{"id":1901,"date":"2017-03-18T18:33:40","date_gmt":"2017-03-18T22:33:40","guid":{"rendered":"http:\/\/blog.bitsofgenius.com\/?p=1901"},"modified":"2017-04-10T00:33:10","modified_gmt":"2017-04-10T04:33:10","slug":"the-endless-reincarnation-and-death-of-the-fair-tax-effort","status":"publish","type":"post","link":"https:\/\/blog.bitsofgenius.com\/?p=1901","title":{"rendered":"The endless reincarnation and death of the Fair Tax effort"},"content":{"rendered":"

Prager University has some good videos, which people will occasionally label as right-learning. \u00a0And I agree with them… occasionally. \u00a0Today, I listened to one featuring Steve Forbes entitled “The Case for a Flat Tax”. \u00a0You can watch it here<\/a>.<\/p>\n

As I watched it, I became Captain Picard… and I face-palmed.<\/p>\n

I never ceased to be amazed how often this concept revives itself from time to time under a new name, and why people can’t understand the reason\u00a0it fails to be adopted–every time. If you’ve never heard of it, the concept is that regardless of how wealthy or poor a person is, they should be paying the same rate of tax. \u00a0It\u00a0has an altruistic appeal, especially to people of middle and lower class status in America. \u00a0After all, the fact that a big corporation once in a while pays little to no tax means they are a robber baron, right! \u00a0They should be paying their fair share!<\/p>\n

It is what I call the Robin Hood effect.\u00a0Popular culture in America sees Robin Hood in a different perspective than the actual story. \u00a0The real legend of Robin Hood was to stop a temporary tyranny, but American pop culture sees the story as equalizing wealth. \u00a0Somehow this moralistic view gets superimposed on taxation, and fair tax is seen as a way to make the rich pay their fair share.<\/p>\n

So, why does it always fail to pass? \u00a0The core problem, which is much deeper than I can go into depth on in this post, is that America is perhaps the only country which does not teach its youth its own system of economics. \u00a0The school system in America is geared toward producing people to work as employees in someone’s business–not to be a business owner. \u00a0Business ownership is taught by business owners to their children, and certain\u00a0business owners start businesses to teach it to others. \u00a0But most people leave school in America with no knowledge of how to create and run a business.<\/p>\n

What does this have to do with Fair Tax incentives? \u00a0In a capitalist society, the economic system has to provide an economic incentive for someone to take an economic step of faith. \u00a0For example: if a person wants to open a business requiring a physical location, the crime rate in the neighborhood where they will operate the business is one of many factors the owner considers. Ask any city manager to confirm this:\u00a0the more the poverty in an area, the higher the\u00a0crime rate will be. \u00a0Yet, descent hard-working people live in both poor and non-poor areas and they need services.<\/p>\n

So how does a Government agency deal with this issue of inequality? After all, the number of shops in a given neighborhood (poor) is lower than other neighborhoods which are not poor. \u00a0So the government has to create an incentive for the prospective business owner to choose the neighborhood in more need, despite the extra risk. \u00a0The city can guarantee a certain amount of police presence, but let’s face facts… police often arrive after a crime has been committed and can only do reports and search for the perpetrators after the fact.<\/p>\n

So the Government has one tool it can use: the tax incentive. \u00a0The Government can lower, defer, or even eliminate taxes for the potential owner to offset any extra risk the potential business owner is taking on. \u00a0The concept of a flat-tax rate would exclude this ability.<\/p>\n

If a business example is not a good one for you, try another closer to (literally) home… the mortgage interest tax deduction. \u00a0Every person who buys a house without paying fully in cash benefits from this. \u00a0Why does it exist? \u00a0A person who has home ownership gains value in the long term by doing so. \u00a0And a person who owns something is going to care for it more than someone who is renting: ask any landlord about that. \u00a0So home ownership, in a country with an economic system which rewards ownership, is seen as a positive thing.<\/p>\n

The Government,\u00a0seeing the need to direct the way people invest their money to make this a possibility, creates an economic incentive for home buying in the form of a tax reduction to offset the additional cost of the loan, the maintenance, etc. \u00a0So people who rent, who couldn’t afford a house normally, now have an economic incentive to take the step of faith in ownership.<\/p>\n

All of this goes against what the flat tax proposes. \u00a0A flat tax gives the government no economic tool to steer investment to an area where it is needed, or even away from an area that is doing harm. \u00a0A Fair Tax may seem fair, but there are times where the Government has to step in to level the playing ground… and it needs something other than physical threats to make it happen. \u00a0These tax incentives (not loopholes as they are mistakenly called) answer the age old human question: “What’s in it for me?”<\/p>\n

The icing on the cake of this video is when it discusses how the varying tax rates started with two rates in the Reagan area, and then ballooned into the seven we have now. \u00a0And the very first thing it does is ask the question “won’t the 17% be too much of a burden for people with low income?” \u00a0And the solution: make an exception… 17% for everyone, except for …”<\/p>\n

So much for a flat rate.<\/p>\n","protected":false},"excerpt":{"rendered":"

Prager University has some good videos, which people will occasionally label as right-learning. \u00a0And I agree with them… occasionally. \u00a0Today, I listened to one featuring Steve Forbes entitled “The Case for a Flat Tax”. \u00a0You can watch it here. As I watched it, I became Captain Picard… and I face-palmed. I never ceased to be […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[21],"tags":[],"class_list":["post-1901","post","type-post","status-publish","format-standard","hentry","category-politics-and-public-policy"],"_links":{"self":[{"href":"https:\/\/blog.bitsofgenius.com\/index.php?rest_route=\/wp\/v2\/posts\/1901","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blog.bitsofgenius.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blog.bitsofgenius.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blog.bitsofgenius.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/blog.bitsofgenius.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1901"}],"version-history":[{"count":23,"href":"https:\/\/blog.bitsofgenius.com\/index.php?rest_route=\/wp\/v2\/posts\/1901\/revisions"}],"predecessor-version":[{"id":2102,"href":"https:\/\/blog.bitsofgenius.com\/index.php?rest_route=\/wp\/v2\/posts\/1901\/revisions\/2102"}],"wp:attachment":[{"href":"https:\/\/blog.bitsofgenius.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1901"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blog.bitsofgenius.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1901"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blog.bitsofgenius.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1901"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}