The problem with a single NRST is that it would need to be so high it would destroy itself in avoidance and evasion. This is actually a goal of the FairTax — to be so large that it encourages people to question government spending and clamor for reductions.
Even if you had no exemptions (like education as the FairTax does), and no rebates, and only strove to replace the $2.2T current revenue of the income and payroll taxes, the tax rate would need to be 23% as most people understand sales tax rates or 19% “inclusive” the way the FairTax understands it. That is an awful lot of incentive for black market evasion locally and for legal avoidance by spending outside the country. That evasion and avoidance would cause the tax rate to spiral higher and higher.
A 10% NRST would not incite anywhere near as much evasion or avoidance, but would garner only $1.4T revenue. Couple it with a payroll tax that is paid only by the employer on the total cost of labor instead of only the first $100K wages and doesn’t include the value of benefits at all. The employer payroll tax rate at 9% would garner $1T. A total of $2.4T plus another $300B from fuel, alcohol, tobacco, and mining taxes and royalties, for $2.7T overall. No income tax, no individual payroll tax, no capital gains tax, no death tax, and no corporate tax — and no tax credits, subsidies, or deductions to fight over. That would be a pro-growth tax system.
From 2000 to 2008, GDP went from $10T to $15T and with a truly pro-growth tax system like above, I can see going to $25T by 2020. I think it is possible to grow out of our entitlement spending problems, as long as we hold down the runaway costs to 2-3% per year while GDP grows at 6-7%.
The problem with a single NRST is that it would need to be so high it would destroy itself in avoidance and evasion.
Sorry not true. The current tax rate is hidden in the cost of all goods and services. If a 1.00 item has corporate tax of $.06 (30% of 20% profit) and $.135 payroll tax (45%/item labor cost X 30%) which equals $.185, then the new selling price (with NRST) would be $.815 + $.185 = $1.00 As far as the Black Market. We will always have tax cheats.
‘...legal avoidance by spending outside the country.’ how do you get the stuff back in the country?