Good debate! I love a reasonable discussion with people I respect. I gotta run to work, but I wanted to address a couple of these points.
Me too - and I'll wait for ya.
"Because the FairTax is automatically border adjustable, the 17 percent competitive advantage, on average, of foreign producers is eliminated, immediately boosting U.S. competitiveness overseas.
Well the problem becomes when you enter into foreign markets - you have a free trade agreement with Australia (which makes our situation better, moreso than yours, as the US has already broken into the Aussie market, but Aussie products found the tariffs to stifle their trade), but according to
this website you don't have free trade agreements with anyone in Europe. That means that in order to protect their own industries, they have tariffs. That therefore means that whatever percentage they place on foreign imports removes any advantage that you have. If they find that they're being less competitive, they'll just raise the tariffs on the US imports - so there will be no way for foreign imports to kill off their industry.
In addition, U.S. companies with investments or plants abroad bring home overseas profits without the penalty of paying income taxes, thus resulting in more U.S. capital investment.
The changed taxation system in the US would not oblige other countries to remove their taxes - there would be no way possible to say that if Coca cola Amatol resides largely in the US, they don't need to pay Australian taxes and worker entitlements. So I don't see how that is going to make "large profits to bring home".
While I see your point with cheaper labor and no one can beat .50 cents an hour or whatever stupid wage some countries pay, the fact that exported good are not subject to the Fair Tax, while imported goods are will help even things out.
Ah - but that's the issue you see - tariffs make the prices comparable. As I've found that the Fair Tax system is going to keep tariffs, that just means a whole chunk of bureaucracy for the taxation system, and doesn't really cut the amount of bureaucracy.
They removed a 22% sales tax on some items here and replaced it with a flat tax of 10% on everything (barring essentials) and that was heralded as somehow going to bring prices down. But because the market is allowed freedom, they didn't actually ever come down in price. The supermarkets absorbed that profit, and people's prices went up by 10%.
The flat tax and the fair tax are not the same thing. Did you also remove any kind of government income tax? Did they also remove corporate taxes, social security taxes, gift taxes, etc? I don't know how the Australian tax system is set up.
The point was not about how similar the taxes are, but rather that the market does not pass on these savings (and with no business tax on profit and no repercussions why should they) regardless of the good intentions of the government. They took away the 22% tax on many items, and replaced that tax with a 10% tax, and the price didn't go down. That shows that the market doesn't respond automatically - it works to make profits and keep those profits, rather than pass on savings.
I didn't say that welfare programs would be eliminated, just that perhaps less people would need them or need them for less time.
No, but I don't think it will make much of a difference. Inflation at all this increased spending (because more money means more spending) will raise the cost of living.
The fair tax only taxes on what you spend, not on what you earn. In fact, according to this blog, the poor come out much better under the Fair Tax system than the current American tax system
Well, I entered my own meager details into the Fair Tax calculator - based on what I earn and pay in taxes - I came out with $10,000 more than I ever actually earn - meaning that the federal government would be giving me $10,000 and I would be paying no taxes.
I know what tariffs are. I don't think they are wiped out by the Fair Tax, but see my response above. Imported goods will be taxed, exported goods will not.
It is cheaper to buy Chinese stuff now, including all the lead and formaldehyde they include in their products.
Well then, they're not wiping out all taxes and putting up a fair tax - they're replacing one system of taxation for another. That doesn't mean less bureaucracy and more savings - it means "here comes the new boss, same as the old boss". I looked around, and the Fair Tax system does keep tariffs, so some bureaucracy will be required for that, but one of the disturbing things is the increased border tariffs -
here it describes how anything you bring into the country will now require taxation. So that increases a whole lot of bureaucracy for those who go to different countries (boy if you think your airport trip takes a long time now, wait until you get fair tax).
Agreed about the Chinese stuff.
But that doesn't mean no one will buy it.
On essential items, you won't be taxed.
But that doesn't mean prices will be cut - the market doesn't respond like that.
Additionally, business to business purchases for production of goods and services are also not taxed, driving the cost of production down further.
That means a whole new set of bureaucracies for giving back their spending - so the IRS instead of focusing on employer garnished wages will be focusing on the thousands of business transactions needing refunds.
I cannot imagine why this would not impact the final price of new goods. Used good are not taxed at all! The tax is paid once on new goods and nothing on used goods. So, if I can buy something used with no tax those that make new goods would want to be competitive with that certainly.
Used goods are already cheaper than new goods - this does not make new goods more competitive. And the Fair Tax website glossary states that it is only considered "used" once Fair Tax has been paid on an item - meaning that when the changeover happens, used goods will go up by the FairTax percentage, and this item will then need a paper trail to ensure that the Fair Tax has been paid on it. Sounds like more bureaucracy to me.
Furthermore, from the FAQ -
No state is required to repeal its income tax or piggyback its sales tax on the federal tax. Then there will be two taxes on sales - rather than one.
Markets will undercut themselves if left alone. Part, and not all, of what keeps prices high are the stupid taxes the government imposes on businesses (that the government wastes horribly, but that is another topic) that they, in turn, pass along to the consumer.
Ah, the heart of the libertarian belief - that the market, if left alone, will perform like a little lamb.
I've heard that claim many many times - and have yet to see it actually happen. The market over time increases its ferocity and need for input. It is designed to profit, with no other concerns. In a consumerist society where there is no alternative (you can't grow your own corn etc. if you expect to have a comparable lifestyle with your neighbour) then consuming is what you do. Why would they cut their prices for you, when they know you have no alternative? Answer is that they don't.
Case en pointe:
Here, banks were deregulated in the 1990s - with the promise that the market would undercut itself. No dice. Most people now pay monthly fees on bank accounts (unheard of when we had a government supported bank), and you're hard pressed to find a bank that doesn't charge a fee - in fact, I have found none. Banks check out what other banks are doing and don't put their prices down, or stay account keeping fee free - they match with their competitors, and soon you have no choice. Corporate spies make sure that they know what the competitor is doing, and don't try to do much if they already have a market.
Not to mention inflation (surely destined to go up with all this increased spending) will drive those prices sky high.
PMBD
Author