More on the FairTax

Aside from the obvious*, let's have a little more explanation on the FairTax and why it would work better than an income tax.

DEMAND

Some Economics 101: "Demand" is a term economists use to describe the amount of some given thing people are willing to buy. The cheaper that thing is, the more people want to buy it. The more expensive the thing is, the less people want to buy it. Most people are already either explicitly or intuitively familiar with this concept.

Income tax systems are FUNDAMENTALLY FLAWED because they effectively RAISE THE PRICE of jobs/work, rendering labor MORE EXPENSIVE. If there was no income tax, the price of labor would go down, quantity demanded would go up, and job creation would be encouraged rather than discouraged.

SPENDING VS. INVESTMENT

Continuing with Econ 101, there are basically two things people can do with their own money: they either spend it or they save it. Economists call this a "trade-off" between saving and spending, because more of one thing automatically translates to less of the other, and vice versa.

Unless you live in a cabin in the woods in Montana, you probably aren't going to save your money under a mattress -- there is a tendency for savings to correlate directly with INVESTMENT. Investment is a good thing. Investment promotes long-term growth. Investment makes for a favorable balance of trade, as opposed to a trade deficit. Investment means you're making interest instead of paying interest. Surplus is preferable to debt. Investment is what makes capitalism capitalism. Investment is the key to prosperity.

The problem is, spending is fun! Investment is dull. Investment is broccoli, spending is chocolate cake. Since Clinton left office, America has been on the chocolate cake diet.

Now, given that there is a trade-off between spending and investment... if the government were to tax spending (see above re: demand) spending would go down. When spending goes down (see above re: the trade-off between spending and investment) investment goes up.

BASIC NECESSITIES

But what about the things we all have to spend money on anyways, such as housing, food, clothes, medicine, etc.? The FairTax includes a monthly prebate to offset the taxes paid towards spending on these essentials. It establishes an effective base level of exemption, of money that you don't get taxed on -- what economists refer to as a "progressive" tax scheme.

CONCLUSIONS

This is why I advocate for the FairTax -- it streamlines the taxation system by using the already-existing, proven method of a sales tax. It levels the playing field by getting rid of the loopholes rich people and corporations use to avoid paying taxes. It promotes job creation, rather than discouraging it. It encourages investment. And it cuts poor people some slack by allowing for tax-free spending on basic necessities.

This is also one of the main reasons I will be voting for Gary Johnson in the upcoming presidential election.

Learn more at FairTax.org!

--Dan Colgate

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* Which is: that the current tax code is obviously broken; it unfairly burdens the middle class while letting the super-wealthy off the hook; it's tens of thousands of pages long; it wastes tons of taxpayer time and energy; and it really isn't any good for anybody, except elected officials who use it to hand out favors to special interests and the tax accountants/IRS agents whose jobs depend on it.