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Replace all forms of Taxation with a single Consumption Tax

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Voting Style: Open Point System: 7 Point
Started: 11/2/2018 Category: Economics
Updated: 3 years ago Status: Post Voting Period
Viewed: 920 times Debate No: 118836
Debate Rounds (3)
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I will begin by stating that I am more than willing to change my mind on any topic, So long as there is substantial evidence that my opinion is flawed. With that being said, I wish my fellow debater the best of luck- see you in the next round.

First off, For those of you that might see this debate and are not fully aware what exactly the Consumption Tax or (Fair Tax) plan is- let me explain. Currently in the United States we have many forms of taxation, For example; Income Tax, Payroll Tax, Corporate Tax, Small Business Tax, Sales Tax, Excise Tax, Etc. The overarching complexity of the tax system has exponentially grown over the last 2-3 decades and has drastically increased the need for more and more Government workers to try and deduce the absurdity that is the tax code. In fact, According to a study done by www. Learnliberty. Org, Out of 100 tax workers (All of which were looking at the same tax return), No two tax workers came up with same amount that was due for the families tax return.

Obviously having such a confusing tax system is detrimental to the country because it creates higher need for Government spending to fondle its way through the insane tax code, And because it is utterly time consuming for the average family. The Fair Tax fixes this problem by completely abolishing ALL forms of taxation, And replaces them with a single tax- the Consumption Tax. A tax of 20% would be placed upon all NEW goods and services, Meaning that if you bought a used vehicle you would pay nothing in taxes. Many of those who disagree with the Fair Tax claim that it is regressive, Because it impacts those less well off more negatively than those who are rich. While this is true, The Fair Tax plan handles that issue by instituting a sort of Universal Basic Income. For example, A single father would receive 200/month for himself, And an additional 80 for his child. This is meant to serve as a means of guaranteeing all families have the ability to eat, Drink, Etc.

The next argument that is consistently used against the Consumption Tax is thus: 'If there is a 20% tax on all goods and services, Won't that decrease ones motivation to purchase new goods? If something is 20% more expensive tomorrow, Why would I buy it? ' Remember earlier when I mentioned that this tax replaces ALL other forms of taxation- and that includes Corporate and Small Business. Now that Corporations and Small businesses aren't required to give up 20% or more of their profits to taxation they can afford the lower the overall cost of their products. You might say 'why don't they just all keep the same prices and make higher profits? '. Well, Let's say you have Company A, Company B, And Company C. Company A and B keep their prices the same after the new tax plan is implemented, But seeing an opportunity to take over the market share Company C lowers their prices by 20-30%. Consumers will run to Company C to buy all of their goods, Eventually forcing the other two Companies to change their minds or go bankrupt.

Lastly, The Fair Tax guarantees that ALL people within the country pay taxes. Right now, Illegal Aliens don't necessarily pay anything in taxes, Because you have to be legal to work and pay an income tax. With the Fair Tax, Anytime ANYONE purchases anything on US soil- that 20% Consumption tax goes directly to the Government. When all the math is done we would make the same Tax Revenue as we are currently making (or slightly more). Also, Instituting the UBI (Universal Basic Income) system would allow for us to make gigantic cuts to welfare spending. This would hopefully put us back into a surplus and eventually out of debt.

To whomever my fellow debater ends up being, I respect any and all opinions, And thank you for taking the time to have an intellectual conversation!


Happy to think with you today.

I'll get started here as well. I'll state my basic claim and touch on your arguments and mine in as clear a manner that I can.

My claim:
Switching to a Consumption Tax would lead to the same govt. Income as sticking to our current tax plan while reducing our ability to target taxes to address specific externalities. If all goes perfectly, We will have the same net spending from welfare programs and the same net income from taxes. This will extremely negatively impact some members of our society when it comes to transition issues. This means that we'd be switching our whole system around for no added benefit and a lot of extra negatives to eliminate 80k full-time equivalent jobs in the government sector (may not save govt. Money) and tens of thousands more in the private sector. All these negatives for only small positives leads me to believe swapping would be a bad idea.

Your points:

1. Learnliberty 100 tax workers claim.

I was unable to find this anywhere on learnliberty's website. In fact, This debate was link #8 in google and the other top links were youtube videos and articles on learnliberty which did not pertain to this topic. Learnliberty's article on the IRS does not address it. I can't address a source that doesn't seem to exist.

2. Government Spending due to Tax Complexity

The IRS budget for FY 2017 is 11. 5 billion which has decreased every year since 2010 despite inflation. Compare this to a 3. 422T tax income and a 4. 407T overall budget. It was. 25% of the budget for FY2017. It employs 80k people in full-time equivalent positions with that money, Down from 90k in 2012. If we got rid of the IRS, We'd gain 1 trillion dollars in 100 years. Even were we to switch to a consumption tax, We likely would have an agency to deal with research into it and policing of companies to ensure things went smoothly. This seems not only like an extremely unimportant issue but one that is also being improved on year to year even through a Democrat presidency.

3. Time Consuming

The IRS has all our tax information. It can do our taxes for us, Requiring us to spend no time on it at all. Many other countries do this. I believe California does this. It takes significant time for a family to do their taxes, But it'd be 12x less consuming than your basic electric bill if the IRS did them for you.

4. Regressive Nature of the Consumption Tax

UBI doesn't address the regressive nature of it, And adds to the complexity of your system that is supposedly designed for its simplicity, Particularly with the numbers you mention. Food, Health, And Housing put together is roughly 50% of the gdp of the US. Consumption falls as a percentage of income as income rises. This means rich spend less on consumption percentage wise than poor or middle class. Some people for the Consumption Tax argue for cards that allow exemptions to the tax under certain income levels, And cards that would give discounts to the tax between other levels. This also increases the complexity of the system, But can address the regressive nature. No matter which you do, UBI significantly higher than you post or exemption cards, You are increasing the complexity of your system whose main objective was to make things simple. If you got rid of food, Housing, And health you'd have roughly a new sales tax and that figure would need to be 40-50% not the 20% that you quote to make ends meet. There is no guarantee that GDP would remain the same with a drastic overhaul of the tax system.

5. Cost of Goods (Corporations and Small Businesses)

Of course people will swap their spending to used goods as much as possible, But that certainly isn't always possible. GDP will likely remain stagnant or decrease. A lot of companies don't pay a dime in taxes. They would be paying a new 20% tax on all the goods they need to function. Their prices would go up. Small businesses and other companies, IF they were paying a 20% corp. Tax are now paying 20% on their individual goods, So their prices would likely stay the same. No real change, Probably. Few if any will be lowering their price. If you think all corporations are currently paying taxes, You are mistaken. I'll address this point more later.

6. Illegals don't pay taxes.

This one is fairly true. We would likely get a net benefit from illegals paying more into taxes. Illegal aliens are roughly 4% of our population. One would doubt, With how poor they generally are, That that would lead to drastically increased tax revenue more than a percentage point or two. I should note though, That tax reform isn't the way to address illegal immigrants in our country. It is a good consideration, But a problem that likely should be solved by other means. Meaning I concede only a small point.

7. You claim Insitituting a UBI (Increasing government spending) would allow us to make large cuts to welfare spending (more than we spend on the UBI? ) potentially giving us such a large surplus that we eliminate our US debt?

You really need a study to support this claim. Somehow, In your mind, People that are on food stamps now due to low or no income will suddenly have income enough for them to not starve because you've given them a $80 or $200 a month UBI, When you've put a 20% tax on all new consumption. These numbers do not add up, And that is only looking at food. Your UBI is gone just with food at $80 for a kid, Much less rent on an apartment. In my area, A 2 bed 1bath is at least $850 a month. 20% new tax on this would be $170. I don't know where this ability to decrease welfare spending comes from.

My points:

1. Transitioning from our current tax system to Consumption has large problems.

Old people, Retired, Or people who have made the majority of their income already are put in an extremely bad place. A new 20% tax on most things they'll purchase is a direct 20% reduction in the buying power of their remaining money. Imagine having paid taxes all your life and mathematically calculated what you'd need for the remaining years but not having calculated in this 20%. That is losing 1 full year every 5 years on what you saved for. Any system you put into place that solves this has a cost that goes directly to the treasury that far exceeds the 1 trillion~ cost to fund the IRS for 100 years.

2. Why swap?

All you're left with if you want the swap to the new system to be equivalent spending wise is a more simple tax system. Increasing simplicity alone is not sufficient justification for the above transitory problem. It's not sufficient justification for the ten problems we won't know about until we switch. There will always be unforeseen issues. Along with stating that simplicity though, You throw in a UBI as if that won't require hundreds of pages of text if not thousands. UBI sufficient to replace food stamps etc will just be the same system in different names.

3. Govt ability to address externalities

If smoking is causing problems, The US can specifically target a tax on smokers. If solar power is desired to combat pollution (leaving climate change out of it entirely) we can target solar manufacturers with specific tax breaks. You can argue that this gives the govt. Power and increases possible misuse, But Capitalist systems have no innate features to address externalities. This responsibility belongs to the government. You can find examples of many externalities if you look. Any decrease or increase from your cons. Tax instantly increases the complexity, Reducing the reasons to switch systems.

There are several other good reasons. These are the main ones. Increasing simplicity alone is not reason enough to switch systems. If you have reason a source for the welfare claim I'd be interested, But you must address externalities and problems with the transition for your system to have a chance. You also have to argue why we can't change the current system to address the points you bring up.

May your thoughts be clear,


Sources in comments.
Debate Round No. 1


Classicliberal94 forfeited this round.


Passing this round so hopefully my opponent responds.
Debate Round No. 2


Classicliberal94 forfeited this round.


Opponent has forfeited the debate. My conclusions in R1 remain unchallenged.

May your thoughts be clear,

Debate Round No. 3
1 comment has been posted on this debate.
Posted by Thoht 3 years ago
Sources R1
Consumer Expenditures 2017 - Bureau of Labor Stats.
Housing Contribution to GDP - NAHB
Pros and Cons of Cons. Tax - Brookings edu website
Why doesnt the IRS do your taxes for you - Forbes
CBO infographic on tax revenues and govt. Spending 2016
Wikipedia sources on US GDP, Illegal Immigrants, Population, Et cetera.

If you'd like additional sources let me know which claim you need support for. I can think of no others.
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