In Support of FairTax

I'd like to formally pledge my support, for what it is worth, to the FairTax movement.
For the uninitiated, basically FairTax seeks to eliminate, via legislation our current system of national income tax in favor of a ~23% sales tax on most retail items (with few exclusions such as education tuition, supply inputs, etc). There would be no other exemptions or other fun little loopholes companies like to take advantage of. The regressivity issue has been addressed by basically providing an annual rebate in an amount up the consumption at poverty level (in other words, you wouldn't be taxed on necessity items). There really are very few downsides and a whole lot of upsides which I think their website goes into pretty well.

One great thing about this that people don't think about is that the US would lose the ability to provide targeted tax incentives (or disincentives) for economic development. This is a GOOD thing. The companies that currently receive these tax incentives are precisely the ones, often, that don't need them. Often, these companies get the funds via earmarks - which is nothing more than political location-pandering - and is extremely inefficient. The FairTax takes basically all taxation out of business operations and puts the onus on individuals. This of course is good for long-term growth.

The great thing about FairTax also is that we can still 'play' with our tax code (in the future) if we wanted to. Say, for example, that we wanted to disincent tobacco companies and smokers - we could just increase the sales tax. Doing so provides a disincentive to smoke which in-turn reduces the clout of tobacco companies via reduced revenues and market power. Right now, we can punish smokers via state sales tax, but it is very difficult to punish tobacco companies via the tax code.

Of course, this is a political longshot. This is not a new concept - it is just in vogue now. But if policymakers can convince people that is actually structured quite progressively AND it promotes growth, then the age-old economist argument may actually take shape - albeit in a bit more compassionate form.