Now that is interesting.
From their FAQ section:
What assumptions have been made about government spending?
The FairTax Plan is devised to be revenue neutral for the first year of operation. It raises the same amount of revenue as is raised by current law. After the first year, revenue is expected to rise because of the growth generated by this plan. At that time the American people, the Congress, and the president will have to decide whether to lower the tax rate or to spend the additional revenue.
It all seems to hinge on the belief that FairTax will encourage growth and therefore the amount the federal government receives will increase. Given what we know about the wealthy and their proclivity to minimise their tax liabilities I wonder if this legislation would simply result in less revenue for the government, making the prebate, or basic income, another costly government program.
Further down the author alludes to the ‘Irish Miracle’ but given the way Irish tax policy has been abused by multinational corporations I’m not sure how the author can defend the Irish policy. Especially as infrastructure all over the First World, including America, grows evermore dilapidated. Governments have to balance the risk of reforming tax policy and dealing with the wild fluctuations in tax income with the possibility taking on incredibly expensive loans and long term debt. In particular, successive governments in Ireland simply couldn’t budget for essential maintenance of water systems because changing the tax rates would scare off the large firms and they would take with them the dribble of tax they pay anyway.
Don’t you think the FairTax plan also carries with it the risk that firms able to avoid it would much rather simply avoid the tax, leaving the government to find the difference (read: tax poor people more again) to secure funding for large scale projects?