Tax policy

[dzm]

Google News decided I needed to read this diatribe pushing Republican tax policies.  They all seem like terrible social policy to me.  I'd think the basic rules should be:

• Taxes cover the cost of running government
• People who can afford to pay more should
• The tax code should be comprehensible by mere mortals

Comments

[dzm]

Also: the FairTax people never quite say it explicitly, but their real estate white paper does make it pretty clear that "new things are taxed, used things aren't" applies to housing too...so my custom-built mansion I pay tax on, but merely buying a large existing house in an upscale neighborhood isn't.

If the FairTax system was implemented and I was buying a very expensive new house, it's very much worth my while to incorporate, have the corporation build and own the house, and then lease the house back to me. That way the house is capital for a legitimate business charging its customer rates that at least cover its costs, and therefore it's not taxable. Anything that says "business income should go totally untaxed" is extremely prone to this kind of gaming - again, mostly by the upper echelon who have the most to gain from it.

The other thing that makes FairTax complicated is broad (correct) assertions that prices of everything will change. The housing paper above asserts that mortgage rates will drop 0.25%, for instance, which is a partial offset of paying a high sales tax on buying the new house. Compared to other tax code rewrites this is much harder to say "this will be better for them and worse for them"...though it also seems like the sort of thing a first-year economics final exam could have on it.