Say, What About a Luxury Tax?
From a reader named Dominick:
As a small-business owner, I am obsessed with the idea of cutting down the compliance requirements.
Since the FairTax was designed with a prebate to address the lowest levels of the economy, has anyone considered adding a luxury tax to apply to the highest levels? Unlike the AMT, a luxury consumption tax of 15% could be added to the FairTax to items that are sold which are a multiple higher than the average. So, a $600 pair of jeans would be taxed more than a $30 pair.
A luxury tax could quell arguments that the rich would pay less under the FairTax. A luxury consumption tax goes after the type of goods the rich are more likely to purchase. It doesn’t single out any particular industry and it’s unlikely to expand like the AMT to snag more money from those on the lower in the economy.
I’m not a researcher so I don’t know exactly how much of the economy is luxury goods. Likewise, I’m not sure what the additional tax rate should be. But if something like that were implemented, I see the possibility of lowering the initial FairTax rate or even increasing the size of the prebate. Either of those, would be a big win.
Have at it.