February 10, 2013

TAX WHAT YOU DON'T WANT, NOT WHAT YOU DO WANT:

Is a National Sales Tax Really Fair? (David Marotta, 2/10/13, Forbes)
 

A progressive income tax threatens our liberty and prosperity. It punishes the productive by taxing them the highest amounts, reduces employment by increasing the cost of employees and reveals our personal finances and thus invades our privacy.

A popular suggestion is to eliminate the income tax and replace it with a national sales tax, called the fair tax. The idea is that everyone pays their fair share based on what they spend rather than what they earn. Taxing consumption rather than productivity would encourage saving and investment, in turn stimulating production and economic growth.

The national sales tax would fall between 23% and 30%. It could replace the income tax and the 6.2% employee portion of the Social Security tax.

If the income tax was eliminated, the Internal Revenue Service, as well as thousands of pages of the tax code, would be obsolete. You would not be required to report your personal financial information to the government, which would both protect your privacy and reduce falsification on tax returns. [...]

Taxing income decreases productivity. Taxing consumption will similarly decrease spending. Less demand for consumer goods will reduce prices and also consumer debt. Families will be encouraged to have capital to save and invest as the tax burdens are removed on investments.

Deferred consumption, money not spent, is the textbook definition of capital. And because a sales tax is a consumption tax, more people will defer consumption and have capital to invest instead. Money invested earns more money. Increased savings and investing help create a healthy country with better economic growth.

If personal savings are to replace defined-benefit entitlements, you have to force people to save.   Posted by at February 10, 2013 10:41 AM
  
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