Why is it that Republicans love the FairTax and not the Democrats?

Economist Laurence Kotlikoff ask this question and raises a some good points.

For those of you who do not know what the FairTax is, it is an around thirty percent sales tax on everything you buy and it eliminates all income taxes. It also gives out rebates to cover food for everyone.

Laurence Kotlikoff says that it would tax the rich more and give enough rebates to the poor to cover the taxes paid by the poor, so why do Republicans love it and Democrats hate it?

"Take Mr. Megabucks, who is sitting on $65 million and want to buy a jet like Oprah Winfrey’s – a 10-passenger, $50 million Global Express XRS. Under the FairTax it would cost him an extra $15 million because of the 30 percent sales tax. Mr Megabucks gets the jet, but the extra $15 million, which he had budgeted for Beluga caviar, Dom Perignon, and other flight snacks, goes to Uncle Sam."

Does this mean that luxury goods will be bought a lot less then if their is an income tax?

The advantage he states is that:

"The beauty of the FairTax is that taxing wealth at a 23 percent rate generates enough revenue to reduce workers marginal tax bracket to 23 percent. This is dramatically lower than the 30 percent to 45 percent marginal tax bracket confronting most workers under our combined income and payroll taxes."

Is this though going to cause the rich to spend less and move towards more black markets?

Or how about this will cause the government to then cause to raise tariffs in order to stop billionaires from buying their boats and planes from Europe or somewhere else?

This could possibly kill all luxury good markets in the U.S.

I have went back and forth with the FairTax and new ideas came to me, when I saw this, that are discouraging my earlier support for this.

Published in: on February 27, 2008 at 7:58 pm  Leave a Comment  

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