June 26, 2013
Wednesday

There are dozens of reasons why the FairTax would be better than our current system. Not just the abuses of the current regime. Let s start with our current system actually suppresses our economy.

What is the GDP? For this example, let s say that every time an individual spends any money it was like exhaling a bit of air to a very large balloon. Then the GDP would be the sum of all spending in our country and would be represented by the area of a balloon inflated by every purchase by everyone in the country.

When our politicians decide that our government needs to confiscate money for their purposes. That subtracts from the individual s choice to spend or save as they see fit. They no longer have it to spend or contribute to the economy and thus reduces the GDP, or our balloon contracts.

Economist Richard Rahn pointed out that throughout history, our government collects only 18% (+/- 2%) of the GDP in taxes regardless of the actual tax rate. And regardless of the actual tax rates the economy expands and contracts to this confiscation.

Economist Art Laffer came up with the Laffer curve. His curve explains that if the tax rate is zero you will collect zero. If the tax rate is 100% you will collect zero.

How? Simple, when you step up to the roulette wheel of business, is there any guarantee that you will win? NO! If the government guarantees that if you win, the government will confiscate 100% of the winnings, are you going to bet your money?

The fact is that the closer to 100% tax rate the less economic activity can happen, and taxation beyond a certain point only serves to suppress our economy, reducing the GDP and shrinking the economic balloon that the government can siphon 18% of.

The FairTax flips the equation around and lets the engine of our economy have all of its money, and only collects its share when the consumer buys a new good or service. Every decision, a choice by a consumer to spend, vs. an arbitrary confiscation that only slows our economy. A purchase of a new good or service pays the consumption tax.

Our tax code has chased over 14 trillion dollars worth of business and investment out of this country. How much of that would return if our corporate tax rate went from the highest in the world to zero?

The result is more jobs and a growing economy, and the government collecting more money as the size of our economy grows. Our politicians have a term for the portion of our paychecks they allow us to keep. It is called a tax expenditure .

Our current system started with a few pages and a single 6.5% flat tax. Since then our politicians have been bribed to go back and fiddle with our tax code over 20,000 times and our tax code is now more than 71,000 pages long. Their deceit extends to the misinformation about their beloved balanced budget amendment it would not stop them from spending in excess of our income but raise taxes to shrink our economy when they spend more than they collect.

The next thing that would happen is that other countries would have to enact legislation to slow the exodus of business and investment from their country. In fact, exporting freedoms and opportunities to countries that may never have allowed it in the past.

Keith Whitcomb
keith.whitcomb [at] comcast.net
Atlanta, GA

About: "fair tax supporter"

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