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The Republican party is generally claimed to be the party of fiscal responsibility. Note the term "claimed" here; I do not think the record of Republican governance proves this claim at all well, but nonetheless the default expectation seems persistent. When I was younger, this was certainly a selling-point of the party to me, and I voted for Bush II in the hope that he'd get government spending under control. Then 9/11 happened, and he wasted trillions wandering our military through the middle east.
Now the debt is very bad, and people are once more raising the banner of Fiscal Responsibility. Is it in Republicans' interest to enforce "fiscal responsibility", and if so, how? If we were to seriously cut spending and raise taxes, as people claim the fiscal situation demands, this would almost certainly cost us the next election. In the best possible case that I can see, we would be expending our political power to create stable economic conditions for our opponents to then rule. The more likely case would be us expending our political power to ameliorate spending that our opponents increase to gain power for themselves, resulting in a much shakier economy and our complete political irrelevance.
Why not offer the Fiscal Responsibility mantel to the Democrats? The economy is very complicated after all, and they are at this point clearly the party of Expert Opinion: who better to determine and implement the hard-nosed measures necessary to right our economic vessel? When I was younger, the obvious rejoinder would have been that they would do a bad job of it and disaster would result, but it seems to me that we have not done all that much better, and disaster seems likely in any case. If disaster cannot be meaningfully avoided, then why expend limited resources demanded by a serious political conflict on an unfixable resource-sink of a problem? What's the actual plan, here?
The US unironically needs to raise taxes on the rich (I mean actual rich, not those earning large salaries). (Non-land) Wealth taxes are usually bad, but with the global reach of the IRS and their policy to tax worldwide income, there's no reason the US can't easily adopt a policy of taxing worldwide assets without too many bad side effects. This would raise significant money, imagine even a 1% worldwide non-US housing asset yearly tax on all US permanent residents and citizens (temporary residents get a pass because you don't want to discourage smart wealthy people from the rest of the world coming to the US), it would easily fill the black hole.
The FairTax would make it so the truly rich couldn’t spend money without the government getting a quarter of it. Anything else either has loopholes or drives them out of the country.
The FairTax proposal does not tax anything rich people spend a lot of money on.
The section of Wikipedia page on FairTax titled "Taxable items and exemptions" says:
It also says that rent would be taxed. It's not specified there, but reading into the sources, I see buying a house would not be except for new construction (unclear exactly what that means if most of the price of the house is the land it is on? Is that amount re-taxed every time a new building is built on it?).
Sure, rich people spend more on food and other everyday expenses than poor people, but not a lot more. Many more expensive purchases (housing, education, companies) are exempt from the tax or could easily just be made in a different country (yachts, private planes) and carefully never "imported". Those purchases are currently made with money that's at least theoretically taxed as income.
Investments aren't spending, they are a form of savings.
Sure, that's the way they act for the middle class when who are just buying enough stock to fill out a retirement account. But for the wealthy making investments large enough, they are buying power.
TANSTAAFL, no matter how rich.
If they’re financing businesses through loans, the businesses will be buying services and goods on the open market using the loan money, and those will be FairTaxed. The goods or services those businesses sell will be FairTaxed. That’s less money returning to the investor.
If someone rich buys a used mansion, either they’ll refurbish/remodel it to their own standards using FairTaxed services and goods, or the seller will refurbish/remodel it before putting it on the market and raise the purchase price from “fixer-upper” to “like new”. And if they try to work around the FairTax to refurb it, the contractors will get caught and charged with tax evasion, so the contractors will be sure to include FairTax in their receipts. Trickle-up taxation.
According to Google search summary by AI, “New home sales and improvements, which would include land, would be subject to the tax. Sales of existing homes and, presumably, existing land, would not be taxed. This is consistent with the FairTax's exemption of ‘used items’ to prevent double taxation.”
If the rich are buying used stocks (not IPO), why should they pay FairTax? If they’re buying new IPO stock, they’re transferring ownership of a used company from the private proprietors, who built it by buying and selling FairTaxed goods or services. If they’re buying and merging companies, same deal. The difference is they can’t just sell it at a loss to cut their tax liability. (I’m looking at you, Hollywood Accounting!)
If the rich buy a big, big boat worth a bunch of bucks in Bahrain and keep it in the Bahamas, why should the federal government of the USA get a single dime of that purchase?
As to the fairness of power, prestige, reputation, value speculation, and all the other ancillary benefits of capitalism, the existing income and investment tax system has no ability to curb them, so the FairTax doesn’t even try. The tax system should be focused primarily on efficiently collecting necessary revenue for the government, not solving all the social ills caused by the 1% of the 1%. That’s what antitrust is for.
Thank you for engaging with me on this, there’s little I love as much as talking FairTax.
I think this is a really cool idea, and I appreciate being introduced to it. Thank you.
How on earth does it work with buying a house vs renting?
If I buy a house for $100,000 and then sell it for $150,000, is the new buyer taxed on the incremental $50,000? How does that change if that $50k comes from land appreciation vs renovation? What about if you sell a house at a loss?
Does this play as an absurd penalty to rent vs buy? Does renting get 30% more expensive while purchasing used housing stock stays the same price?
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