Let me rephrase to help me understand. Under this proposal, we tax the rich until they are relatively close to the working class (whatever that is arbitrarily set at). This money is funneled into government programs to improve the financing of health care, education, and "other programs". Since the poor and middle class (also arbitrarily defined) no longer have to pay for these things?
No, my argument is for progressive taxation but not so much that there's no benefit for producing a lot of wealth. As I recall this argument started over how unfair it was for the wealthy to pay more in taxes than somebody who was lower/middle class.
Then we would have to decide at what point there is enough benefit to producing a lot of wealth, versus too much benefit. "I have a great idea that could make me a billionaire, but instead I'll be forced to be a millionaire" is what this says to me. Thus, for efficiency sake, it would be easier to aim lower. Unless you're very lucky, it's extremely hard to become that rich, and a whole hell of a lot easier to aim lower.
And that is a huge problem for me, because innovations rarely come from collective efforts. If it was up to teh collective efforts of society, we would have innovated our way to breeding a better horse, and not into a world of cars. Woudl cars be invented? sure, but the car industry took off because of entrepreneurs who organized the car-making model and refined it to be more profitable, marketable, and easier to make. Diud someone else make the car? sure, but they never would have if the entrepreneur didn't set up the company and the system to allow that to happen in teh first place. Jobs are rarely done without a motivated leader to push it, and one of the biggest motivators for efficiency is money.
You're looking at too small a scale. The society provides the infrastructure necessary for cars to have come about. There wouldn't be need for cars without roads, there wouldn't be engineers without Education, there wouldn't be production without workers, and there wouldn't be many consumers without a powerful middle-class.
Innovation is great when people of wealth actually pursue it, but being wealthy doesn't necessarily mean they're putting the money to productive use. By easing the pains of the lower-classes they also have a better chance of upwards mobility and become the kind of rich people who do put wealth towards innovation.
The infrastructure was designed for horse drawn carriages, not for cars. The infrastructure for cars came from their being a demand for cars at the quality and price set by early entrepreneurs, which only existed because they switched to the assembly-line (borrowed from gun makers). If you follow the infrastructure history, it was never designed for the innovations it was later used for.
I would mostly agree on the education front, as that's a great place for innovation to start. If you don't have education, you have to do it on your own though. And if the idea hasn't come up before, there is no starting point for the education to work on. Motivation is another factor in major advances in engineering as well though. Thus it makes sense to me when I read (in entrepreneurial books) that the A students work for the C students, and the B students work for the government.
Perhaps I should have just linked you to http://www.factcheck.org/taxes/unspinning_the_fairtax.html where you could have seen the graph source I was using from page 213 of the report (as I noted by the link). The figure I was referencing was figure 9.4 which dealt with the full replacement of the current system with a Retail Tax.
Facts Check (using the President's Advisory Panel on Tax Reform's findings) backs up some points made by the first author such as:
More significantly, however, the panel found that FairTax supporters were employing questionable accounting. In calculating federal revenue, proponents assumed that purchases made by the federal government would be taxed at the full 30 percent rate. But when calculating federal expenditures, FairTax proponents did not factor in the additional costs of the 30 percent sales tax. The Advisory Panel thus threw out the revenue from federal purchases, noting (correctly) that increased revenue from taxing federal purchases is exactly canceled by increased costs in the federal budget
I guess that's all BS then? Because it sounds to me like the people advocating for a Fair Tax haven't been quite honest with their numbers.
Yes, quite honestly, it is. I trust FactCheck.org, but I don't think they understand it as well as they think they do. The taxes that the FairTax is replacing are also measured inclusively. If your job pays you 30,000 a year, they take out 6,000. They don't measure that as "your wage is 24,000, and we're taxing your workplace another 25% on top of that". Instead, they measure it as "your wage is 30,000, and 6,000 of that goes to taxes".
Then, there is the end price. The things you buy now ALREADY have sales tax, but it's hidden along the production line. On everything you buy, you're also paying for the income taxes and business taxes and tariffs and whatever else went into putting that product at that store. If you're going to measure honestly what the end price will be, you need to subtract those costs first. Not doing so is simply a mis-characterization, whether intentional or not.
That inclusive tax from production already exists on everything you buy btw, even the things that the article complains about. Doctors bills are hidden in the wages of the teachers, the wages of the workers of the school, the wages and taxes on the equipment, on teh drug companies, and so forth. While "taxign doctor bills" may seem excessive, you're
already paying it. That already exists on Gasoline and Legal fees, new purchases on homes, and so forth.
when it says "A $150,000 new home would run $195,00 - plus teh 30% tax the buyer would pay on the interest on the mortgage" they're forgetting to subtract the cost that the company is saving first. The company building your home would no longer be paying any taxes on the lumber, the workers, the paint, and so forth down the line. If they want the same profit margin, the prices come back down for you. How much? almost as much as you're paying in the FairTax. However, remember, you're bringing more money home. How much more home? the entire amount that you saved on the federal income tax.
And so forth down the line.
That graph, btw, is just as misleading.This graph shows that they're giving the prebate to ONLY the poor, instead of to everyone. But the proposal doesn't descriminate. Thus that graph is just plain wrong. Then, they basically ignore their last two paragraphs, which states the other more technical economic benefits - larger purchasing power, long term income increases, and so forth.
And then when they say it makes it "less fair", they're using the alternative definition of fair, which I've repeatedly mentioned. Fair, under their definition, means equal. Fair, under teh FairTax definition, means under the same rules. The current system puts in different rules for everybody, the FairTax puts everybody under the same rules.