Sunday, August 01, 2004

Faith Based Taxation

Wonder if Bush will really make abolishing the IRS a campaign theme [drudge link]. The thing about those who advocate replacing all federal taxes with a VAT taxes, they almost inevitably lie about just about everything when they're advocating it. Any changing tax system needs to start with what it would take for a revenue neutral change. They always set the tax rate too low, often obscuring it by calculating percentages rather weirdly (say, if the total price including tax is $1.30, and the price without tax is $1.00, they call the associated tax rate as ((1.30-1)/1.30)= .23 instead of the .3 that we normally think of it). They claim you can include progressivity by exempting the first $X worth of purchases, ignoring how this would require a massive increase in the underlying tax rate. They pretend compliance and enforcement costs simply don't exist (abolish the IRS!). And, they exaggerate the overly impact on the economy which serious studies find to be at best a tiny bump.

But, I'm sure by next week the media will be goo goo over the fact that we won't have to file our income taxes anymore! Though, the dollar and bond prices may plunge...