Last week at Fubar, J-Hole tried to explain to me what the "Fair Tax" is. I stubbornly insisted that he was talking about a flat tax, not cluing in to his plaintive proclamations that 'it's embedded in the sale'. I then decided he must be talking about a VAT, since I had no idea what 'embedded' meant in this sense. Plenty of beer on both sides of the conversation failed to facilitate communication.
A follow-up search this week told me that the Fair Tax is one of those things that everyone knows about except me. It seems like there are more and more topics like that in recent years. Anyway, if I read it right the Fair Tax would do away with all Federal income tax, which as near as I can tell would put all the tax accountants out of work. And since tax accounting is big business, I don't see how the Fair Tax could ever be enacted. Unless there are some other big businesses that get behind it in a $meaningful way$.
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2 comments:
The VAT does intrigue because its applied to imports and rebated for exports, and consumption taxes encourage savings.
One problem with the fair tax is that it would effectively tax people who save money twice.
Say I have been saving post-tax dollars and have a nice fat bank account. Now the fair tax comes in and all consumption will be taxed.
The saver then spends their savings and they are taxed AGAIN (once in the old system, once again in the new.)
One possible solution I came up with, would be to introduce a new currency at the same time as the tax, and all old dollars would get 1.23 new dollars, thus avoiding this problem. Its kind of a pain in the ass though.
A flat income tax would be much, much easier to implement and has other advantages as well.
There's more wrong with it than just the accountants but anything that gets rid of the IRS has me hoping.
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