Signal Intelligence About The LP

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Tuesday, April 8, 2008

Selling the Fair Tax to the LP

Steve, thanks for being fair to Sen. Gravel -- and  for letting me dial in to the discussion.  I hope Sen. Gravel's silence at the end just meant that we lost his phone connection, and not that the Senator didn't like being graded on his libertarianism.  :-)   It's incredibly exciting that the increasing relevance and core principles of the LP are calling home such longtime advocates for peace and liberty as Mike Gravel.
I don't think it's impossible for Sen. Gravel and  Rep. Barr to sell a Fair Tax to the LP .  What's bad about the Fair Tax is
  • the new prebate entitlement 
  • the possibility of ending up with both a federal income tax and a federal sales tax
  • the creation of a uniform nationwide federal sales tax infrastructure
  • the uneliminated deadweight loss of taxing a good (consumption == unsaved production) rather than a bad (e.g.  pollution, congestion, extraction of resources from the commons, free-riding subsidies to land value through municipal services)
What's good about the Fair Tax is
  • a switch from taxing income to taxing consumption is effectively the untaxing of savings and investment  -- something every libertarian should favor 
  • it eliminates the IRS and 60,000 pages of requirements for reporting income
  • it has a built-in ceiling on tax rates, since compared to income it's easier to take consumption underground or just postpone/move/cancel it (That its Laffer Curve thus peaks at a lower tax rate and lower level of revenue is a good thing, not a bad thing.)
One way to sell the Fair Tax to the LP might be
  • link it -- weld it -- to repealing the 16th amendment
  • link it to an interim/fallback tax-cutting plan, such as Kubby's annual increase in the personal deduction
  • call it a Federated Fair Tax and say D.C. will bill the states by their population, tempting the 45 states with sales taxes to pay the bill by increasing their sales tax rate
  • point out that it would take  many decades for state consumption taxes to become as loophole-ridden as the current 60,000-page federal income tax
  • point out that it's much easier to move your consumption (or residence) to a low-tax state than to hide from a federal tax
Ideally, the five states without sales taxes would pay their bill using a Land Value Tax, and thus would begin the competition among the 50  "laboratories of democracyAs a good geolibertarian, David Nolan correctly tried to steer Gravel toward  property taxation.  The list of libertarian economists who call a Land Value Tax  the  "least bad tax starts with Milton Friedman and is longer than I have space to include here. 
Decentralize taxing authority, and cut taxes all the way down to the ground!

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