kind, how big, and how to pay for it…

I would certainly welcome your views on how to provide those minimum services usually provided by the government by not forming a government or quasi-governmental body. And please include how those services will be funded, and how providing that funding differs from a tax.

Russ April 3, 2009 at 4:10 pm

Paco wrote:

Since this discussion seems to be focused around how many angels can dance on the head of a pin, here is another reason why the FairTax is the perfect tax for libertarians: IT’S VOLUNTARY!

Eliminating personal income tax would be voluntary, too. After all, anybody who thinks that the federal government is not getting enough of his money, can write the federal government a check! *grin*

Paco April 3, 2009 at 4:19 pm

Bill in StL:

Under the FairTax, most citizens never have to send anything in. They don’t even have to claim the prebate. Businesses collect the FairTax and get paid for doing so. I own a business and I am already collecting and remitting sales tax — and I don’t get paid to do it. In addition, I have to collect and pay SS tax, medicare tax, unemployment tax, withholding tax, income tax — should I go on?

Read the bottom of the 1040 that you will be submitting to the IRS, right above where you are required to place your signature:

“UNDER PENALTIES OF PERJURY, I declare that I have examined this return…and it true, correct, and complete.”

If you have made an error or committed fraud (the IRS decides which it is), you have admitted to perjury. If the IRS decides that they disagree with your interpretation of the tax code, the burden of proof is with you in Tax Court. It is the only court where you are considered guilty until you can prove you are innocent.

Again, as a libertarian who has been voting for Libertarian candidates for longer than many commenters on this thread have been alive, I am not seeking perfection. I’m tired of waiting for a libertarian society – a modicum of relief will suffice.

Russ April 3, 2009 at 4:41 pm

I am not seeking perfection. I’m tired of waiting for a libertarian society – a modicum of relief will suffice.

I am not seeking perfection either, Paco. I simply believe that the Fair Tax will not result in what you think it will result in. Here’s what I see happening if the Fair Tax law you support is passed:

1) Let say, for the sake of argument, that the IRS is eliminated.

2) Another, new agency is created to handle the Fair Tax. It also takes over the IRS’s old responsibilities.

3) Fair Tax is added to our current tax burden for 5 years.

4) After 5 years, the government decides they like the extra tax income so much they create a new Fair Tax law that doesn’t have a 5 year sunset. This would be like income tax withholding; after WWII, the gov’t liked it so much they decided to keep it. Then we are stuck with more taxes than ever before.

In short, I think you are being naive. I agree with Mr. Vance’s general thesis: we are more likely to lessen our tax burden by eliminating taxes, than by creating new, different taxes.

Paco April 3, 2009 at 4:43 pm

OK, Russ, I agree. The federal government spends too much and collects to much in taxes. So, what is the optimum amount of spending and taxation – say as a percentage of GDP?

Let’s start at 5%. I personally think it should be lower, but politically, that might be something that can pass. Now that we have that issue out of the way, let’s figure out how the feds should collect 5% of GDP (that would be around $550 billion give or take.

I say we pass a consumption tax, eliminate payroll taxes, income taxes, estate taxes, and every other tax I can think of. Let’s also eliminate the IRS and repeal the 16th amendment so Congress can’t reinstitute a head tax. And to make sure we don’t double or triple tax certain goods or services, let’s only impose the sales tax on new items.

We can also have businesses collect the tax since they are probably already collecting sales tax at the state level, but let’s reimburse them for the cost of collection, to be fair. Also, so that the %$#* government doesn’t tax me and you for existing, let’s reimburse us, and every US citizen, for whatever the amount of tax we typically would pay for basics like food and shelter.

Now, what rate should we make the sales tax so that the government only collects 5% of GDP? I would guess somewhere around 6%-8%. We need to do a little research to figure the correct amount.

One more thing; we need to come up with a catchy name to help pass this new tax reform legislation. I know. Let’s call it the FairTax and see if we can get some congressmen and senators to write and file a bill that could get passed given enough pressure from voters.

Paco April 3, 2009 at 4:59 pm

Russ, you are missing the point. The FairTax eliminates the income tax. Congress would have to reinstitute an income tax in addition to the FairTax. Could they do it? Of course. But (and, au contraire, this isn’t a straw man) they can do it now. Nothing prevents Congress from enacting any tax on anything.

Why don’t they raise taxes to 35% of GDP? Because voters wouldn’t stand for it (at least not yet). This is the same reason they would not be able to reinstitute an income tax in addition to the FairTax. I could be wrong.

BTW, who says passing the FairTax and repealing the 16th amendment can’t be accomplished at the same time? A movement is building in several states to call for repeal of the 16th amendment, in conjunction with passage of the FairTax, through a constitutional convention.

It’s a start.

Russ April 3, 2009 at 5:17 pm

Paco,

Seems like an overly-convoluted plan to me. I like the part about eliminating taxes, and repealing the 16th amendment. But completely restructuring the way the government collects funds makes me nervous. Maybe it’s just my conservative side, cringing at the thought of wholesale social re-engineering. It seems to me that leaves way too much room for the socialists to spin your plan in some unintended and unpalatable way.

Anyway, here’s my alternative. Here is some data I got of the ‘Net; don’t know how accurate is is, but let’s say it’s close:

2008 Projected Federal Revenue
—————————————-
1,146 billion – individual income taxes
275 billion – corporate income taxes
906 billion – social security taxes
81 billion – excise taxes
25 billion – estate and gift taxes
25 billion – customs duties
47 billion – miscellaneous receipts
TOTAL – 2,506 billion

If we hack out everything except corporate income tax and social security (no realistic chance in hell of getting rid of those anytime soon), we have cut out about 50% of the revenue (about 70% if we don’t count Social Security). So there is still enough to run the federal government at a reasonable level, for a libertarian at least. Why add any new tax? What, really, would be the point?

Granted, the IRS may need to stay, to collect corporate taxes, but some agency would need to exist to collect the Fair Tax, too, so what’s the difference?

And, yes, eliminating the government’s ability to inflate the monetary supply and borrow money would need to be reduced, or we will just be taxed in an alternative way, but those are separate issues.

Russ April 3, 2009 at 5:31 pm

Paco,

Let’s say, for sake of argument, that you’re right, and that the Fair Tax law passes and would result in no federal taxes other than the Fair Tax, the corporate income tax and the SS tax (and let’s be realistic, getting taxes down even this far has an almost nil chance of happening). And let’s say my misgivings are unfounded, and that the Fair Tax results in a better financial climate for everyone.

Which is better?

1) Fair Tax + corporate income tax + SS Tax?

2) Corporate income tax + SS Tax?

I would pick the second option myself.

BWM April 3, 2009 at 7:22 pm

Why is it so hard to attack the Fair Tax on it’s own ground if it’s so bad? Every time I read one of these articles, I’m astounded by how little that is done. A flaw of the Fair Tax is that other taxes may aslo be passed? In what way is that possibly a reflection on the Fair Tax? Really, what’s to stop them, RIGHT NOW, from imposing a consumption tax on top of the income tax? Nothing! But they don’t do it, and just automatically assuming that the Fair Tax passage will lead to an income tax is a complete farce. That’s like saying that buying a safe, family car is bad because it might inspire your daredevil brother to buy a tricked-out Mustang and drive like an idiot.

The rate of the Fairtax is 23 percent, and millions have been spent to establish it. And of course, yes, it’s revenue neutral; it’s STILL better than what we have. Libertarians like you who OPPOSE anything that’s not flat out tax elimination prevent progress.

The amount by which prices would drop is clearly and openly admitted to be both unknown and unknowable; they simply state that, together, wages will raise and prices will fall roughly equal to the amount of the tax.

And charging the government the tax is bad how? It simply makes it easier and again tries to cover up loopholes.

And finally, complaining about taxes in general and then pinning those complaints to the Fair Tax is an obvious sophistry. No one is saying that it’s AWESOME to pay money to the government. The whole point, thrust, and design of the tax is to reduce compliance costs and bring investment home; if you think it will fail to do that, then argue that point, instead of accusing it of being “a tax”, like we didn’t know.

The Fair Tax is not income redistribution. Since every household, by definition, would be paying pretty close to the amount of taxes given back through the prebate, no one would actually come out ahead. And since everyone gets the same prebate, even the rich, it’s not just for one class. And it’s only in the bill for one reason; so the poor can actually survive. Would you say the plan would be BETTER if the poor had to pay taxes before they bought food?

Really, why would it be better to argue tomorrow for lowering taxes by an amount less than the compliance costs of the system itself, when we could be arguing to eliminate those costs? That would be a BIGGER boon to the economy. It would bring home jobs and investment. And besides, remember when Bush “lowered” taxes? Right now, the system is SO complicated that you can raise taxes and make them look lower. We need to eliminate THAT ability for tax reduction to even be possible. I suppose you would say we are foolish for quibbling over whether to lay a foundation instead of just going straight to construction as you desire.

Redman April 3, 2009 at 7:33 pm

Folks, the point of Fair or FLAT is a non-starter as most folks in the US do not owe federal income taxes, regardless of what they may think or believe. Earnings derived from activities of common occupations in the private sector are outside the taxing authority of the fed. govt. These earnings are, by definition, not “wages” or “income” as those terms are used in the internal revenue code. Pls read Cracking the Code and get the rest of the story and do not fall for these ‘other’ tax schemes.

Peter April 3, 2009 at 7:45 pm

The FairTax philosophy is that no one should have to pay taxes on the essentials of living

Why not? If the reason is that taxes are wrong, then they’re wrong for everything, not just “the essentials of living”. If you don’t think taxes are wrong per se, why would it be a bad idea to tax “the essentials of living” just like everything else?

D. Frank Robinson April 3, 2009 at 7:46 pm

I think this discussion illustrates my point that everyone has their own subjective evaluation of what is an acceptable level of oppression in return for some level of subjective security. Therefore, there should be many ‘governments’ with a variety of features and a variety of sizes of the inevitable oppressor class.

Among a population of 300 million it might well take 600 ‘governmental’ units or more to optimize the subjective preferences of that population. A Fair tax set of ‘states’, a flat tax set of ‘states’, a progressive income tax set of ‘states’, etc. All such groups would be as they are now a temporary and provisional coalition of oppressors and oppressed. In other words, roll your own regime if you can attract enough like-minded individuals voluntarily.

One thing is apparent, the U.S. Constitution was not a very scalable scheme of governance.

Peter April 3, 2009 at 7:53 pm

The “equal tax” is definitely the way to go.

Furthermore, the amount of the equal tax should be determined by popular referendum– NOT by acts of the legislature. Every citizen could suggest an amount, and final tax could be the median of all the suggestions.

I’ve got a better idea: have a referendum on what the tax rate should be, and then each person pays what he voted for. If you say 0% is right, you pay 0%. If you say 90% is right, you pay 90%. Etc.

But: don’t tell anyone they’ll be paying what they vote for until after the votes are collected. Let the evil ones shoot themselves in the foot…and then let them try to say it’s not voluntary!

Re-run the referendum every 5 or 10 years. (Of course, after the first time everyone will write 0…)

Peter April 3, 2009 at 8:02 pm

Everytime the discussions on this forum shift to taxes, it makes me more certain that the realistic chances for any kind of a libertarian revolution are pitifully small.

So, if I’m inferring your meaning correctly, you’d prefer a libertarian revolution without the libertarianism?

Lowell April 3, 2009 at 8:04 pm

I don’t know why the Flat Tax doesn’t stay dead. The group on this forum should be looking at unintended consequences. Why so much discussion about the mechanism the government uses to steal from us?

Most state sales taxes are in the 6%-8% range. It pays to avoid sales tax on larger items. If the price is the same, why not buy on the internet if sales tax is greater than shipping (as is usually the case)?

Let’s look at what will happen with a sales tax above 30%. Remember we will have to pay state sales taxes in addition to the national Fair Tax. This would really make it pay to avoid paying the Fair Tax. Expect Black Markets to crop up. The government will now have its excuse to regulate the internet since it will obviously be used to avoid paying tax. Expect raids by tax agents in homes and businesses to take inventory of all possessions. You had better be able to prove you paid the Fair Tax on all your possessions. What, you claim you bought that in 2008. Let’s see your sales receipt.

If you don’t like the present IRS you will not like these guys. Wait, it’s going to be the same guys. You think the government is actually going to fire anyone.

Matt April 3, 2009 at 9:06 pm

Paco:

Conceptually, this is how I see the government remaining heavily involved in the fair tax scam. I’ll quote Mr. Vance’s article:

“This “prebate” is based on the government poverty level and family size. Thus, although everyone would pay the same rate under the FairTax, the end result would be that some Americans would pay no taxes at all, some would have most of their taxes offset, and some would get more money back than they paid in taxes. This makes the FairTax an income redistribution scheme under the guise of tax reform.”

A tax system where some people end up paying no taxes is not “fair” at all. Further, these prebates are based on government poverty levels, meaning the government remains directly involved in the taxing system.

Clarity2009 April 3, 2009 at 9:59 pm

DNA & Russ,

Please re-read my comments more carefully. I didn’t not say the FairTax legislation repeals the 16th amendment. The legislation is written so that if the 16th amendment does not get repealed within 5 years, the FairTax ceases to exist.

All the arguments that we could have a consumption tax and an income tax ignore the fact that there is nothing stopping Congress from doing that today.

Believe me I have as much concern over federal expansion of power as anyone, but the FairTax would hamstring their capability to keep the income tax around.

Gil April 3, 2009 at 10:58 pm

I beg to differ Lou S – C. Evans was arguing (I believe correctly) that invasion by a random foreign aggressor is a highly unlikely event whereas being the victim of crime is far more common. Therefore, in an idyllic society, people would simply carry guns for self-defence and engage in militia training on the off-chance that they might actually be invaded (Switzerland?).

Still, talk of ‘fair taxation’ puts many a minarcho-Libertarians in a quandary – what’s the ‘reasonable’ amount of taxation and government? What amount tax isn’t ‘theft’? What are the services that government is allowed and can’t be provided by the free market (natural monopolies)? After all, governments can’t be ‘voluntary’. If you can choose your government and personally pay for the services you want and are free to stop using their services and stop paying them fees when you want to and choose another or none at all then you’re dealing with a private business in a free market.

newson April 3, 2009 at 11:24 pm

americans, be warned about “modernizing” the tax code. here in australia, the gst (goods-services-tax) was ushered in with great fanfare, promising relief on direct taxation in favour of indirect.

result: federal tax revenues shot up, and marginal income tax rates have only come down slightly. it’s been a gold-mine for the state. compliance costs also expanded dramatically, despite the gst being more “efficient” (fewer loopholes and arbitrariness) that the old wholesale sales tax regime.

forget about amelioration, and concentrate on progressively striking off imposts from the statute books.

Paco April 4, 2009 at 12:17 am

Gentlemen, Ladies(?):

Let’s not all get our underwear in a wad. Please stay in the realm of reality.

1. There will be taxes collected by the Federal government for as long as the Federal government exists. If you want to argue about whether there should be a Federal government, take that to another thread. This thread is about the “fairness” of the FairTax.

2. OK, the FairTax is not fair. So what? Go back to Marketing 101 if you want to equate tax fairness with the FairTax.

3. Here is the only question that counts: Which is better, the current system, the proposed FairTax, or some other tax reform?

4. In my opinion, the FairTax is the most well researched (and most radical) tax reform proposal. And it is the best of several possible tax reform measures because it actually has a remote chance of being passed.

5. It has a chance to pass because it “picks off” various objections: (a) it is revenue neutral so big government supporters can’t object to it based on “cost” to the government. (b) arguably, it is less regressive than the current system (i.e., payroll taxes — the most regressive taxes — are eliminated and the prebate takes care of people at the poverty level). (c) It eliminates multiple government bureaucracies, including the IRS, the most hated and most anti-libertarian agency. Conservatives should support the FairTax for this reason alone. (d) There is an actual bill, with 50+ cosponsors, currently in the legislative hopper. 200 cosponsors would be better, but name another tax reform bill that has even been submitted.

I could go on, but these long comments become counter-productive at some point. BTW, Matt, please tell me you aren’t really basing your arguments on anything Mr. Vance has written. Given the choice between trusting Larry Kotlikoff or the opinions of a part time accounting teacher at Pensacola Junior College, well, I don’t really have to complete this sentence, do I?

Bill in StL April 4, 2009 at 12:31 am

Paco,

Why do you think the FairTax courts will be any better than IRS tax courts? Should I be delighted that a slightly smaller class of people, businessmen, will be abused directly by the tax agents than those now abused? Do you think they’ll suddenly stop prosecuting people randomly for perjury? How will the tax structure change that? That’s just part of enforcement of any tax code.

FairTax and FlatTax proponents rave about getting rid of the IRS, but don’t acknowledge that there will have to be an apparatus to collect these new taxes. Maybe fewer people will be affected directly, and maybe there will be some savings with compliance costs, but that’s it. There will still be a large portion of the citizenry subjected to the injustice that is tax enforcement. Ultimately, enforcing the tax code is less about clear rules, and more about fear. The occasional demonstration of arbitrary power will still occur under the FairTax.

Furthermore, I have a dim view of a group that would be so misleading to say that an item that costs 1.00 before the FairTax, and 1.30 after, will only be subjected to a 23% tax. If we were talking sales tax, or any other mathematical equation that comes to mind, that’s 30%. On top of that, that number can only be justified based on the mutually exclusive assumptions that the government will pay this tax for the goods and services it consumes, but won’t have to spend any more money.

By what magic are prices not going to rise when you slap a 30% sales tax on everything? If you claim that the demand curve will hold them at current prices, remember that when assuming that, you best also assume a sharp reduction in supply.

Anyway. Not that I’d be outraged to wake up one morning and see a flat tax in place instead of an income tax. But I see it as a very marginal step towards liberty with a very huge danger of just getting both income and sales tax.

To answer the question of why the feds can’t impose a national sales tax now. Indeed there is no law prohibiting it, it is only the disgruntled masses who resist it by voting out the proponents and making a stink. The more the FairTax idea gains steam, the less resistance there will be. Perhaps you’ll get your wish – but even so, I bet the income tax outlives all of us.

Gil April 4, 2009 at 1:39 am

“So, if you only buy used items and grow your own food (and make your own liquor/beer/wine) you would never pay any tax. Plus you would get the prebate which should more than cover those few times when you accidently incurred a tax.” – Paco.

Golly, if you lived on your own self-sufficient farm and don’t have a formal income you won’t be paying income tax either!

Paco April 4, 2009 at 1:51 am

Bill in StL

I don’t know what to tell you. I own a business. I already collect sales taxes for the state. There is no reason for me to try to cheat. Whatever sales tax I collect, I report. Now I suppose there are some who would want to collect sales tax from a consumer and keep it. But that would be morally wrong. That’s Madoff.

On the other hand, when I fill out my tax return, I really don’t know what the tax code says. And neither does my accountant who charges me $5,000 to do my business tax return. I also employ an accountant who takes care of the books but who really isn’t qualified to do my tax return. She’s a CPA.

And really, what does it matter if the rate is 23% or 30%? It’s the same amount of money. If I buy something and it says the price is $1.00 and that is broken out as 77 cents for the cost of the item and 23 cents as the tax, what is the difference if the price is marked as 77 cents and when I get to the checkout I have to pay 30% tax? The price is still $1.00.

How about if we just talk about the FairTax conceptually? Let’s trade the IRS, income taxes, social security taxes, medicare taxes, withholding, capital gains, estate taxes, unemployment taxes, 401K rules, IRAs, alternative minimum tax, tax courts, audits, loopholes, $300 billion in compliance costs, section 179, K-1s, 1040s, 1120s, depreciation (I can go on) for a simple sales tax. It is the same type of consumption tax that everyone currently pays in every state except New Hampshire and (I think) Oregon. I hope you realize you are currently paying 15%-20% tax in the form of embedded taxes in everything you buy (you don’t think I price what I sell based on what it costs me to employ people, including payroll taxes?). Plus you are paying payroll 7.65% taxes.

BTW, the Flat Tax is still a tax based on income. It would still require me to withhold, pay social security, medicare, and unemployment taxes, deal with 401K rules, and fill out whatever forms the IRS requires me to fill out under threat of perjury.

Paco April 4, 2009 at 2:03 am

Gil

My statement about taxes under the FairTax being voluntary was a little tongue-in-cheek. It was in response to those who say all taxes should be voluntary. I wish that were so. As a matter of fact, search You-Tube for a Harry Reid video where he insists that the current income tax is voluntary. Sure, it’s voluntary — more like volunteering to go to prison.

In any event, notice that I said “BUY used items.” You need money to buy and you need income to have money (unless you have made your money the old fashioned way — inheriting it). Income = income tax.

Matt April 4, 2009 at 7:46 am

Paco:

You said, “BTW, Matt, please tell me you aren’t really basing your arguments on anything Mr. Vance has written. Given the choice between trusting Larry Kotlikoff or the opinions of a part time accounting teacher at Pensacola Junior College, well, I don’t really have to complete this sentence, do I?”

LOL!! Nothing more needs to be said, this sums up your position perfectly. Basing your opinion on someone’s level of education/where they work is as laughable as it is absurd. George Bush went to Harvard Business School…should we solicit his opinion on this matter? Methinks the difficulty of thinking about this debate conceptually lies with you, not me.

Intelligence is a tool; it doesn’t matter where you went to school or where you are presently employed – a mistake is a mistake. I don’t care if Mr. Vance is a Junior High School Janitor – he’s on the right side of this issue. When viewed through your lens, the fact that a part-time accounting professor can refute the “venerable” Mr. Kotlikoff’s tax proposal should tell you something about the absurdity of Kotlikoff’s theory in the first place….but I’ve already given you more attention than you deserve.

Ha!

Kakugo April 4, 2009 at 7:56 am

Greetings from the Land of the Soviets (Europe).
I find the argument behind Fair tax simply laughable. Why? Around here we have both a personal income tax and a “Fair Tax” in form of a 20% VAT and deductions are getting fewer by the year. And they still haven’t enough money. Beware.
On the other hand I completely agree with Jay H.: small steps are what we need right now, both in education and politics. That’s how Socialism conquered the West.

D. Frank Robinson April 4, 2009 at 9:30 am

“Do not give in to evil, but proceed ever more boldly against it.” But with bold baby steps?

Why be coherent, consistent and audacious?

Another illustration that many different temperaments call for many differing forms of governance – even if the levels of coercion and retributive torture are similar, form and style still matter to many people.

The United States is neither eternal, indivisible nor with liberty nor with justice for all. People are too diverse to ever live peaceably under one god either.

Those who hang together fanatically may also hang separately.

Paco April 4, 2009 at 11:55 am

Matt

I didn’t say anything about education. You just assumed — and you know what that does. I am simply noting the difference between opinion and research. Published research can be checked, analyzed, and refuted or verified. Opinions are like you know what. Everyone has at least one.

The title of the article that is the subject of this thread posits that the FairTax is not fair. As I have commented before, so? In this article, Vance himself says “I don’t consider myself to be an expert on the FairTax.” Unless I missed it, he does not reference one iota of research while stating his opinion. Yet, you use his opinions to back up your opposition to the FairTax.

All I am saying to FairTax opponents and fence sitters is look at the research. Then decide. There seems to be very little review of the research going on by the opponents. A good place to start is here:

http://www.fairtaxblog.com/research/

I wager I have purer libertarian credentials than Vance — I’m older and have voted for every Libertarian candidate since 1976, including Dr. Paul. We may all be tilting at windmills, but I think it is far more likely for a true libertarian uprising if voters can SEE how much they are being taxed — which is one of the things the FairTax accomplishes. There is little chance for reducing taxes or spending under the current system that continuously reinforces the take and give cycle between politicians and their benefactors. Maybe, I say maybe, a different tax system will break that cycle.

Think about it.

Paco April 4, 2009 at 12:02 pm

Kakugo

You need to do a little research on the FairTax. It is not a VAT. And the bill is written to prohibit both the FairTax and an income tax. Not that it can’t be changed, but that’s another battle.

In reality, there is nothing stopping the feds from enacting a VAT and retaining the income tax now. In fact, a VAT is one of the tax measures currently being considered by the Democrats.

Bill in StL April 4, 2009 at 1:35 pm

Paco,

I’ll grant that a national sales tax would be less byzantine nonsense than what we deal with currently. But ultimately it is the amount we are taxed, directly and by inflation, that measures our liberty. And even if there are economic improvements resulting from lower compliance costs, and a less destructive incentive (save vs spend), it’s all just a sidetrack on the road to liberty. By your own insistence, this is revenue neutral, meaning the government is stealing just as much money from us.

From a practical standpoint, I think the issue has slightly more chance of succeeding than efforts to show the 16th Amendment was never legitimately ratified. Regardless of the merits of the proposition, political reality prohibits it. Was it Mencken who said, “The art of taxation lies in so plucking the goose as to get the most feathers with the smallest fuss?” Our byzantine tax code, with it’s myriad components, serves the political purpose of obscuring the true amount of taxation from the citizenry. To suppose that politicians will open up the books and reveal their parasitic cost is, in my opinion, to misjudge their selfish natures.

In conclusion, I agree it would be better than what we have now, but I don’t mistake it for liberty. I don’t think it will ever happen, and if it does, we’ll probably just end up with a national sales tax in addition to everything we’ve got now.

cavalier973 April 4, 2009 at 2:27 pm

We already have an income tax coupled with a national sales tax in the form of corporate taxes. Corporations do not pay the taxes themselves, they collect the taxes from its customers and/or its employees (through higher prices and lower wages).

The 23% percent/30% rate quotations turns on whether you calculate it tax exclusive or tax inclusive. With the income tax, we quote the rate as tax inclusive. That is, we say that a person who has income of $100,000 and pays $30,000 has a 30% tax rate. But you could also say that he has a 42%-43% tax rate, if you exclude the amount of taxes he pays from his income ($30,000 is around 43% of $70,000).

The proponents of the FairTax use the 23% number, to be sure, because it’s a little less threatening than 30% (which, as someone has already pointed out, is added to any state sales taxes). The argument they use for doing this is that they are comparing a tax-inclusive income tax rate with a tax-inclusive sales tax rate. Even though I’m a FairTax supporter, I prefer to use the 30% rate to avoid charges of dishonesty by people who cannot or will not comprehend the difference.

I am less troubled than some about black markets arising under a FairTax system; several states that rely exclusively on sales taxes seem to have more or less honest venders who do not sell their goods out the back door to customers wishing to avoid the tax.

Perhaps the increased cost of retail goods brought about by a national sales tax would incentivise such behavior, but I think that the elimination of costs to productivity would in the long run tend to reduce prices, which would also make the benefits of trading in the black market less likely to outweigh the costs involved in circumventing the law. At least, that’s how I think it would be for most people, especially as the purchasers have more money to spend, their gross incomes and net incomes being the same.

Most objections to the FairTax are answered on the website: http://www.fairtax.org/site/PageServer?pagename=about_faq_answers#5

Kakugo April 4, 2009 at 3:55 pm

Paco, the only difference I see is how the tax is collected. I end up paying a surcharge anyway, no matter who picks up the cheque to put it in the government’s coffers.
A tax is tax, no matter how it’s painted.

Fogyreef April 4, 2009 at 4:10 pm

Why is the blog owner blocking my posts? Is there a problem quoting Supreme Court cases?

Scott D April 4, 2009 at 6:14 pm

I see no point in even debating this issue, which, if you read Laurence M. Vance’s article carefully, seems to be his stance as well. Libertarians should have higher standards than to argue with a mugger over whether he should threaten you with a gun or a knife. Fairtax is a distraction from the real issue, which is the choking off of liberty by government. Whether it passes congress or not, it’s not my concern unless it allows government to grow larger, and Mr. Vance discusses some of the ways that it might.

I also found it rather amusing that so many people expressed confusion when Vance proposed his “equal tax”. “Oh, but that will be too much for some people to bear!” “How can you call that fair when some people are too poor to pay such a tax!” Slap yourself a few times hard and TRY to see the problem here. Got a good slap in? Good. Don’t you think that a tax that is larger per capita than a great many people earn in a year might be a bit too big? Does government really need to spend more on its citizens than they can possibly produce on their own?

And I call bullshit on people that express the woefully naïve idea that the fairtax will both improve standards of living and due to its “transparency” (I hate this political buzzword–look, it’s see through!) will also cause people to agitate for lower taxes. It’s one or the other, folks. A given person will either be happy with the income redistribution of the prebate, or pissed off that the price of everything rises. If you want to piss people off, start taxing at rates high enough to pay down the national debt.

I see a lot of non-libertarians making their case here. To be blunt, if you don’t see the enormity of government spending as an issue of critical importance, you are in the wrong place, and in my opinion, are in need of further education. If you, like me, remember the Reagan era and all its promises and still trust government to pass tax reform that a) makes people agitate for tax reduction, and/or b) restricts the power of government to increase taxes, then you are either a fool or a liar.

Aunt Polly April 4, 2009 at 6:46 pm

My commentary is of the textile sort:

http://tinyurl.com/crmtza

’nuff said.

~ Aunt Polly

Paco April 4, 2009 at 7:19 pm

Bill in StL: I pretty much agree with everything you say. My support of the FairTax comes from my belief (hope?) that changing the system from an insidious web of hidden taxes to one that screams out from every receipt “You fool. You just paid $130 for 4 bags of groceries and the federal and state governments just tacked on another $40 — 10 bucks a bag! ” The FairTax bill requires the taxes to be itemized. Of course, lifting the compliance burden alone would be worth it to me.

Kakugo: The difference between the FairTax and a VAT has to do with my response to Bill, above. I believe the first step in reducing taxes is make sure everyone knows how much they are paying.

Travis April 4, 2009 at 8:37 pm

I wish someone would explain what they would do to fund the legitimate expenses of a responsible government. I agree with the spirit of Mr. Vance’s arguments, but I fail to understand what he and others think will be the result of the practical implementation of their philosophy.

Lowell April 4, 2009 at 10:07 pm

I agree with the spirit of Mr. Vance’s arguments, but I fail to understand what he and others think will be the result of the practical implementation of their philosophy.

Freedom, Peace, and Prosperity.

Paco April 4, 2009 at 11:59 pm

Scott D: If Vance would just stick to espousing the elimination of taxes, I would be right there with him. Unfortunately, he continues to attack every proposed change to the current tax system. It’s a little naive for Vance to think that we will leap from government taxing at the current level to having a user fee or head tax based tax system. First things first.

As to your points, I’m not sure where to begin.

(1) The IRS is public enemy #1 when it comes to “choking off liberty.” You are the one who is naive if you don’t get this. The FairTax bill eliminates the IRS. See if you can construct a logical syllogism around these premises and come up with a conclusion that follows.

(2) As has been pointed out in numerous comments, nothing in the FairTax provides any additional power to the government to raise more taxes. They already have this power. On the contrary, it does just the opposite by bringing into the equation the repeal of the 16th amendment.

(2) I don’t recall any commenter expressing confusion about Vance’s “equal tax.” Certainly I am not confused by it.

(3) Transparency. What do you think would happen if withholding were eliminated and employees had to write a check each month to pay SS taxes? Milton Friedman called withholding his greatest regret (he invented it).

(4) Your comment about the prebate redistributing wealth or being pissed off about prices rising is a non sequitur.

(5) I’m not sure what case a lot of non-libertarians are making here. Yes, the government spends too much. And?

Now, why the anger? I assure you I am neither a fool nor a liar. I imagine I was agitating for libertarian ideals while you were still in diapers. The fact is that currently there is nothing to restrict the government from raising taxes and spending. At least the FairTax, along with its concommitant repeal of the 16th amendment, does restrict the government from raising, even imposing, income taxes.

Scott D April 5, 2009 at 3:20 am

Paco:

If Vance would just stick to espousing the elimination of taxes, I would be right there with him. Unfortunately, he continues to attack every proposed change to the current tax system.

Propose to cut federal spending by 2/3rds and income tax in half. If Vance is opposed to that, you will have proven your case. It seems to me that he is opposed to tax reform that does nothing to actually address the problem of government spending.

(1) The IRS is public enemy #1 when it comes to “choking off liberty.” You are the one who is naive if you don’t get this. The FairTax bill eliminates the IRS. See if you can construct a logical syllogism around these premises and come up with a conclusion that follows.

Who decides whether or not the US needs a new tax? Who decides which people will be taxed? Who decides how much they should be taxed. It’s not the IRS. The IRS is only there to ensure compliance. Yes, it is a horrible institution, but calling it “public enemy #1″ misses the point. Eliminating the IRS now, today, would not remove the people’s tax obligation. Consider your major premise refuted and your syllogism void.

(2) I don’t recall any commenter expressing confusion about Vance’s “equal tax.” Certainly I am not confused by it.

I found two without much effort.

1776Freedom:

5) He supports an “equal tax”? Where a $20,000 a year worker pays the same as a $200,000 a year worker? HHHMMM, I don’t see that generating the same amount of revenue.

Henry Stock:

The equal tax could be implemented only in a fairy tale because in reality there are people out there who through no fault of their own have no money or at least not enough money such as to make paying an unvarying lump sum impractical. Do we take the bread off their table or throw them into the street if they are unable to pay this lump sum?

(3) Transparency. What do you think would happen if withholding were eliminated and employees had to write a check each month to pay SS taxes? Milton Friedman called withholding his greatest regret (he invented it).

What you describe and the fairtax are two different things. What would happen in your scenario is that a LOT of people would come up short on their taxes. This might precipitate some kind of movement towards lower taxes. In fact, I kind of like this idea. Let’s do that instead of the fairtax!

(4) Your comment about the prebate redistributing wealth or being pissed off about prices rising is a non sequitur.

No, let me explain how I see this. The fairtax people are playing politics and seeking support from diverse groups with conflicting claims. “It will be fair and progressive”, they say to the liberal. “It will protect the wealth of the rich” they say to the conservative. “People will be upset and want to lower their taxes”, they say to the libertarian. Just thinking of this pandering makes me sick.

(5) I’m not sure what case a lot of non-libertarians are making here. Yes, the government spends too much. And?

The non-libertarian arguments I’ve seen above amount to: well, we need to fund the federal government, why not try to improve our methods for collecting taxes? A libertarian always questions the need for new legislation, always looks for hidden meanings and motives, and always makes the point that there WILL be unintended consequences. If you trust government to not screw this up and the economy to react as predicted, then the fairtax probably looks pretty darned snazzy.

Now, why the anger?

I am angry because the ship is sinking and people such as yourself are arguing over the configuration of the deck chairs. Socialism is here, staring us in the face. Have you seen the proposed federal budget for the next few years? The fairtax sure as hell isn’t going to pay for it. Not without crippling commerce.

I assure you I am neither a fool nor a liar. I imagine I was agitating for libertarian ideals while you were still in diapers.

So what you are saying is that you do trust government to pass the fairtax and retain the spirit of what you and others claim it is. You expect the federal government, using internal processes, to restrict its own size and even put itself into a position where smaller government is seen as desirable by the majority?

You act as though the concept of cutting spending is this monumentally complicated problem, that it somehow requires us to alter the methods for collecting revenue to change. If a company has too many people on the payroll, management doesn’t first change the packaging of its products and alter its distribution chain. No, they just look at who is expendable and they fire them. We know that the size of government is the problem. I say we try to address it directly. Coming at it from an oblique angle like this will fail precisely because you have not made your case for your true intent. “Lower taxes?” your congresscritter will scoff. “Son, this here bill swapped one tax for another. Revenue neutral, you know what that means? It’s supposed to pay the same as before. Have you seen next year’s budget? The money has to come from somewhere.”

I can see a few incentives for instituting the fairtax, if we view the government is a parasitic entity. First off, enforcement becomes much simpler. Rather than keeping track of hundreds of millions of working adults, the fedgov only has to audit businesses that sell retail products. Compliance will rise, bringing in more revenues. Look, the government is saving money and getting more money! That’ll sure put a dent in that $900 billion deficit!

At least the FairTax, along with its concommitant repeal of the 16th amendment, does restrict the government from raising, even imposing, income taxes.

I hate to be the bearer of bad news here, but even some of the regular contributors to Mises.org have it wrong. Here is the text of the 16th amendment:

The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.

Without understanding the history that preceeded the creation of this amendment, it would seem that the 16th amendment is saying that Congress has been granted a power that it did not have before. That isn’t exactly true. The first income tax was imposed in 1862 and eliminated in 1872. A number of court decisions followed in the intervening years leading up to 1909, with the 1895 case Pollock v Farmer’s Loan and Trust (157 U.S. 429) disallowing a tax on income derived from real estate. The actual debate in this and preceding cases was over whether an income tax was direct or indirect.

To understand the difference, consider:

Article I, Section 8, Clause 1:

The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States.

Article I, Section 2, Clause 3:

Representatives and direct Taxes shall be apportioned among the several States which may be included within this Union, according to their respective Numbers….

Article I, Section 9, Clause 4:

No capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or Enumeration herein before directed to be taken.

What the 16th amendment actually did was to declare that an income tax was, in fact, an indirect tax, and only subject to the rule of uniformity, not the rule of apportionment. Repealing the 16th amendment would not remove the power of Congress to tax incomes, but would only roll back a “clarification” of what is and is not a direct tax. To achieve the effect you want, Congress would need to define the income tax as a direct tax, in which case the apportionment rule applies.

So I say again: fairtax is a distraction. Stop thinking you can hoodwink Washington into tying its own noose. The only way to get rid of the income tax is to (shock), get rid of the income tax. Creating a new tax will only do that: create a new tax.

guinea-pig April 5, 2009 at 4:09 am

Let me offer glimpses of real-world experience with going from the progressive brackets system that maxed out near 50%, into a 19% flat-tax regime.

Sure flat-tax here is progressive, especially after the latest changes done to it. But know what, those last changes were concentrated on reducing the deductions, as we managed to get the politicians away from touching the “flat” rate of 19%, never mind reintroducing progressive brackets.

So there’ve been tax increases, but at the same time the taxes for the richest remained the same, they paid 19% before and pay 19% now. Neat.

On the budget side, the reform was targeted to be neutral, but right from start it brings more revenue than expected. The key is simplicity, and cutting the highest tax by more than half helped, too. I’d say there’s more consent paying the flat-tax than there’s been within the progressive system.

All in all, I’d choose flat-tax over progressive regime any time, then continue in the quest to abolish income tax altogether.

To get more details about us, google Slovakia. (Small speck of land next to Austria. Once parts of the same empire, then divided by iron curtain, now getting sort of rEUnited.)

About the fair-tax: first, not sure how they deal with the repeated taxation one gets when stuff must be sold from one manufacturer to another before it becomes the finalized consumption thing. (VAT addresses this.)

Second, the real kicker is to distinguish consumption from proudction. If say someone buys a car, it then can be used for his personal benefit (consumption), or for conductiong business (production), and most of the time it’s a mixture of both. (VAT suffers this very same issue of course.)

a chinese student April 5, 2009 at 9:43 am

Extremism in defence liberty is not vice, and moderation in pursuiting justice is not virtue. Remeber what Goldwater told us.
Anyone who believe changing the name of tax would makes things better is living in utopia.

excellent article,but where can I get some further reading. If anyone has some resources, publish them ,thank you.

Chris Long April 5, 2009 at 10:45 am

As a Libertarian I understand, and largely share, Vance’s stance on taxes in general. As a critical thinker and a natural skeptic, I constantly question everything I see & hear, as well as what I already know & believe…especially when something appears to be “too good to be true”. Having said both of those things, I am a FairTax supporter. Having said THAT, & considering my Libertarian views & skeptical nature, I have long been searching for an sound, intelligent and fact-based rebuttal to the FairTax. Sadly I have not found one, & Vance is no exception.

Vance’s writings reveal his objections to be largely rooted in philosophy (taxes are bad) & semantics (the use of “Fair” in the FairTax’s name), rather than in actual economic concerns. Now I am not saying that Vance does not offer an economic basis for his opinion; simply that his objections are obviously not rooted there. Sadly, neither of those objections offer a substantial rebuttal. Even more sadly, the few lucid objections that Vance does offer are quickly & resoundingly discredited by the fact that he admits both to not fully knowing the subject matter & [most egregiously] misrepresenting the tenets of the FairTax. He simply refuses to base his critique on an apples-to-apples comparison, & thus misinforms & shortchanges anyone looking for a sound, intelligent and fact-based rebuttal to the FairTax.

It pains me that someone who represents himself as a scholar & an expert (boasting of degrees in history, theology, accounting & economics, & prolific authorship) shows such willful disregard for intellectual honesty and academic integrity. What pains me more is that a revered institute like the Ludwig von Mises Institute would allow its name to be associated with Vance’s work.

Mr. Vance, it is perfectly acceptable that you dislike the FairTax, but it is both discrediting & reprehensible that you abuse your credentials by peddling misinformation. If you are going to disagree with something, you are both ethically and morally bound to do so without misrepresentation. I implore you, not as a supporter of the FairTax, but as a concerned citizen with a limited knowledge (I know more than the average guy, but less than the average “student” or practitioner) of taxes & advanced economic concepts who eagerly searches for sound, intelligent & fact-based information (both pro & con) – please be honest & accurate in your critique of the FairTax.

PS – Mr. Vance, on a side note, as you say you frequently quote Ron Paul’s assertion that the real problem is government spending (which I agree with), I’m sure you know that he is on record as preceding that statement by stating that he would probably vote for the FairTax if brought to vote.

Dan Fallon April 5, 2009 at 11:15 am

Chris Long,

Taxation necessarily means privilege and privilege represents moral hazard. Taxation also displaces the market and is an imposition on society- it hinders the maximization of society. There is solid economic logic to back this up.

The FairTax proposal can definitely be criticized on apriori grounds: any taxation lends itself to creating calculation problems and misallocation of resources. True, incentive issues do have a moral component as well as a scientific side. But surely calculational issues are logical criticisms not relying on moral pleas. What you need to show is a solid theoretical basis and justification for taxation. You can try listing facts and history. But the past does not interpret itself. Any explanation of the facts presented presupposes an organizing theory/understanding.

Cheers

JD April 5, 2009 at 12:24 pm

It’s a bit frustrating that so many people don’t seem to see the forest for the trees. There exist two core issues which must be addressed, and which, once addressed, obviate the necessity for further directed correction:

- coercive taxation
- state monopoly on currency

We do not need to argue about how large the government should be, or what proportion each individual should contribute in order that it continue to operate. We understand the market, and we just need to recognize that there is also a market here – we just need to let it work, rather than trying to explicitly dictate how government looks and works.

To unchain this market requires the implementation of two essential components:

#1: repeal coercive taxation by instituting a ‘Taxpayers Line-item Veto’. How this works is: the IRS is tasked with dividing the proposed budget into several distinct categories, providing the appropriate level of contribution for each based on a combination of (a) a flat per-person fee, and (b) the individual’s net worth*, and sending these forms out to citizens. Now in this system, payment is strictly voluntary, and the individual can direct where the funds they contribute are to be applied. Categories which receive no support will have funding cut directly by the taxpayers. Where politicians currently have the vote as their sole incentive, they now have a price mechanism; if they are too expensive, they lose power, if they are not, they gain it.

#2: provide the Federal Reserve with a feedback mechanism as regards monetary expansion; that is, abolish legal-tender laws. It is not strictly necessary to abolish the Federal Reserve itself, it only needs to face the possibility that the money it prints is as worthless to the government as it is to the people. This feature is necessary because even under a purely voluntary funding system, the state is able to print its funding in toto. This feature subjects the Federal Reserve to the rigors of competition.

As to the article, if one approaches the question from a neutral direction, there is only one obvious answer: there is no such thing as a fair tax, so long as that tax is coercively collected. Someone will invariably have his funds expropriated against his will, to be used for ends of which he explicitly disapproves. The problem is not the level or manner of calculation; it is coercion – he cannot opt out on a selective basis. That aside, the question still remains: how much should he pay? What is his fair share? What is the proper price of his citizenship? The answer is simple, since it is the same as with any other transaction he may choose to make: as much as it is worth to him.

I am not idealistically proposing that these things are even remotely possible to accomplish, due to the current state of affairs in this country. But they are, nonetheless, the true keys to solving the problem. Anything else is just another consequentialist faustian bargain; reasoning men should expect it to fail.

* the reason that estimates of ‘fair’ taxation should be tied to a combination of a head-tax and individual net-worth is simple. The baseline fee is based on the fact that all people realize certain benefits as individuals, and none realizes a greater benefit than another, due to the nature of the benefit. As to the net-worth modifier, many government services roughly equate to insurance against various calamity (i.e. national defense), and it is not difficult for people to understand that those with more have more at stake; they should not have it protected for the same fee as those with less to lose. To be clear though, I propose these factors be used in determining contribution recommendations; the ultimate choice of what to pay remains in the hands of the individual.

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