| Eomund said: Ok I found another economists view on this. I will post the link (as I cannot edit the PDF to grab the graph), and yes it is from FairTax.org but they are referencing independent data.
|
Again, you have to question the impartiality of this document, as it's published and released by the very group trying to push this tax system. That said, I read it anyways and believe it to be flawed.
The first problem is one of math. This document claims that, through some miracle of bizzare numbers, everyone pays a smaller amount of taxes, but somehow the government makes the same amount of money. This is pure INSANITY. They offer up not a single explanation for this fact, leading me to believe that they either don't know about this gaping hole, or they know about it and don't want to admit it.
If you look at their claim that this tax system encourages home ownership with any sort of critical eye and depth, you'll notice that they give a lower interest rate in the Fair Tax system than the current? Why? Apparently, in 1995, some reasearch was done claiming that tax reform could result in a drop of 25% in interest rates. They cleverly say "a tax system such as the Fair Tax" to keep you from noting the obvious problem that the FairTax hadn't been conceived in 1995. I would question the wisdom not only of having to cite a study done 13 years ago(If this were such a bulletproof conclusion, you would expect to see confirmation, I'm betting they're cherry picking here), but especially when they're taking analysis of one system and applying it to theirs. This absolutely defies logic. All of this, and we haven't even taken into account the fact that this is totally reliant on an economic guess at the future from just one study. Sorry, but I'd like to see a very long list of studies done on the topic, not just one. I believe they're cherry picking here, as well. In addition, there's no mention of the potential side effects of interest rates that are 25% lower. We're just coming through a credit bubble right now, have these guys not learned that lower interest rates aren't always better?
Then you take a look at their GDP growth table. Ignoring the once again flawed idea that we're relying on economic guesswork, there are problems. For one, the meaning of this table is very vague. When they claim that in the tenth year GDP growth will be around 11%, do they mean for that year along the GDP will grow 11% or do they mean that over 10 years it will have grown 11%? If they mean that 10 year GDP growth will be 11%, then this tax system is in trouble. Over the past 10 years, the percentage growth year over year has added up to over 11% themselves. Since this doesn't take into account the fact that previous years growths would make the actual percentage larger than the sum of percentages, we can conclude that an 11% growth over 10 years would be rather, well, pathetic. If they mean an 11% year over year increase in GDP, then that too isn't so good, as it would lead to economic overheating. They make the vague claim that this growth is x% "than it would otherwise be." Again, you have to question the assumptions that they made for "otherwise be." What were they putting GDP growth at for "otherwise be?" We don't know, and they're not telling us. Additionally, as we all know, GDP doesn't always grow. They haven't shown how the system reacts to the FairTax in years of recession. This is troubling.
These sorts of problems are peppered through that document, so I personally believe it to be inherently flawed.
