Tax Reform may Ward off or Help Prepare for Smoother ‘Wiedemer’ Aftershock Economy
Radical tax reform such as the Fair Tax (bill in Congress as HR 25), if implemented in 2013, has potential of rectifying the economy significantly, with a BIG IF:
IF we include major pro private economy initiatives such as opening up public land for natural gas and oil drilling. The US must take advantage of unexpected but enormous resource of gas and oil. By itself this can add 1-2 million jobs per year and soon cut our 3% of GDP trade deficit in half, per Investors Business Daily.
IF we set in motion decrease in government % of GDP back to 20% from current 24% by 2015. This will allow greater contributions by the private sector to GDP growth and to increase economic productivity. The latter is the #1 driving force behind genuine long term economic growth. Robert Wiedemer expand on this extensively in his ‘Aftershock Investor’.
There BIG 3 – tax reform, oil and gas drilling, and decrease share of public sector to 20% are measures that Obama strongly opposes, at this time. However it is our responsibility as free market capitalists to make the case and educate as many as we can.
Even if we implement these BIG 3 in 2013 we may still crash into a dollar collapse due to our huge debt and suffer a Wiedemer Aftershock Economy. However we will be in a better position to absorb it and recover. Why? We will once again have set up private economic expectations and will have whittled down the entitlement culture with our move to decrease the % of government in GDP.
On the other hand, if taxes rise this decreasing GDP, decreasing tax revenues, further increasing debt, our encounter with the very, very likely Aftershock Economy may be very severe. Why? Our entitlement culture will have further advanced and our grasp of free market economics will have further weakened. Take your pick and educate our citizenry.
More on Tax Reform – Fair Tax
Dec 2, 2012 the Home News of East Brunswick published my letter regarding tax reform and specifically the Fair Tax. Below is the link and letter content for reference. A 2nd link www.returntoexcellence.net is a very detailed site with extensive explanations how the Fair Tax is expected to work and how it will impact you. Click on the Fair tax section.
Home News Letter
I agree with Robert Cheechio’s recent letter “Target deductions, not tax rates.” Why? Most tax deductions have little or no impact on improving economic growth. Income, however, is success and we should encourage more of it. That is why lower tax rates lead to stronger economic growth and decrease debt as the resulting income growth generates more Treasury revenue. Therefore, tax rates should be lowered to offset the impact of limiting deductions. This will render this measure as revenue-neutral.
The above is an interim measure. However full-scale tax reform is required for significant and sustained economic growth. The Fair Tax, now in Congress as HR25, is the most promising tax reform option. A central part eliminates all deductions. It also eliminates federal personal and corporate income and payroll taxes and replaces that with a consumption tax. This will empower the private sector to significantly lead us back to prosperity as our businesses will be able to more strongly compete globally.
The Fair Tax remains progressive via prebates to all up to poverty level. To learn more please visit www.fairtax.org.