[kstenerud]

The Fair Tax would increase inequality in the USA by shifting the burden of tax payment onto the poorest.

The rich spend between 1 and 10% of their income on goods and services, whereas the poor spend upwards of 100% of their income, and even more by going into debt to cover life expenses.

All this tax would do is ensure that the wealth of the rich remains locked up and out of circulation forever, multiplying tax free in hedge funds (basically sucking even more money out of the economy), while the poor pay for everything.

[no-s]

> The Fair Tax would increase inequality in the USA by shifting the burden of tax payment onto the poorest.

So there are some provisions to address this:

- basic rebate: every person gets a rebate corresponding to a base amount of tax paid; this is intended to ensure poverty-stricken folks are not taxed out of subsistence (HHOS). This is like earned income credit but it’s streamlined so the bureaucracy is minimized and there is no magical cutoff. It’s optional so progressive types can refuse it.

- tax only first sale: only new goods and services are taxed. resale is not taxed. However this does mean direct services are taxed and that may be unpleasant for those who earn by invoicing for service (lawyers, truck drivers, etc). OTOH consumable things like food, disposable diapers, etc will always be taxed

- Only the federal individual income tax is repealed and outlawed. There’s plenty of taxation schemes left and some even applies to wealthy individuals and corporations.

I question your explanation of “rich get richer, poor pay for everything”, it doesn’t seem obvious. Hedge funds serve a purpose or they wouldn’t exist, but you seem to imply they only serve to pull money out of the economy. That at least would be deflationary, but AFAICT it seems like the appreciation of hedge funds at least creates wealth that gets put to some use in further capitalization. Which grows the economy, so I scratch my head at your characterization.

Furthermore “the poor pay for everything” seems like it could be substantiated only if the actual amount corresponding to the 100%+ you claim the poor will pay exceeds the amount corresponding to the 1%-10% the rich will pay such that the latter is lost in the noise. The reality even in the current tax scheme is the rich pay for everything eventually (even more so in California, the pinnacle of benevolent taxation, up yours Franchise Tax Board).

[anigbrowl]

- basic rebate: every person gets a rebate corresponding to a base amount of tax paid; this is intended to ensure poverty-stricken folks are not taxed out of subsistence (HHOS). This is like earned income credit but it’s streamlined so the bureaucracy is minimized and there is no magical cutoff. It’s optional so progressive types can refuse it.

How are you going to minimize the bureaucracy? Poor people are still going to have document all their income/assets to qualify for a rebate, richer people who hate taxes will channel their income through some sort of trust while claiming that their designer suits are owned by the trust and administrators are required to wear them like any other employee.

Hedge funds serve a purpose or they wouldn’t exist

As does Fentanyl, but I bet you don't think it's a good idea to sprinkle it on your cornflakes. As does fentanyl, but that doesn't mean it's a good idea to sprinkle it on your cornflakes.

[no-s]

> Poor people are still going to have document all their income/assets to qualify for a rebate,

nope, no qualifications, no means test. Only one rebate per person, same amount for each person, computed from poverty line statistics. Children too, legal guardian collects.

> As does Fentanyl, but I bet you don't think it's a good idea to sprinkle it on your cornflakes.

I’m not sure how to construe your analogy. I would agree its inappropriate to eat hedge fund participants for breakfast, but OTOH Fentanyl does have a legitimate use even if some might abuse it as a cereal topping. Perhaps you should clarify your original point instead.

Fair Tax isn’t really intended to address wealth disparity and the outsize influence of the wealthy. The Fair Tax asserts the defects of the Income Tax outweigh the virtues, particularly WRT to transgressions against individual rights, costs vs benefits, and exceeding limited government. It's an alternative tax system. The macroeconomic impact is debatable, static analysis is probably an error due to the outsize influence of perverse tax incentives.

[anigbrowl]

no qualifications, no means test. Only one rebate per person, same amount for each person

Ah, so by 'base amount of tax paid' you mean averaged across the population? A rebate generally implies a refund of prior payment, so I found your summary confusing.

I’m not sure how to construe your analogy.

That just because something has a purpose does not imply it is a net good. In general I think high concentrations of wealth are bad on a systemic level, like too much sugar leading to diabetes. So I'm not sure that the capital allocation performed by hedge funds is a necessity for an economy to operate sustainably.

[no-s]

> A rebate generally implies a refund of prior payment, so I found your summary confusing.

Sorry, it is a “pre-bate”, intended to offset the first x dollars of tax that would be paid on “necessities”, determined by some poverty line/CPI related computation performed periodically. No means test or qualification except citizenship. Don’t recall if there was any effort to address non-citizens that were not dependents.

> In general I think high concentrations of wealth are bad on a systemic level, like too much sugar leading to diabetes.

I can’t quite dis-agree with you, but I’m not certain how to address it. Perhaps we should just have rules/criteria regarding breaking up concentrations of wealth/power or splitting up giant organizations. Meanwhile this happens under the current tax system, thus orthogonal WRT the objectives of FairTax.

[kstenerud]

Note: I'm not saying that hedge funds are bad or anything; I've just singled out one aspect of them that will cause problems in a world without a capital gains tax.

It helps to stop thinking of money as "property" and more as "the power to take from the national pool of resources". One is something you own, the other is a grant by the polity to take from the nation's resources. Regardless of the amount of money we have, at the end of the day there is a limit to how much can be bought with it, because we as a country only have so much stuff to divide among the populace. Money and the market are just efficient means to decide who can take how much.

Money lending structures such as hedge funds absolutely do serve the useful purpose of financing promising ventures that could bring real material wealth. But if the money supply is allowed to become too lopsided (i.e. too much inequality), your efficiency, competitiveness, and effectiveness as a country diminishes astonishingly fast. This phenomena has been understood for at least 4000 years, with one of the main correction methods being a debt jubilee to (among other things) correct runaway inequality and keep money from being too idle. The IMF has many pointers to this issue here: https://www.imf.org/en/Blogs/Articles/2011/09/14/why-inequal...

There was actually a study done a few years back that isolated an "optimal inequality" range; too much or too little and your efficiency goes down. I wish I could find it again...

But regardless, an income tax (as well as others such as wealth tax, inheritance tax etx) will take a larger share of money out of the hands of the rich (who can't really do anything with it except lend it, making it less efficient). A straight consumption tax, even with rebates, will still cause a disproportionate amount to be paid by those who actually produce things, while rewarding those who let money go idle. And that's bad for everyone.

Also one more note: The current tax system in America is by no means efficient. The richest can basically pay no tax at all under the current rules, and that of course is bad for the same reasons I outlined above. Many other countries have laws that prevent this sort of thing, so it's not insurmountable, but one must be careful to understand the implications of changes to a tax scheme, and I believe that those promoting the Fair Tax have not considered everything.

[anigbrowl]

Just according to keikaku.

(Translator's note: keikaku means plan.)

[kstenerud]

It's not really a plan per se; it's just a natural consequence (or emergent phenomena, if you will) of a political system where one must already be rich and connected in order to become a senator and thus affect the laws of the land. Not all countries have this problem.

[anigbrowl]

My post was more bleak sarcasm than analysis, but I think it's about 50-50. Perverse incentives are part of the issue, but there are networks that diligently and patiently work to maximize their number and perversity, eg applying the lessons of selectorate theory in a maximally adversarial rather than diagnostic way.

https://en.wikipedia.org/wiki/Selectorate_theory