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"Where there is an income tax, the just man will pay more
and the unjust less on the same amount of income." - Plato
Become a FairTax vs Flat Tax Expert!
Our research staff just updated an outstanding briefing
document that cuts to the heart of the flat income tax versus the FairTax
debate. It makes the case for what defines the best possible tax reform in ways everyone can understand.
The full paper is available here and below are excerpts from Grading
the Tax Reform Plans: Who is the Fairest of Them All?
With the exception of tax lawyers, tax preparation firms,
some bureaucrats, tax lobbyists, tax software firms and more than a few tax
professors, almost everyone embraces tax reform. So the Congress is bent on
effecting “reform.” The problem is that nobody really knows how to define
reform…
In general, a reformed tax
system should minimize the adverse economic impact of raising the revenue that
Congress decides is necessary to fund the federal government, and do so in a
fair manner. A tax reform plan that meets the following twelve specific
criteria will accomplish the twin goals of fairness and maximizing the economic
prosperity of the American people.
The Criteria for Fundamental
Tax Reform ought to be the following:
Prosperity Criteria
- Not
be biased toward consumption and against savings and investment but rather it
should be neutral between different types of consumption, savings and
investment.
-
Have the lowest possible marginal tax rates, removing to the greatest extent
possible the disincentive to work, save and invest while providing the greatest
opportunity for upward mobility.
-
Be neutral between whether to produce in the U.S. or abroad; it should not
provide an artificial incentive to move jobs and production overseas.
- Impose
the same tax burden on all forms of productive activity and should tax each
activity at a uniform rate.
-
Treat human capital formation and physical capital formation alike.
- Dramatically reduce the
administrative and compliance burden on the public.
Fairness Criteria
- Exempt
the poor from tax and allow everyone to meet the necessities of life before
paying tax.
- Once
the necessities of life have been met, however, the plan should treat people
equally without favoring one set of taxpayers over another and by taxing the
same proportion of goods and services they purchase for their own personal use.
- Should not play favorites or
reward the politically powerful or well connected.
Civic Criteria
-
Be transparent and understandable so the public understands the tax system; it
should not hide the true tax burden or obfuscate.
- Be
politically stable, so that the reform will last.
- Have a manageable transition.
The answer is that true
reform is the plan that best fulfills these criteria. The prosperity criteria
are those that will maximize economic growth and the economic well-being of all
Americans. The fairness criteria are those that we believe most Americans
accept. The civic criteria are those that promote a healthy body politic and
improve our political process...
Read the full paper here to see the many ways the FairTax is a superior system to a flat income tax. Then save it to review before your next conversation about the FairTax!
The paper also includes a detailed scorecard:
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