Taxing the building blocks of growth--savings, investment, labor and production--is destructive and yet this is exactly what income taxes do. Removing taxes from the very elements that cause the economy to grow cannot be achieved with any federal revenue system that taxes income, including a flat income tax. The original effects of the income tax system, when enacted a hundred years ago, were minimal but it has grown beyond all proportions those legislators originally intended to do structural damage to the overall economy. Our tax code now makes business and personal decisions about savings, investments and even mundane day-to-day-personal spending all about tax consequences. If taxing income was a sound idea in the first place, this might work--but it is not.
The destructive effects are clear and the process that creates such dysfunction has been documented again and again--the corruption of definitions of income in order to either raise additional revenues or exempt a favored group from equal treatment, distorts the economy. This is the inevitable byproduct of leaving such tax code decisions with politicians whose primary concern is not sound economics or even fairness but ill-considered social engineering ideas from both sides of the political spectrum and driven by an entirely human, if destructive, motivation: creating tax code favors that are rewarded with increased power or campaign funds, or both. The result over the years is a Byzantine system of complexity, without any unifying rhyme or reason, that does great harm to the economy. The flat tax merely temporarily simplifies an inherently corrupt system and the kind of taxation that, at this scale, is destructive to the economy. Taxing retail consumption under narrow FairTax definitions leaves few distorting decisions to the political class, makes taxation entirely visible and ensures that what is taxed is what is produced by the economy, not what actually creates a healthy economy.
These truths are at the core of the FairTax proposal but are ignored by this writer who rather doubtfully asserts himself an authority because of a claim of practicing corporate tax law. Thousands of pages of peer-reviewed research and economic modeling by widely respected economists across the political spectrum, including a Nobel Prize recipient, in favor of the FairTax are therefore somehow simply dismissed in passing by a self-proclaimed expert with far less impressive credentials. Rather than argue the substance of the FairTax idea, this writer picks at the edges and small imperfections (which do exist, of course), simply makes up several dire and ridiculous consequences out of whole cloth and treats us, to the "Lawyer's Rule": "When the law is against you, argue the facts. When the facts are against you, argue the law. When both are against you, call the other lawyer names."