The FairTax system of taxation should be adopted in the USA
Second round arguments only
Third Round Counter Arguments
Forth Round responses
Debate rounds are shorter so make sure you are committed to this debate if you accept!
You may argue for another tax system if you so choose (i.e. flat tax, VAT, etc.)
I accept. I know await my opponents arguments.
What is FairTax? FairTax is a twenty-three percent inclusive consumption tax that will tax all services and new goods that is in its final stage of production while repealing every other federal tax. It is important to note that the tax will only be applied to new goods so preowned cars and homes will be tax free on the federal level. Furthermore, since it only taxes goods in the final stage of production, aka the retail stage, the goods will not have any price inflation because of taxes along each stage of its production.
FairTax would be beneficial to the country as a whole. In order to prove this, I will begin by describing the benefits to the everyday person, the consumer. Firstly, the individual gets to keep all of his salary. Currently, the income tax may take a large chunk of his gross salary and leave with a significantly smaller net income. In many cases, the individual just accepts this net salary and does not even realize what happens as it is all forcefully withheld from his gross salary. Imagine getting to take home one hundred percent of a well-earned salary, and imagine only getting to take home seventy "five percent of a well-earned salary. Which feels better? At this point, it is understood that the amount of money in a person"s bank account would increase, but this does not earn much if all goods cost significantly more. Luckily, they will not. The thing is, with our current convoluted income tax system, the price of nearly every good is inflated by approximately 22% due to the taxes tacked on at every stage of production. Without the income tax, that additional cost would disappear leaving us with cheaper goods and more income. Therefore, purchasing power dramatically increases and, as a result, the demand curve shifts way to the right. This is good for business.
Unfortunately, many of the tax"s opponents insist that the system would shift the tax burden to the poor. This is because they are ignorant of the tax system. FairTax will provide a prebate system to offset the taxes paid on life"s necessities like food and shelter. The prebate is a monthly payment to each household based on the number of people living in it. For example, a family of four would get a larger prebate than a family of three. This entirely prevents the tax burden from being shifted onto the poor and middle class families.
FairTax will also benefit the individual because it is significantly simpler. No more tax day. No more refunds. No more long documents to fill out. No more wondering if you qualify for a deduction. It is super simple"as simple as buying something actually. This of course, would also reduce the IRS to 5% of its current size. I have never met anyone who says that is a bad thing.
What about benefits to the economy? Yes, a tax rate of 0% may be good for the consumer but bad for the economy, so it is important to describe the economic and fiscal effects of this tax bill. Firstly, everyone will pay taxes. There will be virtually no avoiding it. People on the underground economy will pay it and illegals will pay it. Of course, illegals will not get the prebate, so these people are 100% profit! Furthermore, it is expected that FairTax will boost revenue 352 Billion dollars in the first year alone. This is because everyone will pay the tax, the economy will grow, and more will be spent and saved. Also, the FairTax provides something that the income tax lacks, and that is stability. People will always know what they pay and businesses do not have to worry about huge hikes in their marginal tax rates.
Furthermore, businesses will flock to America because it will have the single most competitive tax system in the developed world. This will lower unemployment and increase demand. Also, wealthy individuals will no longer have incentive to hide their money in offshore accounts because there would be no income tax to hide from. That means that all that money comes into US banks which would lower interest rates and lead to business expansion. In fact, it is estimated that the economy could grow up to 10.2% after institution.
I thank my opponent for permitting me to accept this debate. There's just a few problems that I have with the Fair Tax system.
My opponent talks about prebates, so lets look at that first.
1. Working poor person - earns $30,000 a year - works paycheck to paycheck - spends it all on necessities - has 0% to invest tax-free under FairTax.
(INCOME plus PREBATE X 12 minus NECESSITIES) divided by INCOME mult by 100 equals PERCENT LEFT TAX RATE
My opponent also states that we need to eliminated the IRS and scale it back, but that is also problematic as if we do commence that it would make tax evasion so much easier now that the IRS has little to no enforcement for it's policies. (http://taxprof.typepad.com...) In 2008, CNN reported that Huckabee's Fair Tax Plan lacked enforcement and we can cross apply this problem here as we can see without a valid enforcement agency this tax cannot be enforced. (http://money.cnn.com...) When we check the political fact checker on the same issue we can see that this would in turn cause taxes to rise causing further tax evasion. (http://www.politifact.com...)
If we observe the above chart we can see that it compares Flat, Progressive, and Regressive Tax. We can see that the flat tax would be the best here as it permits the same tax percentage for all. This is key when we decide to tax income instead of products as we would never be 100% sure that consumer confidence would be up and under a fair tax plan in zero consumer confidence the federal government would be making no money compared to if the average joe has a job then the government would be making money reguardless if the consumer spends their paycheck or not.
Next here I will quote Gary Johnson, " The Fair Tax calls for abolishing all federal taxes and replacing them with a 23 percent nationwide sales tax that applies only to new goods and services. For example a used car or secondhand clothes would be exempt, while groceries would not. In addition to a simplified tax, everyone would receive something called a monthly prebate check."
My opponent may look to Europe for possible signs of sales tax working, but that is only because they use VAT, meaning that they take 25% of the FINIAL sales profits. This is a much better system than what my opponent is purposing and we can see it doesn't harm the business, as much, and it helps the government by ensuring that business are still in operation and it doesn't harm the consumer as much. (http://www.forbes.com...) Though I still prefer the flat tax system.
2. As far as enforcement goes, all American businesses have the infrastructure in place to pay sales taxes. The IRS will still exist; it will just be smaller. Plus, most Americans do not have the resources necessary to avoid paying this tax. Furthermore, over years after the implementation of the tax, new policies will be implemented to enforce the tax. Remember, this tax policy has only been theorized, and when put into practice, some things may be subject to change.
3. The Flat Tax:
The biggest problem I have with the flat tax is that it will not generate enough revenue. The Laffer Curve teaches us that each income level has its own optimal tax rate. By taxing everyone at the same rate, some will be taxed to high and others to low. This will reduce revenue generated by the government. Furthermore, the tax forms still have to be filed just like under the current income tax system. The only paperwork done under the FairTax is a one page prebate form completed once per year.
My opponent claims that people have no net taxes due to the prebates they would have to pay under the poverty line, but this is highly incorrect. My opponent has no valid sources to back his claim, so it's null. I have shown the equation of which said Fair Tax would be based off of and what it would use. We can see that I have given valid evidence and sourcing for how the tax works and it's rebate so we have no other valid choice, but to use that.
Bruce Bartlett, former Secreatary of the Tressury, stated that, "Even with the rebate counted the way the Fair Tax supporters want it calculated — as a reduction in tax liability rather than an increase in income — there would be an enormous shift in the tax burden from the wealthy to those with lower middle incomes." (http://www.politifact.com...)
Thus we can see that once again that the tax burden would be shifted to the middle class and would not be helping the average American at all. Even with the IRS still there with it being greatly reduced as the plan calls for we can still see tax evasion on a large scale and this is something that we would need to avoid.
Many Flat tax plans have been shown to work. Hermin Cain purposed the 9-9-9 plan in which people would pay a 9% flat income tax. Let's compare that of a Progressive rate to that of a flat tax system.
Above we can see that under the flat tax system they all pay the same exact tax rate vs. that of a Progressive tax rate. Under this system we can see that you would be getting more revenue than under the progressive tax system which is rediculous. (http://one-simple-idea.com...) Here we can see that under the flat tax system you can get more revenue and you wouldn't be harming the average joe as much as they wouldn't be paying as much in sales tax that would come under the Fair tax and not only that, but we have to realize that the harm that would be done under my opponent's purposed system, which he DROPPED! So I'll extend those points across the board.
The Politically Incorrect Guide to American History by Thomas Woods
The FairTax Book by Neal Boortz and John Linder
Somebody's Got to Say It by Neal Boortz
To begin, I will criticize the Flat Tax. Nominally, yes, the flat tax LOOKS like it will generate more revenue. However, when we look at the conditions for the Laffer Curve, raising tax rates slows the economy and destroys incentives to work. In the same way, lowering taxes below their optimal level will generate less revenue. Therefore, the only people who will be taxed at the optimal tax rate are those somewhere in the middle. The poor will be taxed above their optimal rate and the wealthy below it. Thus, in practice when economic growth changes are accounted for, the flat tax would generate the least of all the three tax systems: FairTax, Progressive Income Tax, and Flat Tax. The reason the progressive tax was instituted in the first place was because the flat tax that we had before it was simply not generating enough revenue.
Next, I would like to state that my points that the economy will grow, foreign business will move to the US, everyone will be taxed, savings will increase, interest rates will decrease, and employment will increase have gone entirely unopposed up until this point. The only criticism that my opponent has brought up is the shift in the tax burden (which I have disproved, despite whatever reasoning Con has for it) and potential tax evasion. I have not addressed the potential tax evasion under the flat tax, but I will now. Nothing will change from today. The wealthy will continue to hide their money in the Caymans where it is tax free, and their will still be fraud on the forms. Under FairTax, these forms of fraud would be impossible.
I am going to conclude this debate now because I know that it is getting long for my readers, so I will say this. There is no faster way to bring about positive change in our economy than to overhaul our current tax system and replace it with the simple FairTax.
I would like to thank my opponent for giving us a few sources, because they contradict what he's trying to sayin. First let's go with the flat tax. According to the National Bureal of Economic Research, from 1989 to 2007 started a boom that trippled the US profit margins due to the flat tax system. The increase was from $20 trillion under Reagan to $60 trillion under Bush Jr. (http://www.laffercenter.com...) The Yearly growth rate of the GDP was at 3.8% annually showing that the flat tax system was indeed working and helping the American economy dramatically. We can cross apply this to the Reagan cuts and that everytime the cuts started to take affect was when the economy was at a low and the cuts boosted the economy up dramatically. (http://www.laffercenter.com...)
My opponent's Fair Tax website is only a website trying to get us to petition Congress to make it law. This source means nothing. My opponent argues that in order to get foreign buisnesses to move here we must enanct this tax plan, but that is highly flawed. As a matter of fact the US is OVERregulated and this is according to the US Chamber of Commerce. (https://www.uschamber.com...) According to the US COC there is approximately 17,000 new regulations a year coasting the US economy over $1 billion per 27-30 regulations. This is extremely painful on the US economy and even if we enacted this plan we could still see that the regulations would prohibit much of the newer industries that my opponent is talking about.
s://www.uschamber.com...; alt="Since 1976 federal agencies have issued over 180,000 new regulations." />
My opponent has dropped how I argued that the flat tax is better overal and how harmful the fair tax is how it harms the average joe. With that I thank you for this debate.
Please vote Con.
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