Posted by
Andrews on Tuesday, November 27, 2007 2:26:25 PM
Since I have been beating up on the FairTax proponents so much, I figure I should really set down both what I feel is wrong with the FairTax and what I would want in its place.
Due to work, I can't do that now, but I can offer a very brief description of what I would do, instead of what I oppose.
I suppose if we can't control federal spending, and have to have a federal tax, we could have a flat income tax. It has a lot of shortcomings, but it is equitable, does not have the horrors of prebate that the FairTax does, and does not require quite as much bookkeeping as the retail/wholesale silliness in the FairTax. If we remove all exemptions and tax only earnings, not interest or dividends, and eliminate corporate taxes, we could probably come up with a relatively simple tax.
A better solution would be to move to the original plan of the founders and support the federal government by receiving payments from the states. In that way each state would have to decide locally how to tax, what to tax, etc and we would have no federal taxation problems. Instead we would have 50 different taxation scheme, and citizens could see how each competing scheme helped or harmed local economies. In short, a set of competing tax schemes, allowing us to select the best possible choices.
We could supplement this with a small tariff, applied equally to all goods. (I was hesitant to suggest a tariff, due to all the political wrangling and harm such duties can do, but in the end, they seemed one of the least harmful forms of taxation. Only, however, if we enact laws stating that tariffs must be applied equally to ALL goods imported, not by type, country of origin, or any other category. Otherwise import duties are likely to return to being the political tools they are today.)
If we can really downsize the feds, the best system would be to use a small, equitable tariff, supplemented by a national lottery. But that would be only if we can really downsize. (Think about it: If a state can run a $1M jackpot every week, the 50 states could probably put together a $100M jackpot every week and still, turn a profit of at least $50M, more like $100-200M, every week on ticket sales. More on that in the longer essay.)
So, my alternatives to the FairTax:
1. A flat tax, though this is the worst choice
2. State funding of the feds (as intended by the founders) with small evenly distributed tariffs as a supplement
3. Maybe a national lottery for additional income
Of course, to live on such meager income, we would have to seriously downsize, but that is one of the pluses of my plan. Unlike the FairTax, mine is NOT revenue neutral. I hope to make the feds live within their means and reduce their functions to the bare minimum.
As I said, a better essay, criticizing the FairTax and laying out my plans in detail, will follow as soon as possible.