Cleveland Buck;859862 wrote:Well no tax is going to be near enough to balance a $4 trillion budget. I don't care if the Fair Tax or something similar does or not. If it, along with tweaks like I suggested, can bring in an average of 18% of GDP while eliminating corporate income taxes and capital gains taxes and all income taxes for 99% of the people, I don't see a downside. I'm not saying the Fair Tax is the best plan or only plan, I'm saying I like the concept. Obviously spending has to be gutted for us to ever balance the budget.
That's the problem, Fair Tax can't come remotely close to 18% of GDP. To be revenue neutral, many economists believe the rate would have to be nearly double (this was before the monster monster deficits, meaning a 30% sales tax would generate approx. 10% of GDP). On top of that, they have this crap prebate and other exclusions. It's no magic bullet - the more you read about it the more you realize it will be effectively the same system of taxation but collected on consumption rather than income. The complexity of the revenue code comes from the desire to use tax engineering to achieve certain social. progressive, and economic goals. Most people don't seem to understand that will always and everywhere prevent having a simple straightforward code.
That plan is just crap crap crap. It is completely unsound from a fundamental economic perspective. I agree we need a VAT, but that is by no means justification for the disaster that is Fair Tax (I realize that's not where you're saying, we're basically on the same page). Thank God that thing died off, though I suspect they may try to mobilize the rednecks again come 2012. Fortunately, looks like a lot of those supporters have gravitated toward the Tea Party.
I've only seen one or two articles seriously suggest a VAT. I've heard nothing from Washington, and my guess is because both the Repubs with "no riasing taxes" and Dems with "soak the rich" have backed themselves into a corner where neither can support a VAT. Closing loopholes and lowering rates is an interesting idea to raise revenues, but I don't expect much from it. Corporate taxes are only 11% of revenues, and collecting 50% more without doubt makes our rates uncompetitive. The main reason you can't really soak the rich is most of their income is capital gains, and hiking that much more than 5% is also going to be a drag on the investment/economy. Reality is we need to raise taxes on EVERYONE, that means bumping FICA and the employer match and a VAT. That is the only way to get beyond 18% of GDP because those are REAL tax increases that are difficult to evade/avoid/manage. Everyone wants European style socialism (no idea why) but they don't want to pay for it, nor is there an effective way to get the rich to foot nearly all the bill.
.
