Quote Originally Posted by DuncanONeil View Post
The FairTax woul;d be better than what we have now!!!!
Fair Tax is a system that is even easier to defraud than the current IRS. How many contractors do you think are going to under report or fail to report work under this system? If they do now they risk having their client claim any deductible work on their taxes and if the IRS tracks it they can show the unclaimed income. The IRS isn't great at it, but it does provide some disincentive. FairTax actually encourages people to be dishonest because from the perspective of the above board guy whose prices are 30% higher, how many sales do you think you get against the guy who cuts corners and claims a much lower bid, adds on the 30% sales tax and doesn't report it.

Also the switch from a largely income tax based approach to a largely sales tax based approach is double taxation on anyone who has already taxed income in investments, this can be a huge issue for retired individuals and will probably result in increased social security expenditures as more individuals become vulnerable in retirement.

Some industries are entirely killed by a high sales tax as well. For instance professional poker would move almost entirely outside the US if there was a X% tax for all entry fees with X around 30%. In this environment there are no poker pros, the edge of the best players in the world at the game is around 25% so they couldn't pay the rake + the tax and still make a living.

Lastly while the tax deduction rules are complicated and need simplification, removing the ability to make deductions entirely would eliminate the governments ability to encourage certain actions. Lack of deductions for charity would result in fewer donations, hurting many charities. Inability to provide financial incentives for marriage and children would result in lower birth rates and the need for more immigration to keep a population level that supports economic growth and funds existing programs. The inability to provide tax deductions for making choices with fewer external costs would result in a lot of individuals externalizing costs to the detriment of society.

High sales taxes would force increased welfare payments and drive up the minimum wage as well. When you shift more of the tax burden onto the poor, the programs that they need to get by will need more money.