

A Realistic Way to Eliminate the Federal Income Tax - intelliot
http://www.intelliot.com/2013/02/fairtax-taiwan-receipt-lottery-apple-store-e-receipts/

======
dragonwriter
Both in the federal form and the state forms that have been proposed by the
same groups, independent analyses have found that the so-called "FairTax"
proposals to replace income tax with sales taxes aren't realistic, because the
proposed tax rates would fail to replace the revenue of the replaced income
taxes.

There are other problems as well; the page linked here states as a problem
that that income tax, designed to be progressive (increased total tax rate as
income increases), has some features which make it regressive in certain
cases, however, the "FairTax" is regressive out of the gate -- because its a
sales tax, the effective rate declines as mean propensity to spend declines,
and that propensity declines with income.

------
kaonashi
Am I the only one who looks at the 'FairTax' and finds it anything but fair?

~~~
MordinSolus
What do you mean by fair?

~~~
kaonashi
Extinguishes currency where it will have the least amount of negative impact.

~~~
intelliot
I don't see how having the least amount of negative impact is unfair.

~~~
dragonwriter
As well you shouldn't, since that was the answer to "what do you mean by
fair?", not "what do you mean by unfair?". The characterization of the
"FairTax" as unfair was that it failed to meet that criteria for fairness.

------
WhoIsSatoshi
I think the concept of FairTax is interesting, but the application through a
lottery system is a gamble at best (har). Because it is working for Taiwan
does not mean that it would be transferable: if a tax-system is holding an
economy together, it might be quite a jump to say that applying it somewhere
else would have same results

~~~
b0o
The lottery system is no gamble, and with it also means creating a uniform
receipt standard, which further simplifies our current system as well. My
taiwanese relatives keep every single receipt, and they even ask for my
receipts when I go back to visit. At the very least it'll have some sort of
positive impact because both the Taiwanese and American economies have a
number of similarities, one of which is that both economies have a huge
percentage of small business owners, and they are the ones most likely to
benefit from tax evasion in the case of a single-rate federal retail sales tax
such as the one proposed by FairTax. However, a lottery system would force
consumers to demand receipts from these small business owners thus preventing
them from doing sales off the books.

Also, the grand prize for the lottery is 10M NTD (New Taiwan Dollar), which is
~$337,781 USD, and overall they might pay around $1-2M USD which is a fraction
of any estimated potential losses in tax revenue if such a lottery receipt
system was not put into effect.

Also, our current tax-system is most definitely not holding our economy
together, it's pulling it apart. Implementing it into our current tax system
might also work too. At the very least, I hope it'll teach Americans to keep
their receipts which is a huge improvement in itself.

~~~
WhoIsSatoshi
You seem to say that the implementation of a lottery would smoothly go. I
disagree: the system has worked in TW but was it implemented in the same
conditions? Do you remember when the US tried to implement the metric system?
There were only positive things about it... I can see a lot of folks opting to
go to a blooming "grey market" where they get everything at 20% discount (3%
markup from OP tax rate) where they wouldn't get receipts, or a second hand
economy rise and not enough revenue being generated. In either case, any
drastic change is a gamble,but we're so far down the hole that it might be our
last option.

------
chrisbennet
A politician's ability to attract campaign donations is strongly related to
benefits he can bestow on his benefactors. A politician who can't give out tax
breaks will have less ability to attract donations/bribes. I suspect that
reason alone would make it difficult to adopt such a tax scheme.

------
xxchan
This would definitely put the brakes on the consumption a bit. Do you think it
would get to pass? Yeah.. no.

~~~
anigbrowl
Consumption might go up between the monthly prebate and the lack of income tax
deductions from paychecks. Although this would be a one-time boost, it would
be a pretty significant one. A 23% sales tax isn't as awful as all that; the
average rate of VAT in Europe is about 20%, _on top_ of income tax.

I've been rather skeptical of the fair tax proposals before, but I wasn't
aware of the prebate concept which is the old idea of a guaranteed basic
income under a new name, and somewhat reflective of the existing incentives.
This bears further consideration and I'll spend some time this weekend playing
with the numbers. It's interesting to me that it's engineered to be
progressive, which a flat tax most certainly is not. I also think the mind-
numbing complexity and warped incentives of the existing tax code create a
huge drag on the economy. It's monstrously inefficient.

~~~
intelliot
You're right. I hadn't thought to compare with the average rate of VAT in
Europe. Additionally, I don't really see how people could say that the FairTax
rate is awful, considering that its rate was chosen to make the tax
approximately revenue neutral.

------
nathos
The privacy concerns of the last part of this proposal are kinda scary.

~~~
anigbrowl
I've got mixed feelings about that. If you spend with plastic (which most
people do most of the time) then all your purchasing is trackable already. And
frankly, I _wish_ I could get my receipts in a standardized electronic format
- my bank statements tell me where I've spent money, but not what I bought.
Retailers have that information about me, but many don't share it
electronically.

For example, my wife and I both like cooking and after we got a house we have
almost stopped eating out because we were having so much fun in our own
kitchen. With $20 of ingredients and our cooking skills we can whip up a meal
that would have cost us most of $100 in a restaurant. There's an app/website
where we can control all our grocery coupons from the local supermarket and
make our shopping lists, which is fine, but we can't look through our previous
purchases that way. I can scan and OCR the receipts easily enough, but that's
a waste of my time. So I look through the paper copy, but I'm missing out on
some useful longitudinal data.

In Europe, by contrast, privacy laws mean you can ask any company to hand over
the data they keep on you to peruse it for yourself. At present this is viewed
as an administrative burden but it has the potential to add tremendous value
for consumers if implemented right.

~~~
intelliot
Excellent point. Getting all my receipts in a standardized electronic format
so that I can look back and see what I bought would be super awesome, and I
wasn't even thinking of that when I wrote the post.

