Two key points in my quest to where I am right now

[John_James]

First off, there was a lot of discussion about this tax issue in the Herman Cain 9-9-9 thread, particularly starting here, with the Schiff/Wenzel debate.

I definitely encourage anyone interested in the tax discussion to check it out.

@Bogart

1. From Rothbard: A consumption tax in its simplest form moves the supply curve for any taxed good to the left. Assuming no changes in demand, that means that the market clearing amount will drop. And suppliers will reduce their future production to accomodate the new calcuations of future demand despite the fact that the market clearing price will go up.

I don’t see how this supports the claim that consumption tax is worse (or at least not better than) an income tax.

2. From Rothbard: If suppliers could raise prices they would do so immediately with or without the tax. If I supplied a good and I could raise the price and not affect my quantity sold, I would do so.

True, but as I pointed out here, businesses could simply start charging for things they used to give away for free. I see this as a way to at least partially shifting new costs forward to the consumer…precisely what Rothbard argues cannot be done.

3. From Rothbard: From 1 and 2 above is not clear at all that a consumption tax would result in more economic growth over the current a tax on earnings, winnings, investment returns and corporate profits.

It is also not clear that it wouldn’t.

There are many reasons for this. One example is the corporate profits tax. It is not clear at all that if a company supplies a good that is taxed that the company would produce more and invest more in futher production with the consumption tax than with the corporate tax.

It is not clear that it would produce more with a corporate tax. But on that note, Dave commented on Peter Schiff’s comments on the profits tax here.

@Bogart

4. From Bogart: With any consumption tax there will be a run on the capitol as suppliers try to get their good onto the list of “Untaxed” goods. So there will be just as much corruption and power playing under a consumption tax as any other.

Why does there have to be such a list?

5. From Bogart: What is worse with the consumption tax is that it is easy to avoid on exchanges through used goods, secondary markets and barters. So the govenrment will have just as big of a bureaucracy trying to track down tax cheats as it does. Furthermore individuals will have to do just as much paperwork to satisfy tax enforces that they are not doing lots of transactions without paying the taxes.

I don’t see how you can simply assume this would be the case. Especially if your only support is:

If you think I am wrong then get behind a farmer in a line at a tool discounter and see if there is a lot of state level paperwork that goes into a farmer trying to skip paying sales taxes.

I’ve watched people skip sales taxes in virtually the same time it takes to ring up any normal sale. I’ve seen people walk up to a register at Office Depot with 5 computers at over $1000 each, flash a card, and have the tax automatically deducted in a few seconds. You wouldn’t even notice if you weren’t paying attention.

And I still don’t see how this is supposed to support your claim anyway.

6. From Bogart: All of these issues happen with or without fiat currency, but with fiat currency and the business cycle a consumption tax is horrible. During recessions consumption will decrease. So tax revenues will decrease.

…because tax revenues don’t decrease when people have reduced income…like when they are unemployed…like during a recession.

@Bogart

As tax revenues decrease the central banks will print more money. So as bad as the bailouts and central bank behavior was with the drop in revenue, the drop in consumption tax revenue will be worse.

…because there wasn’t a drop in income tax and capital gains tax revenues during the latest bust.

Onto the Fair Tax:

1. Mises Website. The Fair Tax is a 30% tax on top of the untaxed price, not the 23% the people claim. So just by thier theme they are already telling lies about it.

2. Mises Website. The Fair Tax has this crazy pre-bate. That simply means that Washington still has all of the power to hand out favors and demand lots of paperwork from the people receiving the pre-bate.

3. Bogart: There is no way that Washington ever hungry to get more money and distribute more favors will eventually start mofiying the Fair Tax to not including items or begin including items.

4. Bogart: The Fair Tax if implemented will destroy or massively reduce activity in certain industries. That 30% tax will certainly curtail or cut back on peoples home buying. Think of what this will do to the already devastated construction industry where the capital gains tax on investment property will change to this stupid Fair Tax. So instead of paying capital gains at 20% on gains. The owner would have to sell for at a minimum of 30% over the original purchase price - transaction costs. So if a person purchased a home for 100K then that person would have to sell it for 100K - 6K realestate - 2K closing costs - 1K Transfer Tax = 91K x 1.3 = 118300. Can you sell your home for that much? Anything less and you are LOSING money.

I don’t necessarily disagree with any of this, but it still does nothing to prove that the current tax system isn’t worse.

I lose a lot of respect for people like Peter Schiff who on his radio show spouts off the advantages of a consumption tax.

Then prove him wrong…In your entire “diatribe” I fail to see one piece of evidence that suggests the current tax situation is better than what Schiff proposes.