Goal: Make Raising Rates Politically Hazardous
Changing the progressiveness of an income tax does nothing to make it difficult to raise taxes. We see it regularly. Part of the reason why it’s so easy for Congress to raise tax rates under any income tax is that voters only think about the income tax rates once a year and that date is nowhere near election day. If elections were to be held on April 16, raising rates on a progressive income tax might become politically hazardous. But that’s not going to happen.
A flat income tax, with a corporate component, is only slightly better, since increases in embedded corporate taxes are not seen by most taxpayers. Furthermore, like the progressive income tax, taxpayers would only think about the tax rates once a year.
A flat income tax without a corporate component is much better, since without embedded corporate taxes in all retail prices, any increase in the tax rate would be more obvious. But again, such increases are really obvious only one day a year and that day is about seven months before election day.
9-9-9 is so convoluted that Congress could easily play games with it, safe in the knowledge that most people wouldn’t have the foggiest idea what’s happening.
On the other hand, since the FairTax is collected at the time of every retail sale of a new product or service, voters will be reminded of any tax increase every day throughout the year, including election day. Congress will be afraid to raise taxes, for fear of voter backlash. In fact, that daily reminder of how much tax they are really paying could very well inspire voters to pressure Congress into lowering the FairTax rate, especially after more new jobs increases the tax revenue and makes reducing the tax rate an obvious next step.
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