Les Rubin, head of Main Street Economics, Inc., https://www.mainstreeteconomics.org/ said this recently:Fair Tax, Federal Debt, and Inflation
What is the relationship between these seemingly disparate topics? I am a big fan of the Fair Tax. It solves so many problems and would work well, when it gets a fair hearing in DC. Unfortunately, that is easier said than done. It would disrupt the cronyism and corruption we find so rampant and distasteful in DC and be a huge transfer of power from the federal government to the people.
Last year, I wrote an email on the Fair Tax, Understanding the Fair Tax. You can find it here on our website at mainstreeteconomics.org.
Unless you have been in outer space for the last year or lost in the wilderness, you know the Federal government has a debt problem – here are a few numbers to highlight this issue (all data comes from the Department of Treasury financials as of September 30, 2022).
Current total liabilities including Unfunded Obligations: $122,000,000,000,000 - $122 trillion dollars
Current interest-bearing debt: $32,000,000,000,000 - $32 trillion dollars
Government projection of interest-bearing debt in 10 years: $51,000,000,000,000 - $51 trillion dollars. At that time the interest only will be $2 trillion dollars (assuming 4% interest rate.)
At this link, you will enjoy our short (1:45 minutes) video where the Grumpy Old Man explains this in more detail.
You also know that inflation is raging out of control as a result of insane fiscal policies, huge deficits, and exorbitant printing of money.
The Fair Tax goes a long way toward fixing both problems – controlling our deficits and reducing inflation. In fact, there are so many benefits to this tax program, it only needs explaining it to the folks on Main Street for the folks to demand the change.
Deficit Reduction: for starters, it lowers dramatically the cost of collection by eliminating the IRS. It will reduce the cheating and cronyism in the current system which avoids paying tax. We would collect more revenue by eliminating the avoidance schemes everywhere in the 75,000 pages of tax code. It is clearly a pro-growth program which will grow the economy, making all of us better off and continuously raising the revenue resulting from growth.
Cost of Government: because all of us are consumers, every day every American will see the true cost of our federal government on every receipt. All Americans will demand that the FAIRtax rate be lowered by cutting spending.
Inflation: the cost savings to businesses would be remarkable, and lowering costs would, through competition and market forces, lower prices. There are many ways it lowers costs, but the major ones I see are eliminating the cost of collecting data for tax returns; eliminating the tax preparation costs and dealing with the IRS; and eliminating the taxes that businesses pay, including their part of Social Security and Medicare.
Individual Benefits: the same benefits a company gets, eliminate collecting data, tax preparation, and paying the income and social security and Medicare tax. Your gross pay is your net pay, isn’t that sweet!
Of course, you will pay the consumption tax on new goods and services, but you will receive a ‘prebate’ check to cover all of the purchases at a basic level of consumption. So lower income folks would effectively pay no taxes at all. And if they shop wisely and buy used items as much as possible, they might even profit from the ‘prebate’ check.
So, What Should We Do? If we sit idly by and do nothing – we will get nothing done. It takes public support for this to get it done. We need to speak up and let our representatives and the public at large understand this, there is so much PBS about it (political bull s—t), from unknowledgeable people who don’t even understand it, it will take more education and speaking up from all of us.
You can find information at //fairtax.org/ . There are videos and papers that answer your questions and the questions you will get from your friends when you discuss this idea.
You can send a message to your elected representatives on the FAIRtax website but you can also go to our website, mainstreeteconomics.org, and Contact Congress. All you need to do is put in your name and a valid address and write whatever message you want so send. There is message preprogrammed about fixing the debt problem, but feel free to edit it to promoting the Fair Tax. It will go to the President, V.P., your 2 senators and your representative.
