Revenue neutral? Ok, so what will they do with the collected taxes? Isn't the government spending ~ the collected taxes? The two are connected no matter how we want to deny it. The government can only spend because it collects taxes. I believe a lot of the trouble comes from the disconnect that currently exists in that arena. And it could be our not understanding that factor that's the basis for so much that's wrong. And its continuation.
At this point, a fivefold increase would require me to add no temporary workers as I have enough surplus capacity now. And that temporary position would be considered one of those low paying temporary jobs with no future. It was mostly manual labor. And it didn't afford the guy any ability to plan any long term anything. Now before you start crying for the poor chap, it was a fill-in job for him. He needed a few extra bucks to add to his debt reduction and savings plan that I recommended he start. He has since taken on a couple more side jobs and has eliminated his credit card debts. He tells me that he now can see reaching his goal of $10k for investments before the yearend. And I reinforce my own point of businesses not needing to create jobs. I did that temporary thing to HELP the guy out. My existing staff would have been happy to take on the overtime. I didn't need any new folks to install, configure, bring online and/or operate the new equipment in either of my businesses. My vendors didn't need to add any new staffing to cover my increased demands either.
National sales tax would be a garbage government handout to hedge fund managers who make millions gambling with other people's money, and CEOs who get paid $200m to retire after taking their companies nowhere. Who will pay most of it? That's right, the average-joe middle class wage earners who barely scrape by as it is. U.S. trade and industrial policies (or lack thereof) have screwed workers and wildly enriched the already wealthy elite, it's only fair that the rich should pay their fair share. I certainly pay my share, if some billionaire can't quite afford a private jet because of that oh-so-burdensome 35% tax rate on his passive investment income, well cry me a damn river. The top tax rate was 90% in the fifties, and strangely enough the very rich were able to survive it. God knows we could use those revenues today. You (anyone) are deluded if you think that the rich can pay a pittance in tax, the poor can pay no tax, and government revenues will remain unchanged. Everything has a cost that must be paid by somebody, you can't just muddle with the point of collection and suddenly zap x hundreds of billions into existence. The last thing we need is to screw with the tax code and find that the deficit explodes to $1 trillion a year, which must then be borrowed from China.
The very first income tax in America was imposed in 1861. http://en.wikipedia.org/wiki/Revenue_Act_of_1861 3% on all income over $800. It was (and is) very simple. A single tax rate for everyone that earns over a specifc amount. So, with the FairTax proposal, we are going back to our roots.
Personally, I've never understood why the income tax structure had to be progressive. The more you earn, the more you pay. Percentage-wise, why does the billionaire have to pay more taxes than the millionaire? Why does the millionaire have to pay more taxes than the thousanaire? My local city provides a service where they pave the roads and keep the traffic lights in working condition. Jeff the millionaire drives on the roads to attend his meetings around the city. Joe the plumber drives on the same roads to attend his appointments. Why should Jeff pay more taxes for driving on the roads compared to Joe? Jeff has a heart attack playing golf. The paramedics from the local fire department arrive to take care of him. Joe also suffers a heart attack from walking his dog. Why should Jeff pay more taxes for getting help from the paramedics compared to Joe?
But that IS the problem! Enough wouldn't save or invest. And many who would, wouldn't have the kind of success that they planned for. There exists a mindeset in my community that we need to enjoy the fruits NOW! Live the good life ASAP would be the battle cry for many. So many wouldn't be interested in saving even $2,000 a year. Many would purchase the biggest, baddest car that their credit would allow. There would be a new run on plasma TV's and riverboats would get a healthy bang. There is no evidence that there's a correlation in the masses that would have your theory holding much water. And afterall, isn't it the pockets of poverty that drive our tears? As long as it's understood that there will be periodic government cash sent out and that there will always be a government program waiting, why try? Without a concentrated education process about money, you will only be creating another dependence class. One that knows, expects, DEMANDS regular supplemental cash infussions.
Local/state and federal taxes are different animals. If you live in a state like mine where there is no income tax, and Jeff and Joe live in homes valued apx. the same, then they are going to pay about the same in property tax. Let's say they are both tight wads and generate about the same in sales tax. Then they are going to pay about the same in local taxes. Again, in my State, the vast majority of local (city) and county roads are paid for and maintained with local property, gas and sales tax. Very little Federal dollars are involved. Joe and Jeff pay apx. the same. The paramedics are all paid via a medic 1 or whatever number voted in property tax and/or property and sales tax. Again, in my state no income tax and Joe and Jeff pay apx. the same.
At the state level, our state taxes supports the National Guard. Should Jeff the millionaire pay more taxes for the National Guard to help him during a flood compared to Joe the plumber? Surely, their lives are equally valuable. Why should Jeff pay more? At the federal level, our federal taxes supports the military. Should Jeff the millionaire pay more taxes for the military to protect our country compared to Joe the plumber? Surely, their lives are equally valuable. Why should Jeff pay more?
Yes, because people who earn more are better able to afford it. The marginal utility of money decreases with rising income. A raise of - say - ten percent is worth much more to somebody who makes $10,000 and is barely able to afford rent and groceries than to somebody pulling in a million. More generally, the revenue must be raised from somewhere - either the people more able to afford it must pay more, or the people least able to afford it must do so. Note here that proposals like the FairTax do retain 'progressive' elements, like the prebate. That's partially why they would fail: the advocates don't want to accept the social and political consequences of schemes like this, so they try and have it both ways.
That still makes no sense. Why SHOULD I pay more? Just because I can? That is twisted logic. I should pay equally for services rendered. The focus should be on the services received, not on my capability to pay.