The "FairTax" fails in a digital economy...
If you're wonder whether the Fair Tax or a Flat Tax would be better, I'd like to persuade you a flat tax is a better solution. Why? In my view, the Fair Tax has a gaping hole in it - and it's called the digital economy.
The FairTax had its genesis in 1995 in Texas with real organization showing up around 1997 - at least according to Neal Boortz and John Linder this is when it started... and it's based on the premise of a personal consumption tax.
My very first email campaign as a direct marketer was sent in 1995. E-commerce was just beginning to get legs. 1995 is long before iTunes, the iPad and "all things digital." In brief, digital commerce is a very disruptive distribution method...
Consider the following - where does taxation occur ? In the consumption of physical goods a consumption tax is imposed where the product is consumed - in the United States. Physical products must travel through ports, warehouses, factory floors and retail store fronts. Taxation can occur because the physical movement of goods can be tracked, held and taxed.
But what about digital goods? Where is a movie consumed when it is streamed from a server that sits in Hong Kong by a consumer in the United States? Or music that is downloaded from a server in Moscow? Or what about software that is delivered as a service to millions of businesses on a cluster of servers in Helsinki, London and Sydney?
In a digital economy consumption doesn't happen in a place - it happens all over. It's not under the jurisdiction of a single country like the United States - and if taxation is based on "personal consumption" then I believe we will rapidly devolve to the honor system unless we're willing to give our government control over "the Internet" and all communication systems in the country capable of delivering digital goods.
I for one am not interested in that proposition...
So how big is this digital economy? I'm sure I'll miss a few things but here's my short list: movies, music, software, games, books, insurance, financial products, education, travel and medical services to name a few. It is an ever expanding list.
This isn't the only reason why I favor a flat tax over "the fair tax" but it is a growing reason.
www.electiangilyeat.com
The FairTax had its genesis in 1995 in Texas with real organization showing up around 1997 - at least according to Neal Boortz and John Linder this is when it started... and it's based on the premise of a personal consumption tax.
My very first email campaign as a direct marketer was sent in 1995. E-commerce was just beginning to get legs. 1995 is long before iTunes, the iPad and "all things digital." In brief, digital commerce is a very disruptive distribution method...
Consider the following - where does taxation occur ? In the consumption of physical goods a consumption tax is imposed where the product is consumed - in the United States. Physical products must travel through ports, warehouses, factory floors and retail store fronts. Taxation can occur because the physical movement of goods can be tracked, held and taxed.
But what about digital goods? Where is a movie consumed when it is streamed from a server that sits in Hong Kong by a consumer in the United States? Or music that is downloaded from a server in Moscow? Or what about software that is delivered as a service to millions of businesses on a cluster of servers in Helsinki, London and Sydney?
In a digital economy consumption doesn't happen in a place - it happens all over. It's not under the jurisdiction of a single country like the United States - and if taxation is based on "personal consumption" then I believe we will rapidly devolve to the honor system unless we're willing to give our government control over "the Internet" and all communication systems in the country capable of delivering digital goods.
I for one am not interested in that proposition...
So how big is this digital economy? I'm sure I'll miss a few things but here's my short list: movies, music, software, games, books, insurance, financial products, education, travel and medical services to name a few. It is an ever expanding list.
This isn't the only reason why I favor a flat tax over "the fair tax" but it is a growing reason.
www.electiangilyeat.com
Income tax started as a flat tax. It is now a cesspool of special favors and punishments.
Much of the digital products did not exist in 1997. But most of what is sold retail was and still is hard product sold in a local store.
Your objections on grounds of Internet control are not related to the FairTax. Internet control is already on the way with IP v6.
All the benefits of the FairTax can't possibly be outweighed by what is already happening. Can they?
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I think the answer to your question is the same as the answer to this question, " all the benefits of a flat tax can't possibly be outweighed by what Congress has done to the tax code - can they?
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