I am concerned that what purports to be a tax reform is actually the old tired ideas dished up in a fancy way. A tax on the results of labor whether in terms of what you earn or what you spend is a tax that slows down the need for consumer goods and consequently the need to produce goods. In other words it causes a slow down in the amout of progress possible.

The only tax that is able to incite the production process and to help the society to grow is one that is applied to land values and which would encourage the land-owners to make proper use of this national asset or alternatively they will need to sell their land to somebody else who will make better use of it without holding on to it for purposes of speculation in its value.

May we expect to see how any of these proposals work in practice by testing them on a simulation model of the macroeconomy? This is the proof of the inovation, but it is vital that the model is fully comprehensive to include the effects of land speculation!

One of the purposes of a land value tax is to lower the cost of land. The problem with this is that current mortgage holders will be permanently under water, as their debt is based on current land value. With the subprime crisis, such a development would be the kiss of death for the economy.

This comment does not face the facts realistically. Even if the mortgages were not directly affected, the effect of LVT is to cause greater prosperity throughout the economy and not to spoil the income or expenditure of those who do pay mortgages. This would ease their ability to pay and not reduce it. The only "loosers" from LVT are the land monopolists, whose present indulgence in sites that they are not using but confining from those who could so do, would now find themselves having to sell their land at its lower price (just as if for them it were a sour investment of any other kind!).

The consumer is the ultimate taxpayer.

Strict accounting reveals that the customer always pays. It is almost self evident that the consumer will suffer the entire burden of any taxation imposed on the means of production. Everyone, including those who don’t think they pay any tax, actually pay tax when they spend. Higher earners spend more, thus pay more tax. That is the full extent of progressive taxation.

Detailed proof is at:
http://ecforster.netfirms.com/Tax/Doc1.html

One must conclude that our complex tax system is a charade to hide the true cost of government from consumers and voters. No wonder the implication is unwelcome to the tax industry; there need only be one tax and that is a sales tax. The Internal (US), Inland (UK), Revenue could be wound up and its employees put to more productive use to our benefit; ditto for tax accountants, advisers and economists.

A sales tax is a blunt instrument, whereas an income tax maximizes the Keynesian effects of moving funds from individuals with a higher marginal propensity to save to those with a lower MPS, thus increasing consumption. Additionally, a progressive income tax counteracts the payment of net interest on debt held by the public.

A single tax would either overtax the wealthy or overtax the middle class. A surtax on high incomes allows a more reasonable tax rate for a broad-based consumption tax. Splitting the broad based tax in two allows both components to be lower still, which discourages evasion. Currently, there are six major components in the tax system in the United States: a payroll tax for social insurance, a federal corporate income tax, a personal federal income tax, a personal state sales tax in many states, a state sales tax in many states and state corporate income taxes.

Michael Graetz has a very good tax reform plan, although there are one or two ways I would tweak it. The components I would include are a federal VAT, a state VAT, a federal retirement insurance tax with increasing diversion into personal retirement accounts, a federal income surtax, a federal business income tax in which labor is no longer deductible to be used primarily as a vehicle to redistribute income to larger families, students (remedial, collegiate and vocational), homebuyers, patients and charitable organizations providing social services and a matching state business income tax. The VAT would cover direct government expenses, while the BIT would be set high enough to maximize the use of redistributive tax expenditures. At some point the federal business income tax would be entirely shifted to the state business income tax, with the federal income surtax to sunset when the entire public debt is retired, including contingent liabilities for social insurance and debt held by federal agencies. In the fullness of time, the retirement tax would be a customary contribution to an employee-owned firm and a mutual insurance fund of like employee-owned companies, while the social insurance costs would become customary expenditures without the need for governmental administration.

A single sales tax has no potential for transferring expenditure responsibility away from public expenditure, which shows the Fair Tax is about political organization rather than being a serious plan to reform taxes.

Not every kind of tax is going to put a brake on prosperity in the way that production based ones do. By taxing natural resources, particularly land values, the effect of lost opportunities from land that is withheld from use (often for purposes of speculation) would be pressed back into use. The direct effect of this would be a reduction in land prices, rents and production costs. This would then encourage production rather than retard it when the other kinds of taxation are applied. No wonder that one of the names for Land-Value Taxation is Incentive Taxation.