Yes, yes, the Fair Tax proposal is silly in the extreme (just, for example, think of the posibilities of fraud, carousel type stuff perhaps, with a sales tax of 30-40% to be paid in one hit at the point of retail….) but this is a little illogical:
Without doubt it would increase inequality in a country that is already as dangerously skewed as it was in the Gilded Age of the 1920s. Averaged across the 1920s, the richest 10% of Americans grabbed 43.6% of total income (excluding capital gains), and the richest 1% a whopping 17.3%. In 2005 the comparable figures were 44.3% and 17.4%. The richest Americans already have a much greater slice of the pie than they have had for several generations and are doing very nicely indeed under a graduated tax rate (complete with Bush\’s tax cuts). A flat tax would destroy the system that seeks to redistribute some of the country\’s finite wealth amongst its people in the form of schools, roads and other public goods. And before the whining begins, this isn\’t a cry of class warfare, it\’s economic common sense. Even if you reject arguments around fairness and moral obligations to those less fortunate, by and large economies with more equality are more prosperous and the countries more stable.
Hmm, prosperity and stability coming from equality. The author has just proved that the US is unequal (actually, the inequality by market incomes, which is what he\’s using, is about the same as that of Sweden. A Gini of .48 to one of .46. Sweden\’s taxation system does a great deal more to alter that distribution than the US system does. Oh, and the UK market income distribution is even more skewed at .51. These figures are from a recent Smeeding paper drawing on the Luxembourg Income Study.) : the US is also the most prosperous nation on earth (leaving aside micro-states) and at 220 years or so and rising with the same constitution (the longest in the world for a written one I think?) also the most stable.
So I think that contention about the link between equality, prosperity and stability can be put to one side, don\’t you think?