Tax Reform: Flat Tax or Fair Tax

I was reading a short article over at the Tax Foundation about them being asked which tax reform plan that they support and their answer was pretty much as I would have suspected. Both of the plans actually cite work done by the Tax Foundation in their plans. Here is a bit form the article...

From an economic perspective, there are many similarities between the FairTax and a Flat Tax. For example:

• Both the FairTax and the Flat Tax are "consumption taxes." In other words, only spent money is taxed, not savings.
• Both would eliminate the estate and capital gains taxes.
• The Flat Tax would be collected on an annual basis like our current federal income tax. The FairTax would be collected at the point of sale, like our current state-level sales taxes.
• Both plans are single tax rate systems that eliminate double taxation. 
• Both plans would dramatically reduce compliance costs and the tax system's dead-weight loss to the economy.

Any tax reform plan will have transition issues and these will have to be thought through carefully. That said, the long-term benefits of fundamental tax reform should far outweigh the short-term transition costs.

For more information on tax reform and what you can do to help, head on over to the site.