The Fair Tax would increase inequality in the USA by shifting the burden of tax payment onto the poorest. The rich spend between 1 and 10% of their income on goods and services, whereas the poor spend upwards of 100% of their income, and even more by going into debt to cover life expenses. All this tax would do is ensure that the wealth of the rich remains locked up and out of circulation forever, multiplying tax fre…
> The Fair Tax would increase inequality in the USA by shifting the burden of tax payment onto the poorest. So there are some provisions to address this: - basic rebate: every person gets a rebate corresponding to a base amount of tax paid; this is intended to ensure poverty-stricken folks are not taxed out of subsistence (HHOS). This is like earned income credit but it’s streamlined so the bureaucracy is minimized a…
It helps to stop thinking of money as "property" and more as "the power to take from the national pool of resources". One is something you own, the other is a grant by the polity to take from the nation's resources. Regardless of the amount of money we have, at the end of the day there is a limit to how much can be bought with it, because we as a country only have so much stuff to divide among the populace. Money and the market are just efficient means to decide who can take how much.
Money lending structures such as hedge funds absolutely do serve the useful purpose of financing promising ventures that could bring real material wealth. But if the money supply is allowed to become too lopsided (i.e. too much inequality), your efficiency, competitiveness, and effectiveness as a country diminishes astonishingly fast. This phenomena has been understood for at least 4000 years, with one of the main correction methods being a debt jubilee to (among other things) correct runaway inequality and keep money from being too idle. The IMF has many pointers to this issue here: https://www.imf.org/en/Blogs/Articles/2011/09/14/why-inequal...
There was actually a study done a few years back that isolated an "optimal inequality" range; too much or too little and your efficiency goes down. I wish I could find it again...
But regardless, an income tax (as well as others such as wealth tax, inheritance tax etx) will take a larger share of money out of the hands of the rich (who can't really do anything with it except lend it, making it less efficient). A straight consumption tax, even with rebates, will still cause a disproportionate amount to be paid by those who actually produce things, while rewarding those who let money go idle. And that's bad for everyone.
Also one more note: The current tax system in America is by no means efficient. The richest can basically pay no tax at all under the current rules, and that of course is bad for the same reasons I outlined above. Many other countries have laws that prevent this sort of thing, so it's not insurmountable, but one must be careful to understand the implications of changes to a tax scheme, and I believe that those promoting the Fair Tax have not considered everything.