Current tax system’s $430 billion tax annual compliance cost is from Art Laffer and his team of economists. The exact amount is not the main point. Whether it is $860 billion, $430 billion or $43 billion, it is money wasted and subtracts from our GDP ( I am obsessed with growing GDP). So eliminating the IRS and current tax compliance costs will increase our GDP. Score this for the Fair Tax.
The approximately $500 billion in Fair Tax ‘prebates’ is a worthwhile and necessary price to pay to keep our tax system progressive. Compare this $500 billion with estimated cost of over $900 billion for special interest tax breaks. Fair Tax eliminates these; hence we have a net savings of at least $400 billion. Add this $400 billion (and likely more as there will be more capital for private entrepreneurs) to the GDP. Score 2 for Fair Tax.
The current income tax system doles out about $456 billion more to favored taxpayers then the prebate provides to everyone with a valid Social Security number in ensuring that no one pays tax on the cost of the basic necessitates of life. The prebate is estimated to cost $489 billion per year (about 4% of the 23% meaning that the FairTax rate would be 19% without the prebate.) Compare that with the $945 billion cost of income tax deductions, preferences, loopholes, credits, favors as estimated by Joint Committee on Taxation. The prebate is half the cost of the current system’s deductions, preferences, loopholes, credits, & favors & unlike the latter treats all Americans equally.
Focus more closely on special interest tax breaks and our nations debt. Remember that one critical Fair Tax aspect is the elimination of special interest tax breaks. How many billions a year go to these interests? Answer is about $900 billion or more. Do the breaks increase GDP? Rather these breaks subtract from GDP. Also subtracting from GDP are $billions in annual tax compliance costs (may be over $400 billion). Our economy is in dire straits. We risk foreign creditors balking at financing our debt. Why buy Treasuries when the US increases debt by 10% a year but only grows GDP by 2%. We need to grow GDP more. The Fair Tax is one significant way to grow GDP for multiple reasons including the zero percent corporate tax rate while keeping tax system progressive and revenue neutral. Score 3 for the Fair Tax.